What is a reason for a business to expand internationally?
(A) Diversification
(B) Licensing agreement
(C) Management contract
(D) Foreign direct investment - HSC - SSCE Business Studies - Question 7 - 2007 - Paper 1
Question 7
What is a reason for a business to expand internationally?
(A) Diversification
(B) Licensing agreement
(C) Management contract
(D) Foreign direct investment
Worked Solution & Example Answer:What is a reason for a business to expand internationally?
(A) Diversification
(B) Licensing agreement
(C) Management contract
(D) Foreign direct investment - HSC - SSCE Business Studies - Question 7 - 2007 - Paper 1
Step 1
A) Diversification
96%
114 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
Diversification is a strategy that involves a business entering into new markets or industries to mitigate risks and leverage opportunities for growth. By expanding internationally, a company can diversify its revenue streams, reduce dependence on the domestic market, and tap into new customer bases and innovative practices.
Step 2
B) Licensing agreement
99%
104 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
A licensing agreement allows a business to grant others the right to use its intellectual property in exchange for royalties or other compensations. However, it is more of a strategy for market entry rather than a primary reason for expansion itself.
Step 3
C) Management contract
96%
101 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
A management contract involves a business or organization hiring another firm to manage its operations abroad. While this can facilitate international presence, it does not encapsulate a primary reason for expansion.
Step 4
D) Foreign direct investment
98%
120 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
Foreign direct investment (FDI) is a significant motivation for international business expansion, where a company invests directly in facilities to produce or market a good or service in a foreign country. This can enhance a company’s global footprint and operational efficiencies.
