Global Strategy (AQA A Level Business): Flashcards

Products, branding and pricing often need to be adapted for different cultures and markets. Inadequate market research increases the risk of costly mistakes.

Finance must navigate more complex international tax rules. It often faces a higher cost of raising finance to fund overseas expansion.

False.

HR must comply with different employment laws across countries and manage a more culturally diverse workforce. This adds complexity to recruitment, training and staff management.

Operations must manage more complex, geographically dispersed supply chains. It may also face difficult decisions about where to locate production.

It can sell more of its existing products into overseas markets (exporting). It can also operate, produce, staff or base part of the business abroad.

Selling globally extends the customer base far beyond a saturated or slow-growing domestic market.

False.

Operating within the target market, rather than only exporting to it, helps a business avoid trade barriers. For example, Nissan's Sunderland factory avoided tariffs and quotas on Japanese car imports.

Tariffs can suddenly increase the cost of exporting, which reduces profit margins.

Operating globally brings the added complexity of managing overseas operations, including unfamiliar regulations, business cultures and consumer habits.

Glocalisation means adapting a global product or brand to suit local tastes, culture or regulations in each individual market.

Tailoring the product to local preferences avoids the risk of a "one size fits all" approach that fails to attract new customers.

True.

Developing multiple variations of a product reduces the economies of scale available from a single, standardised global product. This increases costs and complexity.

If adaptations vary too much or are wrong, they can dilute a brand's global consistency. Research helps the business avoid getting the adaptation wrong.

Low inflation, steady government policies and the absence of conflict reduce the risk of sudden losses or business disruption.

Entering a market with few strong rivals, meaning low competitive intensity, can be more attractive than competing with established global brands.

The US is the world's largest economy, with an enormous and extremely wealthy consumer base. A common business language and similar consumer habits also reduce the cost of adapting products.

India has one of the fastest-growing populations and a rapidly expanding middle class. English is widely used in business and it has long-standing trade links with the UK.

Germany is the largest economy in the EU and is geographically close to the UK, keeping transport costs low. Its consumers value quality, engineering and innovative design.

Significant wage differences between countries can substantially reduce production costs where labour makes up a large share of costs.

It can reduce transport costs and secure a more reliable supply of key materials.

False.

Establishing production within a target market helps a business avoid the tariffs that apply to goods imported from elsewhere.

Many countries offer tax breaks, grants or subsidies, known as government incentives, to attract foreign investment and production facilities.

Maintaining consistent standards is harder when production is managed at a distance, especially when different countries' laws differ.

Labour standards and working conditions abroad may not match expectations at home. The business risks serious reputational damage if poor practices are exposed.

True.

Longer, more complex international supply chains are more vulnerable to disruption, such as port delays or blocked shipping routes.

Managing an overseas workforce requires understanding different working practices and communication styles. This can slow down decision-making.

Producing abroad, particularly through an external supplier, reduces a business's direct oversight of day-to-day operations.

A stable currency reduces uncertainty around production costs once they are converted back into the business's home currency.

False.

Choosing the right location requires far more thought than finding the cheapest option. Businesses also weigh up labour skills, infrastructure, stability, incentives and proximity to markets.

Vietnam offers low labour costs, a skilled textile manufacturing workforce and improving infrastructure. A UK-Vietnam trade agreement also reduces tariffs on finished goods.

Poland has lower labour costs than Western Europe and a skilled industrial workforce. It also has strong EU transport links and is close to major markets such as Germany.

Mexico has relatively low labour costs and a trade agreement with the US and Canada (USMCA) that removes tariffs on many goods. It is also close to the huge US market.

Exporting is the selling of goods or services produced in one country to customers located in another country.

Exporting is the simplest step into international trade because the product is still made at home and only marketing and delivery cross national borders.

True.

Higher output for export can lower average costs, giving the business economies of scale.

Licensing is a legal arrangement where a business (the licensor) grants a foreign company (the licensee) the right to make or sell its product, use its brand name or technology in return for a fee or royalty.

False.

Royalties are only a fraction of the potential full market profits, so licensing gives a limited profit share.

The licensee learns the know-how and may break away to set up its own business.

A joint venture is a medium- to long-term agreement for two or more separate businesses to join together to achieve a defined business outcome, such as entry into a new market.

Chinese managers and employees understand market needs and consumer tastes, giving the venture a greater chance of success. The Chinese government also encourages joint ventures.

False.

Joint ventures are less risky than going it alone because costs are shared and partners can access local knowledge.

Disagreements may occur between managers in both businesses, and the objectives of each business may change over time.

Direct investment, often called foreign direct investment (FDI), is when a business sets up or buys assets, such as factories, offices or shops, in another country.

Building a brand-new site abroad from the ground up is known as greenfield investment.

The parent company has full control over quality, branding and day-to-day running. It also keeps all the profits rather than sharing them with partners.

It has a very high up-front cost. Political changes or recessions in the host country can also hit the investment hard.