4.2.1 Conditions that prompt trade

• Push factors are factors that push a business to expand outside of their domestic country.
• Saturated markets - push factor

  • Occur when the demand for goods and services has reached a peak and becomes challenging for businesses to grow and expand within the local market.
  • Explore opportunities in other global markets.
• Intense Competition - Push Factor

  • Intense competition = need to differentiate.
  • Exporting goods/services to new markets reduces reliance on single market - diversifying revenue streams - reducing their exposure to market volatility and competition.
• Pull factors encourage businesses to operate within markets abroad which present significant growth opportunities.

  (Factors that pull a business into a new market)
• Benefitting from EOS - Pull factors


  Able to purchase raw materials and labour at lower prices than within their domestic markets.
• Spreading Risk - Pull factor

  • Access to different markets = diversify customer base & reduce risk associated with working in one market (economic, political).
• Businesses use offshoring and outsourcing to develop their international trade.
• Offshoring is when a company moves part of the production process, or all of it, to another country.
• Advantages of Offshoring

  • Lower labour costs - available in other countries, help businesses keep costs down and increase profitability.
  • Access to specialised suppliers in countries abroad who provide better quality service, raw materials or components.
  • Economies of scale as businesses sell to a larger international market.
• Disadvantages of offshoring

  • Public relations and employer/employee relations may suffer due to relocation as domestic workers lose jobs.
  • Increased costs in short term, such as relocation costs, acquiring new premises and training new staff.
  • Poor customer service due to language and cultural differences between the domestic consumers and foreign workers.
• Outsourcing occurs when a business hires an external organisation to complete certain tasks or business functions
• • The main difference between offshoring and outsourcing is that offshoring is still carried out under the same business, whereas outsourcing is done by a completely different business