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Going Global

LO: Understand the reasons why some UK businesses decide to locate in other countries. Going Global. You are to answer the following question using your own knowledge, information in this PowerPoint and help from the text book on pages 106-7.

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Going Global

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  1. LO: Understand the reasons why some UK businesses decide to locate in other countries Going Global • You are to answer the following question using your own knowledge, information in this PowerPoint and help from the text book on pages 106-7. • Is it a good idea for Jaguar Land Rover/Burberry to locate in China? Justify your answer.(choose one of these businesses) • Look at the arguments for and against and select the ones you consider to be the most relevant to the business and your argument • Consider the options of just selling there and also producing there (off-shoring). They could do both.

  2. LO: Understand the reasons why some UK businesses decide to locate in other countries Read these background stories to the companies

  3. LO: Understand the reasons why some UK businesses decide to locate in other countries The mark scheme will be as follows

  4. LO: Understand the reasons why some UK businesses decide to locate in other countries Click on the links to find out more about each argument Answer plan

  5. LO: Understand the reasons why some UK businesses decide to locate in other countries Plan your answer before you startIs it a good idea for Jaguar Land Rover/Burberry to locate in China? Justify your answer. • Which business? • Are you arguing for or against selling and/or producing there? • What is your first argument? • What theory are you using to back this up? • What is your evidence? • What does your argument depend on to be valid? • Is this likely to be true/happen? • What is you second argument? • What theory are you using to back this up? • What is your evidence? • What does your argument depend on to be valid? • Is this likely to be true/happen? • You might have a third argument, but no more. • Conclude with your decision and explain why/how you have reached this decision. Back to arguments slide

  6. China has a large market • Population of 1.4 billion people • This gives about 1 billion consumers (ie people who have money to spend • UK has about 40 million consumers • The middle class in China is bigger than the population of the USA and over four times that of the UK! • Big size means lower unit costs (economies of scale). http://www.bbc.co.uk/news/business-23364230 Back to arguments slide

  7. Fast growing market • The Chinese economy is growing quickly • Compared to UK expected of 1% • The Chinese workers are earning more Back to arguments slide

  8. Language and cultural differences • Here some examples of how business is done differently • Ebay hasn’t succeeded in China because business is done face to face • China is a communist country and so the rules of business can be changed at any time (at present motor vehicle producers have to be jointly owned with a Chinese company and cannot be a wholly owned UK company). Back to arguments slide

  9. High transport costs Back to arguments slide It takes weeks to send things by ship, but costs a lot by air. Have a look at the business blog below:

  10. Competition The Chinese have plenty of local businesses who want to sell the same things. Back to arguments slide

  11. Theft of intellectual property • The Chinese are excellent at copying things and making cheap versions • Should businesses take this risk? • But, the Chinese see Western goods as status symbols. So will they will want the real thing Back to arguments slide

  12. China’s anti-corruption drive China is cracking down on corruption, but the targets all seem to be western companies. Is this a problem? Back to arguments slide

  13. Lower labour costs • China is cheap, but not the cheapest country for wages • Labour costs are rising fast Back to arguments slide

  14. Rising labour and shipping costs Businesses are pulling out of China due to rising wage and transport costs. Are the cost savings enough? http://www.reuters.com/article/2012/07/24/us-usa-manufacturing-onshoring-idUSBRE86N05M20120724 Back to arguments slide

  15. Lower land and site costs • It is cheaper to lease land and buildings in the inner part of China, but along the coast prices can be high. • The wealthy areas tend to along the coast. Back to arguments slide

  16. Avoid trade barriers • By setting up production in a country that taxes imports (tariffs) a business can avoid these extra costs and so keep selling prices down. This is why Nissan started production in the UK in the 1970s. Back to arguments slide

  17. Bad publicity Moving production to China might cause job losses which won’t go down well at home. Back to arguments slide

  18. Unethical behaviour This is Pakistan but could it be true in China? Back to arguments slide This is not good for Apple

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