Varnika RAMJEE
4.2 Global markets and business expansion
4.2.1 Conditions that prompt trade
Push factors
- These are factors which may force a business to consider selling abroad
High levels of domestic competition
- Means that business will look abroad to where they may be less competition and lucrative
market opportunities to trade
- E.g., is the food and drink market in the UK is very competitive but there is a very buoyant
market for usual food imports to other countries
Saturated markets with only low growth opportunities
- Means that a business or group of businesses has sold a product to just about everyone who
will buy one
- While R&D is taking place, the business needs to continue to trade and to grow and so will
look for new markets for the products abroad
- E.g., Chinese smartphone manufacturers; Apple, Samsung, Huawei and LG all now sell to
overseas markets
Pull factors
- Factors which may force a business to consider selling abroad
Significant opportunities to sell to overseas markets
- Exporting is one way for a business to increase sales and this can contribute to increased
profits
- An export opportunity may arise when demand increases for you product in other countries
- A business selling in overseas markets will be able to growth faster than those limited to
domestic markets
Ability to spread risk
- A key benefit of exporting to other nations is that it allowed the business to spread the risk
- By selling in other countries the business is less vulnerable to changes in the domestic
economy
- Different countries may have different growth rates at any time, selling in multiple countries
can give a balanced portfolio of growth
Ability to ain economies of scale
- Exporting is an excellent way to drive production to a level that delivers EOS, particularly if
the product or service is standard across export markets with little or no need for adaption
- Achieving greater EOS will allow the business to become more cost-competitive
Offshoring
- When a business relocates some of its business processes to another country
- This may be cut costs in terms of labour pay rates, may also take advantage of trade blocs or
trade deals
, Varnika RAMJEE
Outsourcing
- This is where a business function, such as payroll, is contracted out to a third part business
- This other business may or may not be located abroad
- May be marketing research, legal work, accountancy or even human resources functions can
be carried out by outsourced companies
- E.g., call centres in India
Production
- Sending some production to other companies to complete
- Some motor manufacturers now outsource not only by parts but complete assemblies such
as engines and steering
Payroll
- Payroll is the most common task that companies outsource to other business who specialise
in this task
- This service includes weekly/monthly/quarterly payroll and will involve the completion of
the complex HMRC paperwork
Purchasing and maintaining information systems
- Hiring and evaluating IT staff and training users can be very costly and time consuming for
SMEs
- By outsourcing the IT function, the business can obtain the latest technology and suitability
skilled personnel
Delivery
- Larger business might prefer to contract a major delivery firm rather than maintain their
own fleet
- Either way, the business can hire the expertise to keep delivery problems and decisions off
their desk
Moving call centres to India
Advantages Disadvantages
- Hub of talent, skilled call centre professionals - One of the biggest disadvantages is the risk of
who can provide businesses with efficiency losing sensitive data and the loss of
services at fraction of the UK cost confidentiality
- Centres utilise the best technology, software - Losing management control or business function
and infrastructure mean that businesses may no longer be able to
- Time zone differences allows them to operate control operations as well as if they were in
24/7 domestic markets
- Vast majority speaks English and many other - Problems with quality can arise if the outsourcer
languages does have proper processes and/or is
- Growing pool of technical talent, ideal location inexperienced in outsourcing
for outsourcing - May not give 100% time and attention to a
- Highly advanced satellite-based single company, may result in delays and
telecommunication network helps in high-speed inaccuracies in the work output
transfer of voice and data from all over the - Not understanding the culture of the
world outsourcing provider and the location may lead
- The Indian government is very supportive of the to poor communication and productivity
IT industry and does all it can to nurture it
4.2 Global markets and business expansion
4.2.1 Conditions that prompt trade
Push factors
- These are factors which may force a business to consider selling abroad
High levels of domestic competition
- Means that business will look abroad to where they may be less competition and lucrative
market opportunities to trade
- E.g., is the food and drink market in the UK is very competitive but there is a very buoyant
market for usual food imports to other countries
Saturated markets with only low growth opportunities
- Means that a business or group of businesses has sold a product to just about everyone who
will buy one
- While R&D is taking place, the business needs to continue to trade and to grow and so will
look for new markets for the products abroad
- E.g., Chinese smartphone manufacturers; Apple, Samsung, Huawei and LG all now sell to
overseas markets
Pull factors
- Factors which may force a business to consider selling abroad
Significant opportunities to sell to overseas markets
- Exporting is one way for a business to increase sales and this can contribute to increased
profits
- An export opportunity may arise when demand increases for you product in other countries
- A business selling in overseas markets will be able to growth faster than those limited to
domestic markets
Ability to spread risk
- A key benefit of exporting to other nations is that it allowed the business to spread the risk
- By selling in other countries the business is less vulnerable to changes in the domestic
economy
- Different countries may have different growth rates at any time, selling in multiple countries
can give a balanced portfolio of growth
Ability to ain economies of scale
- Exporting is an excellent way to drive production to a level that delivers EOS, particularly if
the product or service is standard across export markets with little or no need for adaption
- Achieving greater EOS will allow the business to become more cost-competitive
Offshoring
- When a business relocates some of its business processes to another country
- This may be cut costs in terms of labour pay rates, may also take advantage of trade blocs or
trade deals
, Varnika RAMJEE
Outsourcing
- This is where a business function, such as payroll, is contracted out to a third part business
- This other business may or may not be located abroad
- May be marketing research, legal work, accountancy or even human resources functions can
be carried out by outsourced companies
- E.g., call centres in India
Production
- Sending some production to other companies to complete
- Some motor manufacturers now outsource not only by parts but complete assemblies such
as engines and steering
Payroll
- Payroll is the most common task that companies outsource to other business who specialise
in this task
- This service includes weekly/monthly/quarterly payroll and will involve the completion of
the complex HMRC paperwork
Purchasing and maintaining information systems
- Hiring and evaluating IT staff and training users can be very costly and time consuming for
SMEs
- By outsourcing the IT function, the business can obtain the latest technology and suitability
skilled personnel
Delivery
- Larger business might prefer to contract a major delivery firm rather than maintain their
own fleet
- Either way, the business can hire the expertise to keep delivery problems and decisions off
their desk
Moving call centres to India
Advantages Disadvantages
- Hub of talent, skilled call centre professionals - One of the biggest disadvantages is the risk of
who can provide businesses with efficiency losing sensitive data and the loss of
services at fraction of the UK cost confidentiality
- Centres utilise the best technology, software - Losing management control or business function
and infrastructure mean that businesses may no longer be able to
- Time zone differences allows them to operate control operations as well as if they were in
24/7 domestic markets
- Vast majority speaks English and many other - Problems with quality can arise if the outsourcer
languages does have proper processes and/or is
- Growing pool of technical talent, ideal location inexperienced in outsourcing
for outsourcing - May not give 100% time and attention to a
- Highly advanced satellite-based single company, may result in delays and
telecommunication network helps in high-speed inaccuracies in the work output
transfer of voice and data from all over the - Not understanding the culture of the
world outsourcing provider and the location may lead
- The Indian government is very supportive of the to poor communication and productivity
IT industry and does all it can to nurture it
