4.2

Question 1

conditions that promt trade, push factors:

Answer 1

• market saturation, growth slows
• competition
• shareholder pressure

Question 2

conditions that promt trade, pull factors:

Answer 2

• economies of scale

- cost saving

Question 3

whats offshoring?

Answer 3

• moving manufacturing or service industries to a part of the world with lower cost production

Question 4

benefits of offshoring?

Answer 4

• lower wage costs
• access to raw materials
• access to skilled workforce

Question 5

drawbacks of offshoring?

Answer 5

• damage to business reputation in home country
• as economies develop production costs also rise
• cultural and language barriers

Question 6

what is outsourcing?

Answer 6

• moving a business function to a specialist external provider in another country

Question 7

benefits of outsourcing?

Answer 7

• allows the business to upgrade
• takes advantage of a comparative advantage
• access to specialist facilities/knowledge

Question 8

drawbacks of outsourcing?

Answer 8

• reliance on 3rd parties
• cultural and language barriers
• businesses are less flexible if tied into a contract with a specialist

Question 9

production location checklist?

Answer 9

• cost of production
• skills and availability of workforce
• natural resources
• developed infrastructure

Question 10

merger-

Answer 10

• where two companies join together to create one organisation

Question 11

join venture-

Answer 11

• involves two separate businesses to collaborating to achieve a shared goal

Question 12

what are barriers to entry?

Answer 12

• low brand awareness
• cultural/language differences
• knowledge of market
• additional costs incurred through exporting

Question 13

reasons for global mergers and joint ventures:

Answer 13

• spread risk
• global competitiveness
• acquire national/international brands
• resources and suppliers

Question 14

why do exchange rates fluctuate?

Answer 14

• elasticity of demand
• relative economic growth in international markets
• the use of fixed contracts

Question 15

what is cost competitiveness?

Answer 15

• Also cost leadership

- MNCs find it easier to gain economies of scope and scale as they have multiple operations around the world

Question 16

how can global firms use differentiation?

Answer 16

• use a polycentric approach to marketing and adopt their products to meet the needs of local markets

Question 17

what can a skill shortage lead to?

Answer 17

• reduced effectiveness and productivity of its workforce

- operating internationally gives access to unique labour