International Trade 4.1.2

Question 1

What is importing?

Answer 1

Buying products for resale or importing raw materials and components for the production of
goods that are imported from a foreign country.

Question 2

What is exporting

Answer 2

Selling products and services direct to a foreign customer

Question 3

What are the risks of importing and exporting internationally?

Answer 3

risks associated with fluctuations
in the exchange rate that will influence costs and demand from foreign buyers.

Question 4

What is the easiest way to trade internationally

Answer 4

through a local agent. This business will have expertise in the local market, deal with administration and in some cases negotiations with local businesses.

Question 5

What is comparative advantage?

Answer 5

Comparative advantage comes from a country’s ability to specialise in the production of certain goods and trade them with other nations, rather than nations producing multiple products themselves.

Question 6

How can a competitive advantage be gained?

Answer 6

gained from adding value where other businesses cannot, for example using local resources

Question 7

Reasons for FDI

Answer 7

• Investment in expanding industry and fast growing, profitable businesses
• Access to local resources

-Access to foreign brands

• Access to local knowledge and skills
• Access to infrastructure and complementary industries

Question 8

What does FDI involve?

Answer 8

involves direct investment into a country, leading to a business becoming a multinational corporation (MC).

This might include setting up a production facility, a joint-venture with a local firm or buying assets in a foreign country.

Question 9

Drawbacks and advantages of FDI

Answer 9

It is far riskier than exporting or importing, but allows a firm to access the comparative and competitive advantages held by foreign businesses.