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Summary Theme 4.2 notes
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All information of 4.2 covered Business Alevel
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Varnika RAMJEE4.2 Global markets and business expansion
4.2.1 Conditions that prompt trade
Push factors
- These are factors which may force a business to consider selling abroad
High levels of domestic competition
- Means that business will look abroad to where they may be less competition and lucrative
market opportunities to trade
- E.g., is the food and drink market in the UK is very competitive but there is a very buoyant
market for usual food imports to other countries
Saturated markets with only low growth opportunities
- Means that a business or group of businesses has sold a product to just about everyone who
will buy one
- While R&D is taking place, the business needs to continue to trade and to grow and so will
look for new markets for the products abroad
- E.g., Chinese smartphone manufacturers; Apple, Samsung, Huawei and LG all now sell to
overseas markets
Pull factors
- Factors which may force a business to consider selling abroad
Significant opportunities to sell to overseas markets
- Exporting is one way for a business to increase sales and this can contribute to increased
profits
- An export opportunity may arise when demand increases for you product in other countries
- A business selling in overseas markets will be able to growth faster than those limited to
domestic markets
Ability to spread risk
- A key benefit of exporting to other nations is that it allowed the business to spread the risk
- By selling in other countries the business is less vulnerable to changes in the domestic
economy
- Different countries may have different growth rates at any time, selling in multiple countries
can give a balanced portfolio of growth
Ability to ain economies of scale
- Exporting is an excellent way to drive production to a level that delivers EOS, particularly if
the product or service is standard across export markets with little or no need for adaption
- Achieving greater EOS will allow the business to become more cost-competitive
Offshoring
- When a business relocates some of its business processes to another country
- This may be cut costs in terms of labour pay rates, may also take advantage of trade blocs or
trade deals
, Varnika RAMJEE
Outsourcing
- This is where a business function, such as payroll, is contracted out to a third part business
- This other business may or may not be located abroad
- May be marketing research, legal work, accountancy or even human resources functions can
be carried out by outsourced companies
- E.g., call centres in India
Production
- Sending some production to other companies to complete
- Some motor manufacturers now outsource not only by parts but complete assemblies such
as engines and steering
Payroll
- Payroll is the most common task that companies outsource to other business who specialise
in this task
- This service includes weekly/monthly/quarterly payroll and will involve the completion of
the complex HMRC paperwork
Purchasing and maintaining information systems
- Hiring and evaluating IT staff and training users can be very costly and time consuming for
SMEs
- By outsourcing the IT function, the business can obtain the latest technology and suitability
skilled personnel
Delivery
- Larger business might prefer to contract a major delivery firm rather than maintain their
own fleet
- Either way, the business can hire the expertise to keep delivery problems and decisions off
their desk
Moving call centres to India
Advantages Disadvantages
- Hub of talent, skilled call centre professionals - One of the biggest disadvantages is the risk of
who can provide businesses with efficiency losing sensitive data and the loss of
services at fraction of the UK cost confidentiality
- Centres utilise the best technology, software - Losing management control or business function
and infrastructure mean that businesses may no longer be able to
- Time zone differences allows them to operate control operations as well as if they were in
24/7 domestic markets
- Vast majority speaks English and many other - Problems with quality can arise if the outsourcer
languages does have proper processes and/or is
- Growing pool of technical talent, ideal location inexperienced in outsourcing
for outsourcing - May not give 100% time and attention to a
- Highly advanced satellite-based single company, may result in delays and
telecommunication network helps in high-speed inaccuracies in the work output
transfer of voice and data from all over the - Not understanding the culture of the
world outsourcing provider and the location may lead
- The Indian government is very supportive of the to poor communication and productivity
IT industry and does all it can to nurture it
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