1. Factors Driving Global Business Development

 Syllabus Point 1: Factors driving global business development, including:

  • financial growth opportunities and/or loss minimisation

  • consumer purchasing and spending patterns

  • World Trade Organisation (WTO) regulations and sanctions

  • deregulation of the financial market

📘 Syllabus Point 1 Summary Sheet

Factors Driving Global Business Development

1️⃣ Financial Growth Opportunities and/or Loss Minimisation

  • Expand to new markets = more revenue.

  • Lower production costs overseas.

  • Spread business risk across multiple countries.

2️⃣ Consumer Purchasing and Spending Patterns

  • Rising demand in emerging markets.

  • Global trends (e.g. online shopping).

  • Products may be more popular or profitable overseas.

3️⃣ World Trade Organization (WTO) Regulations and Sanctions

  • WTO reduces trade barriers and promotes fair trade.

  • Encourages international business activity.

  • Sanctions can restrict trade with certain countries.

4️⃣ Deregulation of the Financial Market

  • Fewer government rules = easier global investment.

  • Easier access to international capital.

  • Encourages movement of funds and global expansion.

Exam Questions Since 2016: Featured in 5 of the Last 9 Years

Jessica and Lexi, who are based in Western Australia, own a start-up technology company called Jesi Technical Solutions (JTS). The business specialises in cloud storage, and the owners are planning to expand overseas. To facilitate this plan, Jessica has analysed consumer spending and tax considerations across many regions. She has selected Southeast Asia as their initial foreign market due to its strong demand for cloud storage, particularly within the rapidly growing online shopping sector. Jessica and Lexi are also aware of the generous home and host government incentives for foreign trade. They have discovered that Vietnam, one of the nextgeneration Asian high-growth economies, is offering a significant grant of up to USD 700 000 for new technology businesses. Jessica and Lexi are thinking of using this grant to establish their first Southeast Asian branch. As a start-up, Jessica and Lexi are analysing the impacts of globalisation carefully. By opening offices in emerging markets and hiring local talent, they plan to make a contribution to global prosperity. To ensure a positive global image, the business adheres to the World Trade Organisation’s international trade regulations. Jessica and Lexi encourage both their employees and consumers to share information and work together to spread new technologies around the world. Their commitment to cross-border collaboration enhances technological progress beyond their business mission. When making global business decisions, Jessica and Lexi place a strong emphasis on ethical considerations. Central to their approach is a commitment to environmental sustainability, driving them to constantly explore and adopt eco-friendly practices within their operations. Moreover, they meticulously assess the ethical implications of outsourcing and employing workers from different countries and strive to uphold fairness and integrity across their entire supply chain. This dedication to ethical conduct not only aligns with their values, but also fosters trust and transparency in their business practices on a global scale.

(a) Describe two factors driving JTS’s global business development. (4 marks)

  • Answers could include:

Financial growth opportunities and loss minimisation: 

  • JTS identifies financial growth opportunities through investment in a new market with a bigger customer base. Asia has more than 1 billion people so opportunities are numerous. Also, opportunities lie in government grants, such as the USD 700 000 grant for new technology businesses in Vietnam. This presents a significant financial incentive for the company’s expansion and establishment in Southeast Asia. With this, the level of risk that JTS undergoes is minimised when their required investment is lower  
  • The consideration of potential risks, such as overdependency on the domestic market, indicates a proactive approach to loss minimisation. By expanding into Southeast Asia and leveraging government benefits, JTS aims to diversify its revenue streams and minimise the impact of market uncertainties.

Consumer purchasing and spending patterns: 

  • With a booming demand in Southeast Asia, the business will benefit greatly when expanding into this area. They are more likely to make more profit, secure a bigger customer base and diversify their investment portfolio
  • The choice of Southeast Asia, particularly Vietnam, as the first foreign market reflects a strategic effort to tap into the growth potential of emerging markets. The emerging markets are seen as having more potential due to their exponential growth. By aligning their operations with consumer behaviour in these regions, the company aims to establish a strong market presence and drive financial success
  • Each country in this region has a different spending pattern, so understanding the nuanced differences between each country greatly supports JTS’s plan.

World Trade Organisation (WTO) regulations and sanctions:

  • Jessica and Lexi’s business is based in Australia, which is a member of the WTO, so they understand the stringent regulations of the WTO and can make sure that the business operates within the limit and scope of the WTO’s regulations 
  • WTO regulations create a fair ground for member countries to do business with each other, making sure that international businesses are protected, are not restricted by protectionist policies of host countries, and have help with conflict resolution. If a member country does not comply with WTO regulations, sanctions will be placed on them, creating an economic loss for businesses from that country 
  • When JTS expands into Southeast Asia, they have to comply with WTO regulations which can incur additional costs for them, but they will also be protected by an internationally standardised set of regulations. This minimises regulatory and legislative risks for JTS. 

Accept other relevant answers. 

Note: the deregulation of the financial market is not accepted because it is not relevant to the case study

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