Sourcing Resources & Entering Markets
Business Management: IB Diploma, topic 1.6.6
Sourcing Resources
A business may source its raw materials from overseas suppliers as these may be cheaper than raw materials bought from the home market.
Off shoring
- Off-shoring involves a business moving part of its production process to an overseas manufacturer.
- Off-shoring has advantages and disadvantages for a business:
- Off-shoring can reduce cost which allows a business to lower its selling price or increase profit.
- Off-shoring can lead to quality problems if overseas producers do not uphold the same quality standards as the business which outsources.
Reshoring
- Re-shoring involves a business bringing its production processes back to the original country.
- Re-shoring has advantages and disadvantages for a business:
- Re-shoring can increase cost which means a business may need to increase its selling price or accept reduced profit.
- Re-shoring can increase quality as production can be monitored more closely which can build a business’ reputation.
Entering International Markets
Businesses can enter markets in different ways.
Multinational organisations
- Businesses can target overseas markets by becoming a multinational organisation.
- A multinational organisation is a business which has production facilities in more than one country.
Influences on the decision to enter an international market
- The importance of quality may affect a business’s decision when deciding whether to produce in an overseas market.
- The importance of cost reduction may affect a business’s decision when deciding whether to produce in an overseas market.
Test yourself on Sourcing Resources & Entering Markets
A process which involves a business moving part of its production process to an overseas manufacturer.
Which of the following terms does this describe?Which of the following is the definition for a multinational company?