International Trade

Question 1

Define international competitiveness (trade)

Answer 1

The ability of firms to sell their products successfully both abroad in export markets and at home in competition against imports

Question 2

Give advantages of operating in a foreign market

Answer 2

• huge opportunity for growth and to increase sales
• allows for economies of scale
• a firm that has access to many markets has a lower risk of bankruptcy cos not all markets go down at the same time

Question 3

Give disadvantages of operating in a foreign market

Answer 3

• foreign firms may be able to undercut domestic firms
• firms will need to tame into account different laws, regulations and cultures of countries they wish to trade with = problematic

Question 4

What are the factors determining a firms ability to be internationally competitive

Answer 4

• price = efficient production keep costs low
• quality = high quality products can sell at premium price
• employees = productive workforce to reduce costs and therefore price
• distribution = long distances between countries can impact cost speed and reliability of firm meeting orders
• social and cultural differences = e.g names of products could mean different things in countries like Vauxhall nova = don’t go in Spanish
• marketing = must be effective
• government policy = can create economic environment that’s favourable to firms

Question 5

Give causes for Britain’s poor industrial competitiveness

Answer 5

• education system reinforces cultural bias against industry
• front line managers in industry are paid less than German or US counterparts
• big companies are under-represented in high growth sectors

Question 6

What are import controls/protectionism

Answer 6

Designed to limit the number of overseas goods entering the domestic market 4 different types:

• tariffs
• quotas
• non-tariff barriers
• embargos

Question 7

What are tariffs?

Answer 7

Taxes imposed on imported goods to increase price of good and depending on PED of it, may lead to fall in demand, making cheaper domestic goods look more attractive to consumers

Question 8

What is a quota

Answer 8

Limits sales of foreign goods to a specified quantity e.g 1 million pairs of shoes

Question 9

What are Non-tariff barriers

Answer 9

More subtle controls imposed by government cos they wish to restrict imports without being seen doing it
E.g =
-constantly changing technical regulations which makes compliance difficult for importers

Question 10

What are embargos

Answer 10

Order forbidding trade with a particular country e.g North Korea

Question 11

Give arguments for protectionist measures on international trade

Answer 11

• help stimulate growth/sales of domestic firms
• create more jobs for domestic firms
• can be used to punish unethical countries e.g Zimbabwe

Question 12

Give arguments against protectionist measures on international trade

Answer 12

• smaller/less markets for firms to have access to

- inefficient cos domestic is more expensive

Question 13

What are trading blocs

Answer 13

Agreements between countries that promote and manage trade within a specific world regions e.g European Union

Question 14

Explain what the single market is

Answer 14

In addition to customs union, labour and capital can move freely between member states without restrictions

Question 15

Explain the customs union

Answer 15

A common external tariff is applied to all non-members; trade policies are unified

Question 16

Explain the economic union

Answer 16

Member states adopt common economic policies e.g the EU’s agricultural policy

Question 17

Explain the monetary union

Answer 17

Member countries adopt a common currency and via a common central bank, centralised monetary policy e.g the euro zone

Question 18

Explain a free trade area

Answer 18

Members trade freely with one another but determine their own trade barriers with countries outside the bloc

Question 19

Give characteristics of the European Union

Answer 19

• imports into the EU face a common external tariff
• an advantage for EU firms is access to a ‘domestic market’ of nearly 500 million people
• the EU trading bloc means a teacher in the U.K. is free to get a job in any EU country

Question 20

Define globalisation

Answer 20

Term used to describe the growing integration (in terms of goods, people etc) of the worlds economy. There are interrelationships throughout the world between related businesses

Question 21

What are the main aspects of globalisation

Answer 21

• the growing importance of international trade
• increased integration of capital markets -> governments will need to consider global economic position as well as National situation when deciding on policy

-the rise of multinational firms e.g Coca Cola

Question 22

What factors contribute to the growth in globalisation

Answer 22

• desire of firms in saturated home markets to expand and increase profits
• belief that operating in different markets that are at varying stages of the business cycle will help spread risk
• the cost and ease of communication has improved

Question 23

What factors may influence the success of a firms attempts to go global

Answer 23

• distribution = having access to distribution hubs
• marketing
• global/world events e.g world war and Coca Cola

Question 24

Give advantages of globalisation

Answer 24

• larger increases in competition means new markets/customers = larger profits
• greater need for product differentiation due to increase in competition
• get economies of scale
• more locations for firms to operate from = cut costs and improve efficiency

Question 25

What is a multi national

Answer 25

An organisation that owns or controls production/service facilities outside country which it’s based

Question 26

Give disadvantages of globalisation

Answer 26

- loss of cultural identity in each country as few large multinationals dominate market so we all get same stuff - western firms exploit less developed countries - environment suffers from it as trade and travel between countries increases

Question 27

What is an emerging market

Answer 27

Country that currently has relatively low levels of output but is open for trade with other nations and has potential for rapid growth

Question 28

What opportunities do emerging markets place for U.K. firms

Answer 28

- new markets = access to more customers - production costs lower in these countries so U.K. firms can increase profit margins - demand for capital goods likely to increase as these emerging nations look to improve their infrastructure

Question 29

What threats may emerging markets make to U.K. firms

Answer 29

- infrastructure is often poor standard = logistical problems such as primark in Bangladesh - political situation may be unstable in these countries - as U.K. firms cut costs by relocating abroad, unemployment in U.K. may rise

Question 30

Give advantages of multinationals

Answer 30

- provision of significant employment and training to the labour force in the host country - extend business and consumer choice in host country - multinationals add to host country gdp through their spending

Question 31

Give disadvantages of multinationals

Answer 31

- domestic firms may not be able to compete with multinationals and some will fail - may not feel need to meet host country expectations for acting ethically and/or socially responsible - profits earned may be remitted back to its base country rather than reinvested into host economy