Conditions that prompt trade

• A domestic market is a business's home market
• If the business is in the UK, the domestic market is the UK
• Every other market would be an 'international' market

Push Factors

• Refer to factors that compel a business to seek opportunities outside its domestic market

Saturated Markets

• Saturated domestic markets occur when most potential customers have already purchased a product
• With R&D underway businesses need to continue to trade and this is done by seeking new markets
• Chinese smartphone manufacturers like Huawei and Xiaomi are examples of businesses that sell to overseas markets due to saturation

Competition in the Domestic Market

• High domestic competition drives businesses abroad in search of less competitive and potentially more profitable markets
• The UK food and drink market is competitive, leading to a buoyant export market for unique foods

The International Export Market

• The UK exports £22 billion a year in food and drink, representing a taste for British goods
• Major UK food and drink exports include:
• Whisky (£4.5 billion)
• Salmon (£720 million)
• Chocolate (£680 million)
• Cheese (£623 million)
• Beer (£603 million)
• Shellfish (£600 million)
• The top 5 countries for UK food and drink exports:
• Irish Republic (£3.7 billion)
• France (£2.3 billion)
• USA (£2.3 billion)
• Netherlands (£1.5 billion)
• Germany (£1.4 billion)

Pull Factors

• Pull factors entice a business to trade internationally

Opportunities in Overseas Markets

• Exporting allows businesses to increase sales and boost profits
• Export opportunities arise when there's increased demand for the product in other countries
• Businesses selling in overseas markets can grow faster than those confined to domestic markets

Ability to Gain Economies of Scale

• Exporting provides opportunities for economies of scale, especially if the product or service is standardized across markets
• Greater economies of scale makes the business more cost-competitive
• Trade between the UK and India was £21.5 billion in the 12 months ending September 2021 and an 8.7% increase compared to the previous year

Types of Economies of Scale

• Marketing economies of scale: Costs of advertising campaigns can be spread across multiple countries or products
• Bulk buying: Businesses can reduce the cost of raw materials by getting discounts from suppliers for buying goods in bulk quantities
• Technical economies of scale: High fixed costs of large equipment can be spread over greater production volumes
• Financial economies of scale: Larger businesses can negotiate better lending rates with banks, reducing fixed costs
• Risk bearing: Larger companies are more likely to withstand economic downturns

Ability to Spread Risk

• Exporting to other countries allows businesses to diversify risk
• Businesses are less exposed to domestic economic fluctuations when selling in multiple countries
• Different countries have different growth rates
• Selling in multiple countries can result in a balanced portfolio of growth

Doing Business Guides

• Free PDF guides are available to help UK businesses export abroad
• Potential opportunities are available for UK companies in Jordan, Canada Hong Kong, Macau, Russia, Saudi Arabia, Qatar, Ukraine, Brazil, Uruguay, Mauritius, Egypt, Mongolia, Nigeria, Malaysia, Kenya, Poland, Denmark, Thailand, Spain, Romania, Australia and Italy.

Offshoring

• Involves relocating business processes to another country, often manufacturing or supporting processes like accounting

Benefits of Offshoring

• Offshoring offers benefits such as:
• Lower minimum wage levels
• Access to trade blocs or deals
• Tax benefits
• Access to a larger talent pool
• IBM is an American MNC that has operated in India since 1951, employing 140,000 people

Minimum Wage Research

• Minimum wage rates vary significantly worldwide. It is important to research and compare minimum wages in various countries
• Examples of some to check in with the UK for comparison:
• South Korea
• Luxembourg
• Mexico

Outsourcing

• Involves contracting business functions to third-party companies, either domestically or internationally
• Outsourcing examples include:
• Marketing research
• Accounting
• Legal services
• Call centers
• Office cleaning
• Website development
• Benefits of outsourcing:
• Flexibility
• Lower cost
• Access to experts
• Allowing businesses to focus on core tasks

Outsourcing - Production

• Involves delegating part or all of the production process to other companies
• Some motor manufacturers outsource complete assemblies like steering, transmissions, engines, and interiors
• 1/5 of cars in Europe are sub-assembled in Eastern Europe

Outsourcing - Payroll

• Payroll is a commonly outsourced function.
• Services include, weekly, monthly and quarterly payroll. This includes completion of complex HMRC paperwork
• Payroll includes the payments of taxes and national insurance contributions

Outsourcing - Purchasing

• Covers outsourcing the purchasing and maintenance of information systems
• Hiring IT staff and user training can be costly for small to medium businesses
• Outsourcing provides the latest technology and skilled personnel

Outsourcing - Delivery

• Covers delegating delivery to another major firm
• Businesses can hire the expertise to handle delivery problems
• Yodel is an example, a delivery business whose name is a contraction of "your delivery"

Businesses often seek opportunities outside their domestic market due to push factors. Saturated markets, where most potential customers have already purchased a product, drive businesses to seek new markets. High domestic competition also drives businesses abroad in search of less competitive markets.