1. Conditions That Prompt Trade
4.2 Global markets and business expansion

2. What you need to know a) Push factors: b) Pull factors:
saturated markets
competition
b) Pull factors:
economies of scale
risk spreading
c) Possibility of off-shoring and outsourcing
d) Extending the product life cycle by selling in multiple markets

3. What is Driving the Increasing Internationalisation of Business?
Trade to GDP ratios are increasing for most countries
Expansion of Financial Capital Flows between countries
Foreign Direct Investment and Cross Border M&A
Rising number of global brands – including from emerging countries
Deeper specialisation of labour – components come from many nations
Global supply chains & new trade and investment routes
Increasing levels of international labour migration and migration within countries
Increasing connectivity of people and businesses through mobile and Wi-Fi networks

4. Why Do Businesses Increasingly Want to Target International Markets?
Reduce dependence on domestic market
Access faster-growing markets & demand
Achieve economies of scale
Better serve customers located overseas
Build brand value, particularly global brands

5. Factors Contributing to Trading Internationally
Push Factors
Pull Factors
Where businesses feel they have to expand internationally because of domestic / home market issues
Where businesses are attracted by compelling opportunities to grow by expanding internationally

6. Push Factors – Saturated Markets
A feature of markets where sale growth has stalled or is falling
Difficult for firms to grow revenues other than by taking market share from competitors
Market often characterised by a lack of product innovation
Strategic response is often to look for growth opportunities for the same product in overseas markets

7. Push Factors – Increased Competition
Domestic firms may be faced with new market entrants who take market share
Result is lower revenues in the domestic market – creating the incentive to pursue revenues elsewhere

8. Pull Factors – Economies of Scale
Extending a business’ operations overseas provides an opportunity to increase output and access economies of scale, thereby reducing unit costs
This might involve offshoring production to lower-cost economies

9. Pull Factors – Risk Spreading
Ansoff Matrix suggests that moving into new markets (overseas) involves greater risk
However, trading internationally can spread the activities and revenues of a business over a wider range of markets, making the business less dependent on domestic demand

10. Read the Dyson case. P432
Explain one push factor that affected Dyson’s decision to move his production abroad . 4 marks
Assess Dyson’s decision to keep his research and development centre in the UK. 12 marks
Explain the difference between outsourcing and off-shoring. 6 marks.

11. Advanced warning. Thursday Timed Q.
Case study
Zara
(a) Evaluate the importance of push and pull factors in the decision to expand in the EU. (20 marks)