3.2 Economic factors in business expansation

• Describe the difference between push and pull factors

  Push factors deter firms from entering new markets, whereas pull factors attract firms to enter
• Would a saturated market be a push or pull factor

  a push factor
• Would an emerging economy be a push or pull factor

  a pull factor, as emerging economies have a lot of potential for business growth
• Define offshoring

  process of having part/all of a firms services shifted abroad
• How could a firm benefit from offshoring

  they could take advantage of the low labour costs
• What is outsourcing

  occurs when firms get their goods from a supplier abroad
• How does political stability affect the potential for a business to grow

  if a country faces a lot of corruption it will be harder for a firm to set up a long term plan in that country and be able to make a profit
• Would red tape be a push factor or pull

  a push factor
• If a firm is a net importer of raw materials, how would a depreciation of their currency affect prices of their goods

  depreciation makes imports more expensive, thus raising their costs of production which they would pass onto consumers through higher prices
• How would government subsidies benefit a firm

  it would lower their average costs of production, thus improving their profit margin per unit of output sold