International Trade and Business Growth (T4)

Question 1

How does specialisation link to this topic?

Answer 1

Specialisation is the process of concentrating on and becoming an expert in a particular skill. This is relevant as a country will have industries in which it leads the world and export its specialised product/services.

Bonus: This may be due to the proximity of certain raw materials or low labour costs…

Question 2

What is FDI?

Answer 2

Foreign Direct Investment, or FDI means money from one country that is invested into another country… This could be through:

1. Building a new factory and setting up production in another country…

Greenfield FDI will create jobs for the host nation, and employees now have disposable incomes to spend on domestic firms or other MNCs which will become a boost on that economy!

2. Acquiring or merging with a foreign company…
3. FDI could also be through investment in an existing foreign company…

Brownfield FDI is used in order to expand business operations to a new region, bringing new technology and creates new markets!

Question 3

What is Globalisation? And what factors are contributing to this?

Answer 3

Globalisation is the growing integration of the worlds economies, and has been encouraged through…

1. Reduction of international trade barriers and enforcing free trade (trade liberalisation)
2. Political change
3. Reductions in transport/communication
4. Increasing significance of MNCs, thus increased flow in FDI
5. Migration*

bonus:* this is the movement of people from one country to another…

Question 4

Many Governments in the past sought to restrict trade as they believed imports would reduce the demand for their own domestic goods, leading to unemployment. Import tax are ways of making overseas goods appear dearer, explain why this is no longer implemented as such?

Answer 4

Governments have since realised how such actions actually discouraged sales of their own exports, and the implementation of the World Trade Organisation (WTO) has since encouraged the liberalisation of trade and exists to reduce trade barriers to trade and implement of system of trade rules which allows for a boost in the worlds globalisation.

Political changes…
The significance of MNCs
& the reduced cost of transport and communication…

…have also led to less protectionist policies and more open trade between nations, and many businesses may invest/set up inside other trading blocs so as to avoid trade restrictions and manufacture in other economies, increasing the globalisation of countries and boosting economies.

Question 5

Explain how migration can also contribute to globalisation

Answer 5

1. Migration provides a supply of low-cost labour and so this lowers a firms costs and allows them to gain a competitive advantage, allowing them to charge low prices which should increase revenue considering customer loyalty which should result in high profits…
2. Migrants may also provide necessary skills and fill in the skill gap and make a significant contribution to national income…