Theme 4

• A push factor is a factor in the existing market that encourages firms to seek international markets.
• A pull factor is a factor that entices a firm into a new market.
• Offshoring is the relocation of a business function to a location overseas.
• Outsourcing is where a business function is contracted out to a third party.
• Offshoring can lead to lower manufacturing costs and there is potential for higher quality and more skilled workers. It can also overcome protectionism.
• Offshoring can cause longer lead times and the business is more exposed to changes in exchange rates. It can also have negative implications for CSR.
• Outsourcing provides access to specialist expertise and allows the business to focus on core activities.
• Outsourcing can lead to a loss of expertise for the business and there is a risk that the service will not meet the business' standards.
• GDP stands for gross domestic product and is the total value of goods and services produced in the UK.
• GNP stands for gross national product and is the value of goods and services produced and owned in the UK.
• GNI stands for gross national income and is the combination of GNP and remittance.
• Remittance is income sent from outside of the country to its residents.
• Purchasing power parity (PPP) tells you how much things would cost if all countries used the US dollar and so allows a comparison to be made between economies.
• The human development index (HDI) is a broad composite measure of improvement in people's lives. It is measured between knowledge, life expectancy and health, and income.
• Factors influencing choice of location to sell products:

  • Economic growth
  • Ease of doing business
  • Infrastructure
  • Political stability
  • Exchange rates
• 'Ease of doing business' factors:

  • Starting a business
  • Dealing with permits and property
  • Paying taxes
  • Trading across borders
• A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country.
• Trade liberalisation involves the removal of trade barriers such as tariffs and quotas.
• A tariff is a tax imposed only on imports.
• A quota is a restriction on the amount of a particular good that can be imported into a country.
• Factors contributing to increased globalisation:

  • Political change
  • Reduced costs of transport and communication
  • Increased significance of transnational corporations
  • Increased investment flows
  • Migration
  • Growth of the global workforce
  • Structural change
• Factors to consider when deciding on a production location include the location of suppliers, labour costs, distribution, regulations and the ease of doing business.
• Governments use tariffs to aim to increase the price of imported goods, encouraging consumers to purchase domestic goods.
• Governments use quotas to regulate the volume of trade between them and other countries.
• Tariffs help domestic workers keep jobs and provide funds for public services. However they make imported products more expensive and could lead to a fall in the material standard of living.
• Quotas allow domestic businesses to face less competition and leads to greater job security however can limit consumer choice and raise prices.
• Government legislation protects the population from health and safety issues and reduces competition however can provoke retaliation and lead to reduced supply for consumers.
• A trade embargo is a ban on trade between two countries, usually imposed by one country to punish another.
• A domestic subsidy involves the government funding domestic companies to boost their global competitiveness.
• Trade blocs are groups of countries that trade with fewer protectionist measures to encourage trade.
• Trade blocs manage and promote trade activities and can lead to trade liberalisation and trade creation.
• Different types of trade blocs include:

  • Preferential trade area
  • Free trade area
  • Customs union
  • Common market
  • Economic union
  • Full integration
• Effects of skill shortages include:

  • Stress on workforce
  • Low productivity
  • Less innovation
  • Increased costs
  • Outsourcing and offshoring
• An multinational corporation (MNC) is a firm that has its headquarters in one country but operations in others. It produces its products globally.
• Local impacts of MNCs:

  • Local labour
  • Wages
  • Working conditions
  • Job creations
• Global impacts of MNCs

  • FDI flows
  • Balance of payments
  • Tech and skills transfer
  • Consumers
  • Business culture
  • Tax revenue and transfer pricing
• Glocalisation refers to the notion of having to personalise marketing where required to the local market whilst trying to keep marketing approaches consistent in every country.
• Standardisation involves keeping products consistent globally.
• Customisation involves changing products to appeal to consumers in different regions.
• Ethnocentric marketing involves emphasising the heritage and values of a brand. This can lead to lower market research costs but prevents market orientation.