3.2.1.3 International Trade and Access to Markets

Question 1

Volume of international trade

Answer 1

International trade is occurring more than ever before. Globally, the amount of exports has been steadily increasing. The only time trade has decreased was during the Global Financial Crisis.

World exports of manufactured goods has increased from US$8 trillion in 2006 to US$ 11 trillion in 2016.

The amount of global investments occurring is also rising. FDI has risen from $400 billion to $1500 billion in 20 years.

Question 2

Pattern of international trade

Answer 2

Trading and investments used to be heavily concentrated within the most developed countries.

Investments - HICs investing into LICs; emerging economies invest in LICs.

HICs largest exporters; emerging economies also becoming large exporters.

International trade is also changing due to new international relationships, these include:

• Fair trade
• Trade blocs

Question 3

Transnational Corporations (TNCs)

Answer 3

Companies that operate across multiple countries.

Question 4

Spatial Organisation of TNCs

Answer 4

• The Headquarters of TNCs are usually located in high income countries. HQ is responsible for the big decisions, such as investments, meetings with global
  organisations etc.
• There are usually R&D facilities in the country where the TNC operates from, but there may also be multiple facilities in different countries, so that research can be varied and specific to the target market.
• Manufacturing and production facilities are mainly concentrated in lower income countries due to increased profits thanks to lower costs of labour.

Question 5

Outsourcing

Answer 5

TNCs that provide tertiary industry products (services) will often outsource tasks to other companies in order to save money and time.

Question 6

Offshoring

Answer 6

Companies that make manufactured products will often have their factories in LICs due to lower labour costs, better taxes, weaker regulations for workers and weaker environmental regulations. This leads to much dispute about the ethical issues with TNCs exploiting poorer citizens in order to maximise their products.

Question 7

TNCs and linkages

Answer 7

TNCs create links between countries and with other companies. Linkages are created in order to benefit the TNC, and often includes expanding the company.

• Links through FDI
• Mergers
• Acquisitions
• Links through integration (vertical and horizontal)

Question 8

TNCs trading and marketing patterns

Answer 8

As TNCs are usually large companies with a lot of revenue , they can afford to take advantage of global marketing. Many TNCs use the same marketing strategy as it creates a trademark, but they also have the money to adjust their marketing strategy to different countries to maximise profits.