4.1.2 - International Trade and Business Growth Flashcards
What are imports?
Goods and services bought by people and businesses in one country from another country
What are exports?
Goods and services sold by domestic businesses to people or businesses in other countries
What is specialisation?
Occurs when a country/business decides to focus on producing a particular good/service
Benefits of specialisation
+ Improves efficiency of the business
+ Lower unit costs due to Economies of scale as costs are spread over a large output
+ Low unit costs means lower prices
+ Any excess output can be sold abroad as exports
Limitations of specialisation
- Risk loosing sales if demand for their product decrease
- Can increase the cost of training staff as they need extensive training to gain skills necessary in the specialisation process
- If business grows too large they may suffer from diseconomies of scale through lack of communication
What does specialisation lead to and define this
Competitive advantage
- Capability or ability that allows a business to outperform competitors and therefore improve profitability
What is comparative advantage?
An economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners
What is Foreign Direct Investment (FDI) ?
The net transfer of funds to purchase and acquire physical capital in another country, such as factories and machines
Typical ways to grow though FDI?
- Mergers
- Takeovers
- Partnerships
- Joint ventures
How does FDI benefit countries?
- Increased economic growth (inflow of money)
- Increased job opportunities (expanding of operations)
- Access to knowledge from foreign investors
How does FDI impact economies?
+ Brings high paying jobs
+ Brings new technology and creates new markets
+ Increased business investment/increase GDP
+ Increase government taxes / can increase spending - education / health care
How does FDI impact businesses?
+ Gives firms access to new markets - increase sales
+ Take advantage of skilled local labour - increase productivity
+ Allows a firm to obtain 1st-hand knowledge of market - legal system / consumer tastes /markets - rather than simply exporting
+ Increased economic growth as there is an inflow of money into the country
What is inward FDI?
Occurs when a foreign business invests in the local economy
What is outward FDI?
Occurs when a domestic business expands its operations to a foreign country
