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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 ASEAN Membership on Trade Barriers
Answer
Being part of the ASEAN trading bloc allows Nike to enjoy lower trade barriers, including reduced tariffs. This not only decreases the cost of doing business in Indonesia but also presents an opportunity for Nike to increase its market presence due to the larger consumer base of over 260 million people. Thrive in trade enables better access to necessary materials and components, such as rubber from nearby ASEAN countries like Malaysia, potentially lowering production costs.
Step 2
Competition from Other ASEAN Brands
Answer
As a result of Indonesia's ASEAN membership, competitors like Adidas that are also based within ASEAN will benefit similarly from free trade. This increases competition in the Indonesian market, which may erode Nike's market share despite the initial advantages gained from reduced trade barriers.
Step 3
Market Focus and Production Decisions
Answer
Nike may prioritize its focus on production efficiency and cost management in Indonesia, instead of fully capitalizing on the ASEAN market. If Nike aims to lower production costs, it might choose to manufacture footwear primarily for its established markets in Europe and North America, rather than expanding its sales in Indonesia and other ASEAN countries.