Why do businesses trade internationally?
- Created by: rebecca
- Created on: 18-03-13 13:07
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- What makes a business want to trade internationally?
- PUSH FACTORS
- Saturated domestic market
- Occurs when it becomes impossible to expand sales further in that market.
- Fierce competition in domestic market
- New markets
- Price/non-price factors
- Differentiation / reliability / reputation have higher market shares
- Innovation is expensive
- Foreign suppliers=Lower labour costs
- Competition from imports
- Price/non-price factors
- Differentiation / reliability / reputation have higher market shares
- Innovation is expensive
- Foreign suppliers=Lower labour costs
- New markets
- Product is mature/decline stage of the product life cycle
- Development, introduction, growth, maturity, decline
- Saturated market=Maturity stage
- Extension strategy (moving to international markets is one)
- Saturated market=Maturity stage
- Saturated domestic market
- PULL FACTORS
- Potential for increased sales and profits
- Emerging economies
- Economies of scale
- Trading internationally means the size of the business increases
- Competitive advantage
- Lower costs, lower prices
- Risk Spreading
- Diversified markets reduce risk
- Wider the risk spread, the safer the business
- Global sourcing
- Find goods/services from a global market
- Buying cheaper sources aborad
- Low labour costs
- Low labour costs
- Offshoring
- Increase trade liberalisation
- Expanding trade blocs
- Free trade area
- Access member countries' markets easily
- Push specialisation and open new markets
- Free trade- NAFTA
- Common market
- EU
- Free trade area
- Potential for increased sales and profits
- PUSH FACTORS
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