Why does a business seek international markets?

  • Created by: apple87
  • Created on: 10-09-15 10:07
Between 1950 and 2008 how much have world wide incomesand outputs grown by per year on average?
4% per year.
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How much has world trade, imports and exports grown be per year between 1950 and 2008?
6% per year
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What are tariffs?
Taxes on imported goods they make the price higher so sales will generally be lower.
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What is trade liberisation?
Refers to the process of reducing barriers so that economies can move gradually closer to free trade, this would mean their are no trade barriers at all.
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What are trade blocs?
Groups of countries were barriers to trade are reduced or elimnated between member states.
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What are the push factors for seeking international markets?
Saturated domestic market, fierce competition in domestic market, competition from imports, product is in mature of decline stage of product life cycle.
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What are the pull factors for seeking international markets
Potential for increased sales and profit, economies of scale, risk spreading, global sourcing, increasing trade liberisation, expanding trade blocs.
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What is market saturation?
When it is impossible to expand sales further in that particular market.
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How would fierce copetition persuade a business to seek international markets?
There will be vigorously to increase sales. Businesses constantly watch eachother to differentiate their products. Constant and intensive marketing may be needed. Imported products may be able to compete on price.
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What is the product life cycle?
Shows all the different phase a product goes through from introduction to decline.
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What are the five stages of the product life cycle?
Development, Introductin, Growth, Maturity, Decline.
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How can a business prolong the life of a product?
Use an extension strategy by bring in out a new or improved version.
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How will economies of scale give international businesses a competitive advantage?
The size of the business will usually increase, reducion of cost brought by increased production, lower costs may result in lower prices.
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Why might a business seek international markets for risk reasons?
To spread the risk so the business is safer. If sales decline in one country it may be compensated in another.
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What is offshoring?
Locating production in a foreign country. The objective is to exploit cost savings, most often lower wages.
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What is global sourcing?
Describes the practice of finding goods and services from the global market.
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Names 3 international organisations that were set up in the late 1940's?
The International Monetary Fund, World Bank, World Trade Organisation.
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What is the International Monetary Organisation
It co-ordinated the worlds monetary system by trying to keep it stable, and to provide adequate finance for world trade to continue without interruption.
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What is the World Bank?
Lends to developing countries to finance projects to help raise finance and make economies more efficient.
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What it the Wolds Trade Organisation?
Supervises world trading arrangments and negotiations and helps to resolve disputes between governements.
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What is a trade bloc?
Can be an area of free trade or a tightly intergrated common market which creates a level playing field.
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How to free trade areas help businesses?
Makes it easier to access markets without hinderence and encourages specialisation and opens up new markets.
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What is a free trade area?
They are groups of countries that trade completely freely with eachother, no trade barriers. Each member country has its own trade policies with the rest of the world.
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What is a common market?
Have completly free trade internally and a single unified policy covering all members trade with the rest of the world. The is also free movement of people and capital, individuals in all member countries can work in other member countries.
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What is trade creation?
Occurs when there is an increase in the total amount of goods and services traded because of reduced trade restrictions within a trading bloc.
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What is trade diversion?
Occurs when a trading bloc reduced imports from non-member countries, enabling businesses within the bloc to increase sales.
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What are the benefits of trading within a trading bloc?
Access to other markets without ecports being penalised, imports without traiffs, possible economies of scale, spread risk, larger market with attracts foreign direct investment, greater competition within trade bloc can increase efficiency.
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What are the constraints of trading within a trading bloc?
No protection for domestic industries, greater competition from domestic producers, common external tariff can increase cost of raw materials, reaching agreements can be difficult and time consuming, rules and regulations may not suit all businesses.
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How many member countires are in the WTO?
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What does the WTO do?
Main objective is to help trade flow smoothly, promote free trade, encourage, economic growth by reducing trade barriers. Acts as a forum fortrade negotiations. Can help developing in nations with technical matters and trainning programmes.
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What does the WTO not do?
It is not a global policeman, cannot force countries to co-operate.
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What had the WTO been accused of?
Favouring richer countries at the expense of developing ones, some doubt free trade and liberisation is the best solution for developing nations.
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What does FDI stand for?
Foreign Direct Investment
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When does the flow of FDI increase?
As trade barriers reduce and as businesses set up factories, distribution or production facilities in other countries.
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Where does FDI flow most commonly?
Developed countries
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When does FDI occur and what does it bring?
When businesses invest in other countries, they may build factories, offices, distribute. This creates more jobs and can regenerate areas.
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Give two examples of how political change has increased international business?
The fall of the Soviet Union in 1989 and China has moved a long way from a hard line communist and isolationist state, this has opened up access to international businesses.
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What does BRIC stand for and wat is special about these countries?
Brazil, Russia, India, China. They are the 4 largest fast growing economies.
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How is communication and transport increasing international trade?
Containerisation has reduced costs, air freight is cheap enough to transport high value-low bulk products. Cheap air travel and telecoms makes communication with markets and suppliers easier. Easier to create international relationships.
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What do all developing countries have in common?
A growing middle class who appreciate branded goods from countries exporting them. Large number or poor with slow growing income.
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What is a key factor in creating new markets?
To understand the needs of potential buyers.
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What is backwards innovation?
When a low cost simplified product is produced to target lower incomes. They often have basic functions of sophisticated products and may be similar to early versions of products that are now sold with more features in developed countries.
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Why might a business sell product innovations in multiple markets?
To maximise sales and profits. Innovation can be expensive selling in more markets can recoup costs more quickly. Average costs are reduced as fixed costs are spread over a greater output.
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Other cards in this set

Card 2


How much has world trade, imports and exports grown be per year between 1950 and 2008?


6% per year

Card 3


What are tariffs?


Preview of the front of card 3

Card 4


What is trade liberisation?


Preview of the front of card 4

Card 5


What are trade blocs?


Preview of the front of card 5
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