Chapter 24 International Business Flashcards
Explain home or domestic trade
Buying and selling of goods and services in our own country ex: lily o brien’s
Explain open economy
A country that imports and exports goods and services - engaging in international trade. Ireland is a small open economy.
Open economies have a wide choice of raw materials and finished products
Explain international trade
Engaging in the importing and exporting of goods and services between countries
Importing is buying good or services from another country so money leaves Ireland
Exporting is selling good or services to another country so money comes into Ireland
Explain with example visible exports
Irish businesses sell products abroad. Physical goods are sent out of Ireland and this brings money into the country Ex: Irish farmers sell Beef to french supermarkets
Explain with example invisible exports
Irish businesses sell services to foreign countries and this brings money into Ireland Ex: British tourists stay in a hotel in Dublin
Explain with example visible imports
Irish businesses and people buy products from foreign countries. Physical goods are coming into Ireland and money goes out of the country Ex: Dunnes stores buys fruit from south africa
Explain with example invisible imports
Irish businesses and people buy services from foreign countries and money goes out of ireland Ex: irish family stays in a hotel in paris
What is the formula for balance of trade
Visible Exports- visible imports
Explain surplus
Exports are bigger than imports
Explain deficit
Exports are smaller than imports
What is the formula for balance of payments
Visible and invisible exports - visible and invisible imports
What is the formula for balance of invisible trade
Invisible exports - invisible imports
Give four reasons why countries import
Lack of natural resources
Unsuitable climate
Lack of skills
Bigger choice for consumers
Explain lack of natural resources with an example as a reason for importing
Country may not have the natural resources that it needs for businesses and consumers
Ex: Ireland does not have enough oil and imports from saudi arabia
Explain unsuitable climate with an example as a reason for importing
May not have correct weather conditions to grow certain crops
Ex: Ireland imports coffee from kenya
Explain lack of skills with an example as a reason for importing
Country may not have skills- other countries may be traditionally skilled in making certain products
If a country wants the best they must import
Ex: German cars are reknowned and though we could make them in ireland we import ex: BMW
Explain bigger choice for consumers with an example as a reason for importing
Country may want to give their consumers more choice over products they buy
Ex: ireland produces more than enough potatoes but we can still buy foreign potatoes in shops
What are three reasons countries export
Survival
To increase sales and profits
Diversification
Explain survival as a reason why countries export
Home market in some countries may be too small for business to make substantial profit there- must export
Ex: Irish airplane factory would have to export as there are not enough people in Ireland who would regularly buy planes
Explain increase sales and profits as a reason why countries export
Increase sales and profits
Ex: Lily O brien’s is profitable in ireland but also makes much larger profits from its sales to other countries
Explain diversification as a reason why countries export
Business that depends solely on one country for sales is risky- if country goes through bad patch
Exporting spreads risk
Ex: Baileys did not close during economic downturn in ireland as it’s sales in other countries kept it profitable
What is the significance of International trade to the irish economy?
Billions of customers Economies of scale Foreign currency Jobs Competition
Explain billions of customers as an importance of international trade to the irish economy
Ireland has small population. Engaging in international trade means can sell to billions
Increased sales and profits
Ex: Lily o briens sales 80 percent are exports
Explain economies of scale as an importance of international trade to the irish economy
Making more products gives economies of scale to irish businesses which they would not enjoy in irelands small market
More they make cheaper it becomes to make
Explain foreign currency as an importance of international trade to the irish economy
When selling aborad businesses recive foreign currency
With it we can pay for foreign products we need to import
Ex: selling to US we receive dollars
Explain jobs as an importance of international trade to the irish economy
Increased sales from international trade means businesses have to hire more people
Job creation and lower unemployment rate
Government have more money from less welfare and tax receipts
Explain competition as an importance of international trade to the irish economy
Businesses face a lot fo competition from foreign firms
Forces them to keep costs low and improve their quality so they can compete
Competition makes irish businesses better
Ryanair keeps costs low to compete
Explain free trade
Countries can buy and sell with other countries without barriers or restrictions placed in their way Ex: EU countries practice free trade with each other
Explain protectionism
When countries use barriers to trade to try to restrict foreign imports and increase their own exports in order to help their own indigenous businesses to do well
Explain tariff with example
A tax a country adds to the price of foreign imports- Makes them dearer and they will not sell as well
Ex: USA wants to protect it’s drinks industry by reducing irish whiskey sold in USA so adds tariff to jameson’s
Explain quota
Country puts a limit on amount of foreign imports of a certain type it will allow
This helps indigenous businesses limiting imports
No further imports over number are allowed
Ex: EU currently has a quota on how many chinese garments it will allow into EU
Explain embargo
Country puts a ban on all foreign imports to help indigenous businesses
Consumers have no choice but to buy local
Ex: USA had embargo with Cuba but this was for political rather than economic reasons
Explain subsidy
Money that a government gives to it’s indigenous businesses to allow them to sell products and services more cheaply
Helps businesses export more
Ex: EU in past gave subsidies to EU farmers so they could sell their produce more cheaply around the world
What are some major trends in the international economy?
Brexit Globalisation Improved information and communications technology Increasing number of trading blocs New markets Competition from low wage economies
Explain globalisation as a major change in international economy
Increased numbers of global businesses
Operate throughout the world
They treat world as one big market
If they set up in Ireland they buy Irish materials increasing sales and profits
Threat as competition can wipe out indigenous businesses
Explain Improved information and communications technology as a major change in international economy
Businesses are using the internet for international trade
Can sell without having to set up shops over the world
Customers anywhere can see products on business’s website
Irish small businesses can advertise to the world online
Explain Increasing number of trading blocs as a major change in international economy
Countries cooperating forming trading blocs with each other
This is a group of countries who make a formal agreement with each other to freely buy from and sell to each other with no barriers to trade
May impose a tariff on imports coming in from non-member countries
Ex: EU or NAFTA(North American free trade agreement)
Explain New markets as a major change in international economy
New countries emerging as economic superpowers to rival US, Japan and EU
Ex: India and russian economies are growing rapidly
Furthermore deregualtion is opening up more and more countries to international trade
Explain Competition from low wage economies as a major change in international economy
Increasing competition
Workers in these economies get paid less and therefore businesses can sell their products more cheaply than Irish businesses can
Virtually impossible to compete on products that take little skills to make
Explain trading bloc
This is a group of countries who make a formal agreement with each other to freely buy from and sell to each other with no barriers to trade
May impose a tariff on imports coming in from non-member countries
Explain deregulation
Process of removing all the government rules and regulation that prevent free trade between countries
Presents irish with opportunity to increase sales and profits exporting freely all over the world
Ex:EU deregulated airline industry removing monopolies
What does WTO stand for
World trade orgnisation
What does WTO stand for
World trade organisation
What are Ireland’s competitive advantages or opportunities in developed and developing markets
Increased Sales Lower costs Earn foreign currency Overcome trade barriers Diversification English Educated workers Green image
Explain increased sales as an opportunity/competitive advantage for Ireland in international trade
Membership of EU means can sell products anywhere in EU without trade barriers
WTO deregulation also has removed worldwide barriers to allow for freer international commerce
Exporting is easier
Explain lower costs as an opportunity/competitive advantage for Ireland in international trade
Exporters have to make products to satisfy international demand giving them economies of scale
More they make they cheaper products become
This helps lower businesses costs and become more competitive
Explain earn foreign currency as an opportunity/competitive advantage for Ireland in international trade
When irish businesses export they receive foreign currency
They can use this money to pay for goods and services they need to import
Use these imports to make better products
Explain overcome trade barriers as an opportunity/competitive advantage for Ireland in international trade
Irish businesses can set up branches in other countries as a way to overcome barriers to trade
Explain diversification as an opportunity/competitive advantage for Ireland in international trade
Give irish businesses to spread their risk. Business does not rely solely in the irish market. Irish economy goes through a bad patch and businesses sales in other countries will keep it in profit
Explain english as an opportunity/competitive advantage for Ireland in international trade
English is the international language of business
Irish people can automatically converse with other businesses worldwide in english
Explain educated workers as an opportunity/competitive advantage for Ireland in international trade
Well educated workforce in ireland
Excellent education helps irish entrepreneurs invent new products that can sold worldwide to make the country a lot of money
We have knowledge based exports in medicines, chemicals and computers
Explain green image as an opportunity/competitive advantage for Ireland in international trade
Ireland has good image globally as clean green unspoilt country.
Makes easier to sell food to other countries as they trust it to be top quality
Helps attract foreign tourists also
Both these industries bring in billions of euro to the country
What are the challenges facing Ireland in international trading - challenges in developed and undeveloped markets
Foreign languages Distribution problems Exchange rate changes Competition from low wage economies Payment problems Cultural difference
Explain foreign languages as a challenge ireland faces in international trade
Many foreign customers prefer to deal in their own language
can mean communication problems
Must make website in multiple languages, name of product may need to be changed, contracts translated
Costs time and money
Ex:KFC mistranslation of slogan “eat you fingers off”
Explain distribution problems as a challenge ireland faces in international trade
Ireland is an island without land link to other EU countries
Transporting goods is more difficult and expensive
Must conform to shipping and airline companies timetables and weather
Explain exchange rate changes as a challenge ireland faces in international trade
If euro increases in value price of irish products in non-eurozone countries increases - less sales and profits
If euro decreases in value price of foreign materials imported into ireland increases- increasing costs
Explain competition from low-wage economies as a challenge ireland faces in international trade
Rate of pay here is high so manufacturers must charge high price to cover their costs
Other countries have lower wages and products are cheaper
Impossible to compete with simple low technology produce
Explain payment problems as a challenge ireland faces in international trade
Irish firms may face problems getting paid for their exported goods
If foreign customer doesn’t pay there is little they can do to recoup the money
Legal systems may be harder to enforce in other countries
Explain cultural differences as a challenge ireland faces in international trade
Different cultures- notiosn of what is acceptable behaviour
Must learn cultural norms of their trading partners
Wont want to offend them to keep their business
Ex: Revlon perfume in Brazil scented like camellia flowers. However that is a funeral flower in brazil and was unsuccessful
Give points on the role of ICT in international trade
Increases sales
Faster and cheaper communication
Decision making
Reduced costs
Give points on the role of ICT in international trade
Increases sales Faster and cheaper communication Decision making Reduced costs Advertising
Explain increased sales as a important aspect of the role of ICT in international trade
Can engage in E commerce
Business can showcase products on a website to consumers around the globe and can sell to them as they send their credit card details on the website
Even from small businesses auction sites ex: EBay
No need for shops worldwide
Ex: www.lilyobriens.ie
Explain faster and cheaper communication as a important aspect of the role of ICT in international trade
E-mail enables you to send a typed message directly from your computer to another via the internet
Can send as many as it wants for one monthly flat fee
Reduces communication costs
Ex: Aer lingus emails customers special offers
Explain decision making as a important aspect of the role of ICT in international trade
The www is a vast collection of information on millions of topics accessed via the internet
Helps managers make good decisions
Can download any information from the internet in seconds
Information can be gotten about foreign countries, markets and opportunities
Explain reduced costs as a important aspect of the role of ICT in international trade
Video conferencing is a virtual meeting between people in different locations over the internet
Live picture and sound of each person are sent to screens in other locations
Business has no need to travel to overseas branch
Can meet with managers and staff over internet saving time and expense
Explain advertising as a important aspect of the role of ICT in international trade
Allows business to develop a global brand
Social networking sites allow business to reach a global audience and form a real connection
Can have their own website
Name three organisations that help irish businesses export
Enterprise Ireland
Department of Business, enterprise and innovation
Diplomatic services
Explain how enterprise ireland helps irish exporters
Helps firms export by providing:
Market research information on foreign opportunities, introductions to foreign distributors and buyers, financial supports, and training courses
Explain how department of business, enterprise and innovation helps irish exporters
They help by giving advice on documents used in foreign trade and in regulations that must be obeyed.
Also provide export credit insurance- promises to pay exporter if foreign customer does not pay
Explain how diplomatic services help irish exporters
They promote ireland aborad to maintain and increase exports
They lobby foreign governments and companies to trade with ireland
They help organise trade missions to make foreign contacts
They help organise trade fairs - exhibition of products in a foreign country
