International Trade Flashcards
Define international competitiveness (trade)
The ability of firms to sell their products successfully both abroad in export markets and at home in competition against imports
Give advantages of operating in a foreign market
- 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
Give disadvantages of operating in a foreign market
- 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
What are the factors determining a firms ability to be internationally competitive
- 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
Give causes for Britain’s poor industrial competitiveness
- 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
What are import controls/protectionism
Designed to limit the number of overseas goods entering the domestic market 4 different types:
- tariffs
- quotas
- non-tariff barriers
- embargos
What are tariffs?
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
What is a quota
Limits sales of foreign goods to a specified quantity e.g 1 million pairs of shoes
What are Non-tariff barriers
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
What are embargos
Order forbidding trade with a particular country e.g North Korea
Give arguments for protectionist measures on international trade
- help stimulate growth/sales of domestic firms
- create more jobs for domestic firms
- can be used to punish unethical countries e.g Zimbabwe
Give arguments against protectionist measures on international trade
- smaller/less markets for firms to have access to
- inefficient cos domestic is more expensive
What are trading blocs
Agreements between countries that promote and manage trade within a specific world regions e.g European Union
Explain what the single market is
In addition to customs union, labour and capital can move freely between member states without restrictions
Explain the customs union
A common external tariff is applied to all non-members; trade policies are unified
Explain the economic union
Member states adopt common economic policies e.g the EU’s agricultural policy
Explain the monetary union
Member countries adopt a common currency and via a common central bank, centralised monetary policy e.g the euro zone
Explain a free trade area
Members trade freely with one another but determine their own trade barriers with countries outside the bloc
Give characteristics of the European Union
- 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
Define globalisation
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
What are the main aspects of globalisation
- 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
What factors contribute to the growth in globalisation
- 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
What factors may influence the success of a firms attempts to go global
- distribution = having access to distribution hubs
- marketing
- global/world events e.g world war and Coca Cola
Give advantages of globalisation
- 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
What is a multi national
An organisation that owns or controls production/service facilities outside country which it’s based
Give disadvantages of globalisation
- 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
What is an emerging market
Country that currently has relatively low levels of output but is open for trade with other nations and has potential for rapid growth
What opportunities do emerging markets place for U.K. firms
- 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
What threats may emerging markets make to U.K. firms
- 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
Give advantages of multinationals
- 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
Give disadvantages of multinationals
- 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
