4.2.1 Conditions that Prompt Trade

🔗 Reshoring – Where a firm brings back part of its operations in a country back to its home country.

🔗 Offshoring – Sending part of the business abroad. E.G Dyson in Malaysia.

🔗 Outsourcing – The employment of a third-party business. E.G Apple iPhone in China.

Push and Pull Trade Factors

Push Factors

🔗 Push factors – Factors that prompt a business to move part of its business operations to another country as a reaction to current market conditions

• Saturated markets – No hope of growth
• Competition – Too competitive for business to succeed
• Brexit – Uncertainty, tariffs
• Poor infrastructure
• Falling consumer incomes
• Depletion of natural resources
• UK wages are high comparatively to other developed economies

Pull factors

🔗 Pull factors – Factors that encourage a business to be proactive and operate part of its business in another country

• Larger market – More exposure and larger customer base
• Growing market – Market with potential for a business
• Lower costs – E.G cheaper labour
• Entering a market with higher demand and high scale of output -> Economies of scale -> Lower cost per unit -> Higher profit margins
• Diversifying business by entering new markets -> Reduces dependence on one revenue stream/market -> Increases resilience to economic shocks
• Access to raw materials – The exchange rate of the country may be favourable to business
• Economic factors – E.G strong economic growth and growing middle class