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  3. PEARSON (PEARSON)
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  7. Unit 4 - Global business

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Summary Global Markets
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Explains conditions that prompt trade (e.g. push factors, extending the product lifecycle by selling in multiple markets, etc.) and the key considerations when considering a country as a market or production location

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  • September 28, 2020
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  • 2019/2020
  • Summary

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Theme 4 Topic 4
Global Markets
Conditions That Prompt Trade
Push Factors

Push Factors – adverse factors in the existing market encouraging a firm to seek international opportunities

Examples of Push Factors:

 Saturated Markets – sales are limited in the domestic market due to most customers already having
the product
 Competition – high competition in the domestic market may force firms to look for opportunities
overseas

Pull Factors

Pull Factors – factors that entice firms into new markets, they are opportunities that can be taken when
moving to overseas markets

Examples of Pull Factors:

 Economies of Scale – where larger scale production enables lower unit costs
 Risk Spreading – overseas trade reduces dependence on one market so if one market faces economic
difficulties there are others to fall back on

Possibility of Off-Shoring and Outsourcing

Off-Shoring – moving manufacturing or service industries to a location with lower costs

Outsourcing – moving an entire business function or project to a specialist external provider

Disadvantage of Outsourcing – reliance on third parties can leave a firm vulnerable to poor quality or
communication difficulties between the firms

Extending the Product Lifecycle by Selling in Multiple Markets

Selling in overseas markets enables the product lifecycle to be extended by finding new sales opportunities –
this acts as an extension strategy although the firm needs to decide whether to sell a standardised product or
alter the product for local market conditions


Assessment of a Country as a Market
Key considerations when deciding whether an overseas country could be a good market to enter:

 Disposable Incomes  Political Instability
 Ease of Doing Business  Exchange Rate
 Infrastructure

Assessment of a Location as a Production Location
Key considerations when deciding whether an overseas country could be a good production location:

 Cost of production  Location in trade bloc
 Skills and availability of labour force  Political stability
 Ease of doing business  Natural resources
 Infrastructure  Likely return on investment

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