4.2.1 conditions that prompt trade

• push factors

  factors that force a business to consider selling abroad

  examples:

  • high levels of domestic competition/saturated markets
  • high corporation tax
• pull factors

  the opportunities that arise from selling abroad

  examples:

  • spreading risks
  • global economies of scale
  • new customers
  • relaxed legislation
• offshoring

  • relocation of a business function to a location overseas
  • functions which are often moved offshore are manufacturing/customer service
• offshoring - benefits and drawbacks

  benefits:

  • access skilled professionals
  • cost reduction = cheap labour/production costs in countries like India
  • in-house operations still

  drawbacks:

  • expensive overheads like rent, finding workers, communication barriers
  • adjust to other countries laws/regulations - additional costs
• outsourcing

  • when a business function is contracted out to a third party
  • a business pays another organisation to do something for them
  • eg. paying a customer to manufacture your clothes
  • the third party may be located overseas, but not always
• outsourcing - benefits and drawbacks

  benefits:

  • less workload/third party business doing your work
  • good quality if sending production to a specialist business
  • access expertise/talent pool of workers

  drawbacks:

  • quality may suffer
  • loss of control
  • language/culture barrier, timezones
  • share/expose sensitive dara/ no 100% security