4.1.2 International Trade and Business Growth

Question 1

define exporting

Answer 1

selling products into a foreign market

Question 2

define importing

Answer 2

buying goods from a foreign market and selling them in the importers domestic market

Question 3

define specialisation

Answer 3

producing and exporting goods which they have a comparative advantage in and importing goods which other countries / firm can produce more efficiently

Question 4

what does specialisation lead to

Answer 4

competitive advantage as it focuses on goods that a country is skilled at therefore producing them more efficiently reducing price of product and increasing quality improving invitation

Question 5

benefits of specilaisation

Answer 5

• Increased productivity and output, this means reduced average costs and economies of scale
• As more resources are devoted to the industry rather than being spread out the scale of production can be increased to gain the EOS
• Gives them a comparative advantage
• Increased productivity will lead to GDP growth and increasing sales will boost economic growth.

Question 6

drawbacks of specialiasation

Answer 6

• A country may become over reliant on one industry (eggs in one basket) and this does not spread risk.
• Other countries may become cheaper in the same industry, and it may be harder to compete.
• If the business grows too big it may suffer from DEOS through lack of communication and coordination

Question 7

define FDI

Answer 7

Foreign Direct Investment - investment made by one company into another country
- Setting up a business
- Access to new markets and
customers
- Access to new resources /
labour
- Access new partners / joint
ventures