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Assess one effect on Nike of Indonesia being a member of the ASEAN trading bloc. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1
Question 2
Assess one effect on Nike of Indonesia being a member of the ASEAN trading bloc.
Worked Solution & Example Answer:Assess one effect on Nike of Indonesia being a member of the ASEAN trading bloc. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1
Step 1
Effect of Trade Barriers Reduction
Answer
By being a member of the ASEAN trading bloc, Indonesia allows Nike to engage in free trade with other member countries. This reduction or elimination of trade barriers such as tariffs and quotas lowers costs for Nike. Consequently, Nike can increase its competitiveness in the region, which could lead to higher sales and profits due to reduced operating costs and access to a larger consumer base.
Step 2
Step 3
Consumer Disposable Income Considerations
Answer
The success of Nike in Indonesia is further contingent on the disposable income of consumers. If consumers in Indonesia or neighboring ASEAN countries do not have sufficient disposable income, Nike may struggle to increase sales, thereby limiting the beneficial impact of being in the trading bloc.
Step 4
Potential Shift in Production Strategy
Answer
Additionally, Indonesia's membership in ASEANG could incentivize Nike to focus more on local production to optimize costs. This might influence Nike’s production strategy, shifting from outsourcing to utilizing local manufacturing, aligning with its long-term operational objectives.