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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
Identify the reason for international expansion
Answer
Expanding internationally allows a business to diversify its market and reach new customer bases, reducing dependence on domestic markets. This can lead to increased revenue and market share. Diversification is a key strategy for businesses to mitigate risks associated with economic downturns in their home market.
Step 2
Evaluate the options provided
Answer
In assessing the options:
- (A) Diversification: This is a valid reason for expansion as it involves entering new markets to spread risk.
- (B) Licensing agreement: This is a method of expansion, but not a direct reason for expansion itself.
- (C) Management contract: Similar to licensing, this is an approach rather than a reason.
- (D) Foreign direct investment: While a method to achieve international presence, it does not directly answer the reason for expansion.
Thus, option (A) is the most appropriate answer.