4.1.2 International Trade & Business Growth

Question 1

What are imports?

Answer 1

• Imports are goods & services bought by people & businesses in one country from another country
• Imports result in money leaving the country whuch generates extra revenue for foreign businesses

Question 2

What are exports?

Answer 2

• Goods & services sold by domestic businesses to people or businesses in other countries
• Exports generate extra revenue for businesses selling their goods abroad

Question 3

What is meant by specialisation?

Answer 3

• Occurs when a country/business decides to focus on producing a particular good/service
• Countries can also specialise on a norrow range of goods & services e.g. Ghana specialises in cocoa & gold

Question 4

What can specialisation increase?

Answer 4

• Specialisation can increase the quantity & quality of goods & services- this has many benefits including:
• Lower unit costs due to economies of scale as costs are spread over a large output
• Lower unit costs allow the business to lower prices for consumers leading to more sales
• If businesses do not lower their selling price, then due to the lower costs they are able to increase their profit margins
• When a business specialises it can also help them to gain a competitive advantage- if they can increase value added on their goods/services this can help to gain edge over competitors

An example of a competitive advantage includes having access to local markets, resources & materials that competitors do not have access to

Question 5

What is foreign direct investment (FDI)?

Answer 5

• Investment by foreign firms which results in more than 10% share of ownership of domestic firms
• Businesses typically grow through FDI as mergers, takeovers, partnerships or joint ventures

Question 6

How can countries benefit from FDI?

Answer 6

• Can lead to increased economic growth as there is an inflow of money into the country
• Increased job opportunities as businesses expand operations
• Access to knowlege & expertise from foreign investors

Question 7

What is inward FDI & when does it occur?

Answer 7

• Inward FDI occurs when a foreign business invests in the local economy

e.g. In 2017, Kenya opened the Kenya Standard Gauge Railway line built by Chinese investors

Question 8

What is outward FDI & when does it occur?

Answer 8

• Outward FDI occurs when a domestic business expands its operations to a foreign country

Dyson has moved its manufacturing from the UK to Malaysia, China and the Philippines