4.2 – Global Markets and Business Expansion
4.2.1 – Conditons That Prompt Trade
Global market One that targets all of the world’s economies rather than individual
countries
Push factors The factors that atract a business to enter a global market
Pull factors The factors that force a business to leave the market in which they
currently operate to look for new income streams in the future
Economies of scale The advantages enjoyed by a frm when unit costs fall as it
increases the scale of producton
Off-shoring The relocaton of a business process to another country
Outsourcing The practse of using the services of another organisaton e.g. a
recruitment consultancy or cleaning frm to work on behalf of a
frm
Product lifecycle The stages that a product will go through in its lifetme
Push Factors
ISSUE OF SATURATED MARKETS - where sales growth has stalled or is falling.
Difficult for business to grow revenues seeks opportunites abroad
Could be developed or developing economies offer new customers
Entry costs can be high due to expenditure required
There are risks e.g. cultural differences
ISSUE OF COMPETITION - intense rivalry/new markets entrants.
Tough trading market encourages internatonal trading to maximise sales revenue
Overseas there may be fewer compettve pressures and the possibility for a frst
mover advantage
EXTENDING THE PRODUCT LIFE CYCLE - by selling in multple markets.
Launching a product in a new market could prolong the life of a product and increase
revenue
May require adaptng the product to appeal to new market, or large marketng
campaign
Risks associated due to possible changes in legislaton meaning product can’t be
manufactured) as well as economic environment changes
Pull Factors
ECONOMIES OF SCALE - operatng in a global market increases scale of operaton and lower
unit costs.
Moving producton for a whole contnent to one factor will cause economies of scale
Through purchasing economies of scale due to bulk buying
RISK SPREADING - business becomes less dependent on domestc demand.
External shocks have less of an impact, e.g. Brexit may cause lower demand in UK
market, but this has less effect on a business operatng in multple internatonal
markets
However, market development involves risks
OFF-SHORING - when a business relocates part or all producton overseas.
Key reason is cost minimisaton - lower land and labour costs
Closer to market means reduces transport costs
Easier access to customers
4.2.1 – Conditons That Prompt Trade
Global market One that targets all of the world’s economies rather than individual
countries
Push factors The factors that atract a business to enter a global market
Pull factors The factors that force a business to leave the market in which they
currently operate to look for new income streams in the future
Economies of scale The advantages enjoyed by a frm when unit costs fall as it
increases the scale of producton
Off-shoring The relocaton of a business process to another country
Outsourcing The practse of using the services of another organisaton e.g. a
recruitment consultancy or cleaning frm to work on behalf of a
frm
Product lifecycle The stages that a product will go through in its lifetme
Push Factors
ISSUE OF SATURATED MARKETS - where sales growth has stalled or is falling.
Difficult for business to grow revenues seeks opportunites abroad
Could be developed or developing economies offer new customers
Entry costs can be high due to expenditure required
There are risks e.g. cultural differences
ISSUE OF COMPETITION - intense rivalry/new markets entrants.
Tough trading market encourages internatonal trading to maximise sales revenue
Overseas there may be fewer compettve pressures and the possibility for a frst
mover advantage
EXTENDING THE PRODUCT LIFE CYCLE - by selling in multple markets.
Launching a product in a new market could prolong the life of a product and increase
revenue
May require adaptng the product to appeal to new market, or large marketng
campaign
Risks associated due to possible changes in legislaton meaning product can’t be
manufactured) as well as economic environment changes
Pull Factors
ECONOMIES OF SCALE - operatng in a global market increases scale of operaton and lower
unit costs.
Moving producton for a whole contnent to one factor will cause economies of scale
Through purchasing economies of scale due to bulk buying
RISK SPREADING - business becomes less dependent on domestc demand.
External shocks have less of an impact, e.g. Brexit may cause lower demand in UK
market, but this has less effect on a business operatng in multple internatonal
markets
However, market development involves risks
OFF-SHORING - when a business relocates part or all producton overseas.
Key reason is cost minimisaton - lower land and labour costs
Closer to market means reduces transport costs
Easier access to customers
