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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
Knowledge of ASEAN trading bloc
Answer
A trading bloc is a group of economies that agree to reduce trade barriers, such as tariffs and quotas. By being part of the ASEAN trading bloc, Nike benefits from free trade agreements that eliminate additional costs associated with tariffs when exporting products to fellow member countries.
Step 2
Application to Nike in Indonesia
Answer
Nike's operations in Indonesia are significantly enhanced by its membership in ASEAN. Free trade allows Nike to source materials and labor cost-effectively in Indonesia and other ASEAN countries. This minimizes production costs while maximizing profit margins.
Step 3
Step 4
Evaluation of benefits
Answer
The degree to which Nike benefits from ASEAN membership depends on where it aims to sell its products. If Nike's strategy involves expanding into other ASEAN markets or leveraging the size of the Chinese market, the positive effects might outweigh the competition. However, if Nike continues to prioritize North American markets, the advantages of ASEAN membership may be limited.