7115 · 6.3
Business and the international economy flashcards
Revision flashcards for Cambridge 7115 Business and the international economy (syllabus 6.3). Flip, recall, then mark a real past-paper question.
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Exporting?
Lowest cost entry; limited market knowledge and control.
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Franchising?
Franchisee runs local outlets to brand standards — McDonald's model.
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Joint venture?
Shared investment/risk with local firm — useful where law requires local partner.
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FDI?
Own subsidiary abroad — high control and cost.
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Standardisation?
Same marketing mix globally — economies of scale.
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Adaptation?
Modify product/promotion for local culture — higher relevance.
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PESTLE abroad?
Legal, political, cultural differences (6.1) drive adaptation.
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Exchange rate risk?
Overseas revenue value fluctuates — finance consideration (5.2).
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Distinguish between Direct and Indirect Exporting.
Direct Exporting: The business sells its products directly to a customer in a foreign market, handling all logistics. It offers higher control and profit margins. Indirect Exporting: The business sells through an intermediary, such as an export agent or trading company, which handles the export process. It is lower risk but offers less control and profit.
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What is a key risk of international franchising for a franchisor?
The primary risk is the potential dilution or damage to the global brand's reputation. This can occur if a franchisee provides poor quality, engages in unethical practices, or fails to adhere to the brand's operating standards, leading to a negative customer experience.
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Define 'Joint Venture' in an international context.
A business arrangement where two or more parties, often from different countries, agree to pool their resources to create a new, separate business entity in a host country. They share the ownership, risks, control, and profits of this new entity.
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What is 'greenfield' FDI?
A form of Foreign Direct Investment where a parent company builds its operations in a foreign country from the ground up. This includes constructing new production facilities, offices, and distribution hubs, rather than acquiring an existing business.
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What is 'Glocalisation'?
A strategy that involves adapting a global product or marketing campaign to the specific cultural, legal, and consumer taste requirements of local markets. It combines the words 'globalisation' and 'localisation' to mean 'think globally, act locally'.