Selling in other countries Cambridge IGCSE Business Studies revision
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In plain words
When a business has sold all it can at home, the next customers are abroad. New countries offer millions of new buyers, and a set of problems the business has never met.
The way in matters. It can go alone, or find someone who already knows the ground.
5 things to know
- Why enter foreign markets: the home market is full, incomes are rising abroad, risk is spread across countries, and larger sales bring economies of scale.
- Problems: cultural differences (tastes, language, customs), lack of knowledge of the market and its laws, changes in exchange rates, tariffs and other trade barriers, and the cost of transport.
- A joint venture with a local business brings local knowledge and shares the risk, but the profit is shared too.
- Licensing lets a foreign business make and sell the product in return for a fee. It needs no investment, but quality is harder to control.
- A business may also adapt the product, its name and its advertising to suit local tastes.
Tips and tricks
- Cultural differences are the classic problem: a product name or advert that works at home may mean something quite different abroad.
- For each way of entering, give the benefit and the cost. Sharing the risk always means sharing the profit.
It lands in your notebook with its questions as flashcards.
Selling in other countries: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
Which is a reason for a business to enter a foreign market?
There is little room left to grow at home.
A food company finds that its most popular flavour is disliked in another country. This problem is
Tastes differ between countries.
How can a joint venture help a business enter a foreign market?
Local knowledge is what the newcomer lacks.
Under a licensing agreement
The licence gives permission to produce and sell.
Which is a disadvantage of a joint venture?
What is earned is divided between the partners.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 8 marks. Write your answers on paper, then check them.
Selling in other countries
Cambridge IGCSE Business Studies 0450 · 8 marks · papermunch.org
Name ______________________________ Date ______________
State two problems a business may face when entering a foreign market.[2]
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Any two of: cultural differences, lack of knowledge of the market, different laws, exchange rate changes, tariffs, transport costs.
Explain why a business might want to sell its products in other countries.[3]
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Its home market may be saturated, with little room for more sales. Selling abroad gives it new customers, lets it produce on a larger scale, and spreads its risk across several markets.
Explain one advantage and one disadvantage of using licensing to enter a foreign market.[3]
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Advantage: the business earns a fee without having to invest in factories abroad. Disadvantage: it does not control production, so poor quality could damage its reputation.
Answers: Selling in other countries
- 1. Any two of: cultural differences, lack of knowledge of the market, different laws, exchange rate changes, tariffs, transport costs.
- 2. Its home market may be saturated, with little room for more sales. Selling abroad gives it new customers, lets it produce on a larger scale, and spreads its risk across several markets.
- 3. Advantage: the business earns a fee without having to invest in factories abroad. Disadvantage: it does not control production, so poor quality could damage its reputation.