Edexcel Business A Level Revision

A key difference between offshoring and outsourcing is that the offshored element of the business is still part of the same global business but outsourcing means a completely separate business takes over the work. Offshoring - When a company moves various operations to another country for reasons such as lower labour costs or more favourable economic conditions in that other country. The key reasons for this is cost minimisation as the production process can be undertaken at a reduced costs in comparison to the domestic economy. Closeness to market will reduce transport costs for businesses and might allow for easier access to consumers, particularly if operating in the country being targeted e.g. Jaguar Land Rover have set up production in China. As well as this they will take advanatge of economies of scale from operating in larger international markets and having access to more specialised suppliers and services.  However, offshoring includes the fact that public and emp...

Pull factors - are those that attract a business to a global market. These may include lower levels of competition or an untapped market or customers. Pull factors are the opportunities a business may see for expansion into a foreign market. The factors are linked to the foreign market in which the businesses wishes to operate. Economies of scale are present when unit costs fall as output rises. Globalisation has meant a rise in opportunities for international businesses to reduce unit costs by increasing sales volumes to new and emerging markets, thus being able to buy the raw materials to make the products in bulk. Businesses have also moved production to new markets where costs such as wages are significantly cheaper than in their domestic market. Risk spreading is a benefit from moving into markers in order to reduce dependence on the home market. A wet summer in Britian does not worry Wall's ice cream as it sells ice cream in lots of overseas markets. Therefore they nega...

Push factors - are those that force a business to leave the market in which they currently operate to look for new income streams in the future e.g. operating in a different market. Often businesses look to another country when operations in their current market become difficult. This can include a saturated market or products coming to the end of their product lifecycle. These are mainly reasons a business has to want to grow outside of the domestic country in which it currently operates. Saturated markets are the point at which a market is no longer generating new demand and decline in sales revenue for a firm's products, due to competition, decreased need, obsolescence or alternatives. Businesses will look for growth in overseas markets where there are similar characteristics, for example demographic trends and GDP per capita and where sales revenue will rise again. An example of a UK saturated market is the grocery market, where Tesco attempted to expand into China, Thaila...

Protectionism - is any attempt by a country, trade bloc or region to impose restrictions on the import of goods and services. Government legislation - legislation imposed by the government in order to both protect consumers and restrict imports. This might be complex legal forms, health and safety inspections and specific product specifications. Benefits of government legislation is that it allows domestic firms to flourish in the market, but it may provoke retaliation from another country is the ban is seen as unfair. Domestic subsidies - are payments to encourage domestic production by lowering their production costs and improve competitiveness. Low or no interest loans can be used to fund the dumping of products in overseas markets. Well-known subsidies include the Common Agricultural Policy in the EU, or cotton subsidies for US farmers and farm subsidies introduced by countries such as Russia. Advantages of subsidies include; The protection of local jobs and indust...

Protectionism - is any attempt by a country, trade bloc or region to impose restrictions on the import of goods and services. Import Quotas - A type of protectionist measure on trade that sets a restriction on the physical limit on quantity of a good that can be imported into a country in a given period of time. Quotas, like other trade restrictions, are typically used to benefit the producers of a good at the expense of the consumers in that economy. Import quotas are quantitative limits on the level of imports allowed or a limit to the value of imports permitted into a country in a given period of time. Often licenses are granted to importers to the exclusion of other global businesses. Quotas do not normally bring in any tax revenue for the government. Benefits of import quotas include; Keeping the volume of imports unchanged even when demand for imported products increases Local jobs may be created or protected, leading to a greater tax revenue More flexible than tariffs ...

Tariffs - a tax or duty that raises the price of imported products. Protectionism - is any attempt by a country, trade bloc or region to impose restrictions on the import of goods and services. Dumping - Over-production in developed countries may be released into the markets of developing nations which undercuts domestic prices and domestic producers may be forced to leave the market. Balance of payments =  Exports - Imports. This explains the financial relationshio between the UK and rhe rest of the world. A country may use protectionist measures, because of a concern about trade imbalances (too many imports compared to few exports), to protect jobs or to protect politically sensitive industries such as shipbuilding. A tariff is a tax or duty that raises the price of imported products. The price rise is likely to reduce demand for the item and also encourage local entrepreneurs to produce more. For example, according to BBC News, in March 2016 the US imposed a 500% ...

Globalisation - the process of greater intergration and inter-connectedness between countries Trade liberalisation - Includes the removal or reduction of tariff obstacles such as duties and surcharges and non-tariff obstacles such as licensing rules, quotas and other requirements. Transnational Corporation - A business that is register and operates in more than one country at a time but selling the same products. Migration - The movement of people from one place to another International trade is increasing for a number of reasons: Reduction of international trade barriers/trade liberalisation Reduced cost of transport and communication Increased significance of transnational corporations Increased investment flows Migration within and between economies Growth of the global labour force Structural Change REDUCTION OF INTERNATIONAL TRADE BARRIERS/TRADE LIBERALISATION Countries impose trade barriers for many reasons. They include protecting local jobs, allowing new i...

Porter's Five Force analysis - A tool to analyse five competitive forces that affect a market and the intensity of competition within a industry or market. Barriers to entry - The obstacles that a business has to face when it is considering competing in an exisiting market It considers the threat of new entrants to a market the bargaining power of suppliers the bargaining power of customers the threat of substitute products the degree of competitive rivalry amongst exisiting competitors. It attempts to provide a simple way to look at all the relevant issues related to the changing competitive environment in which a business operates. Five Forces can be used by a business currently in a market to assess the security of its market position. Or it can be used by a business thinking of entering a market. THREAT OF NEW ENTRANTS Refers to the potential effect of a new business entering the market, presuming that it will gain market share and rivalry will increase. T...

The changing competitive advantage  means that most markets are continually evolving, with businesses entering and leaving the market. In every market businesses are trying to keep at the cutting edge of product development and changes in customer tastes and fashions. The competitive environment or market structure involves all the external factors that either compete with  or have an impact on a business.  It is constantly changing, it is dynamic and a business that fails to monitor these changes and take action  runs the risk of losing market share or even failure. Direct competitors – Businesses are likely to have direct rivals who produce very similar products and  services, Domino competes directly with Papa John’s, Nationwide with Halifax, Asda with Tesco and so on.  They are competing for the same consumer and will try to find more effective ways of competing. Indirect competitors – are not direct rivals but they are competing for the sam...

PESTLE - is a method used to analyse external influences on a business, in particular Political, Economic, Social, Technological, Legal and Environmental influences. External environment - is all of those factors outside of their control of a business that will impact on its day to day operations, decision making and strategies. Fiscal Policy - They ways the government can adjust spending and taxation to influence the national economy Monetary policy - The ways the government, via the Bank of England, can alter how much money is circulating in the economy and the level of interest rates to create stable prices and a set inflation target. PESTLE can be used by a business to make the most of factors that are seen as beneficial and minimise the impact of factors that have a negative impact. The advantage of PESTLE is that like SWOT it can help identify area of opportunity and threat. A disadvantage is that time and money need to be spent gathering data to perform the analysis. Un...