Chapter 24 International Business

Question 1

Explain home or domestic trade

Answer 1

Buying and selling of goods and services in our own country ex: lily o brien’s

Question 2

Explain open economy

Answer 2

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

Question 3

Explain international trade

Answer 3

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

Question 4

Explain with example visible exports

Answer 4

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

Question 5

Explain with example invisible exports

Answer 5

Irish businesses sell services to foreign countries and this brings money into Ireland Ex: British tourists stay in a hotel in Dublin

Question 6

Explain with example visible imports

Answer 6

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

Question 7

Explain with example invisible imports

Answer 7

Irish businesses and people buy services from foreign countries and money goes out of ireland Ex: irish family stays in a hotel in paris

Question 8

What is the formula for balance of trade

Answer 8

Visible Exports- visible imports

Question 9

Explain surplus

Answer 9

Exports are bigger than imports

Question 10

Explain deficit

Answer 10

Exports are smaller than imports

Question 11

What is the formula for balance of payments

Answer 11

Visible and invisible exports - visible and invisible imports

Question 12

What is the formula for balance of invisible trade

Answer 12

Invisible exports - invisible imports

Question 13

Give four reasons why countries import

Answer 13

Lack of natural resources
Unsuitable climate
Lack of skills
Bigger choice for consumers

Question 14

Explain lack of natural resources with an example as a reason for importing

Answer 14

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

Question 15

Explain unsuitable climate with an example as a reason for importing

Answer 15

May not have correct weather conditions to grow certain crops
Ex: Ireland imports coffee from kenya

Question 16

Explain lack of skills with an example as a reason for importing

Answer 16

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

Question 17

Explain bigger choice for consumers with an example as a reason for importing

Answer 17

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

Question 18

What are three reasons countries export

Answer 18

Survival
To increase sales and profits
Diversification

Question 19

Explain survival as a reason why countries export

Answer 19

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

Question 20

Explain increase sales and profits as a reason why countries export

Answer 20

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

Question 21

Explain diversification as a reason why countries export

Answer 21

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

Question 22

What is the significance of International trade to the irish economy?

Answer 22

Billions of customers
Economies of scale
Foreign currency
Jobs
Competition

Question 23

Explain billions of customers as an importance of international trade to the irish economy

Answer 23

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

Question 24

Explain economies of scale as an importance of international trade to the irish economy

Answer 24

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

Question 25

Explain foreign currency as an importance of international trade to the irish economy

Answer 25

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

Question 26

Explain jobs as an importance of international trade to the irish economy

Answer 26

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

Question 27

Explain competition as an importance of international trade to the irish economy

Answer 27

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

Question 28

Explain free trade

Answer 28

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

Question 29

Explain protectionism

Answer 29

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

Question 30

Explain tariff with example

Answer 30

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

Question 31

Explain quota

Answer 31

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

Question 32

Explain embargo

Answer 32

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

Question 33

Explain subsidy

Answer 33

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

Question 34

What are some major trends in the international economy?

Answer 34

``` Brexit Globalisation Improved information and communications technology Increasing number of trading blocs New markets Competition from low wage economies ```

Question 35

Explain globalisation as a major change in international economy

Answer 35

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

Question 36

Explain Improved information and communications technology as a major change in international economy

Answer 36

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

Question 37

Explain Increasing number of trading blocs as a major change in international economy

Answer 37

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)

Question 38

Explain New markets as a major change in international economy

Answer 38

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

Question 39

Explain Competition from low wage economies as a major change in international economy

Answer 39

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

Question 40

Explain trading bloc

Answer 40

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

Question 41

Explain deregulation

Answer 41

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

Question 42

What does WTO stand for

Answer 42

World trade orgnisation

Question 43

What does WTO stand for

Answer 43

World trade organisation

Question 44

What are Ireland's competitive advantages or opportunities in developed and developing markets

Answer 44

``` Increased Sales Lower costs Earn foreign currency Overcome trade barriers Diversification English Educated workers Green image ```

Question 45

Explain increased sales as an opportunity/competitive advantage for Ireland in international trade

Answer 45

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

Question 46

Explain lower costs as an opportunity/competitive advantage for Ireland in international trade

Answer 46

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

Question 47

Explain earn foreign currency as an opportunity/competitive advantage for Ireland in international trade

Answer 47

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

Question 48

Explain overcome trade barriers as an opportunity/competitive advantage for Ireland in international trade

Answer 48

Irish businesses can set up branches in other countries as a way to overcome barriers to trade

Question 49

Explain diversification as an opportunity/competitive advantage for Ireland in international trade

Answer 49

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

Question 50

Explain english as an opportunity/competitive advantage for Ireland in international trade

Answer 50

English is the international language of business | Irish people can automatically converse with other businesses worldwide in english

Question 51

Explain educated workers as an opportunity/competitive advantage for Ireland in international trade

Answer 51

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

Question 52

Explain green image as an opportunity/competitive advantage for Ireland in international trade

Answer 52

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

Question 53

What are the challenges facing Ireland in international trading - challenges in developed and undeveloped markets

Answer 53

``` Foreign languages Distribution problems Exchange rate changes Competition from low wage economies Payment problems Cultural difference ```

Question 54

Explain foreign languages as a challenge ireland faces in international trade

Answer 54

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"

Question 55

Explain distribution problems as a challenge ireland faces in international trade

Answer 55

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

Question 56

Explain exchange rate changes as a challenge ireland faces in international trade

Answer 56

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

Question 57

Explain competition from low-wage economies as a challenge ireland faces in international trade

Answer 57

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

Question 58

Explain payment problems as a challenge ireland faces in international trade

Answer 58

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

Question 59

Explain cultural differences as a challenge ireland faces in international trade

Answer 59

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

Question 60

Give points on the role of ICT in international trade

Answer 60

Increases sales Faster and cheaper communication Decision making Reduced costs

Question 61

Give points on the role of ICT in international trade

Answer 61

``` Increases sales Faster and cheaper communication Decision making Reduced costs Advertising ```

Question 62

Explain increased sales as a important aspect of the role of ICT in international trade

Answer 62

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

Question 63

Explain faster and cheaper communication as a important aspect of the role of ICT in international trade

Answer 63

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

Question 64

Explain decision making as a important aspect of the role of ICT in international trade

Answer 64

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

Question 65

Explain reduced costs as a important aspect of the role of ICT in international trade

Answer 65

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

Question 66

Explain advertising as a important aspect of the role of ICT in international trade

Answer 66

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

Question 67

Name three organisations that help irish businesses export

Answer 67

Enterprise Ireland Department of Business, enterprise and innovation Diplomatic services

Question 68

Explain how enterprise ireland helps irish exporters

Answer 68

Helps firms export by providing: Market research information on foreign opportunities, introductions to foreign distributors and buyers, financial supports, and training courses

Question 69

Explain how department of business, enterprise and innovation helps irish exporters

Answer 69

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

Question 70

Explain how diplomatic services help irish exporters

Answer 70

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