International Trade and Business Growth (4.1.2) Flashcards
What does it mean if a business trades internationally?
The import and export goods and services
What are imports? UK biggest export e.g?
Goods and services bought by people and businesses in one country from another.
In 2022, the UK’s biggest import was cars.
What are exports? China’s e.g?
Goods and services sold by domestic businesses to people or businesses in other countries.
China’s biggest export was smartphone manufacturing.
What is specialisation? e.g
Occurs when a country/business decided to focus on producing a particular good/service. Countries can also specialise on a narrow range of goods and services.
An example is Apple who focus on production of technological products and services
An example of a country specializing on a narrow range of goods and services is Ghana who specialize in cocoa and gold
What are the benefits of specialization?
-Lower unit costs due to EofS as costs are spread over larger output
-Lower unit costs allow the business to lower prices for consumers leading to more sales
-If businesses don’t lower their selling price, then they increase their profit margins
-Any excess output can be sold abroad as exports
When a business specializes what can it help them to gain?
A competitive advantage
What is a competitive advantage? e.g
By increasing the value added on their goods/services, this can help to gain an edge over their competitors.
e.g. Having access to local markets, resources and materials that competitors don’t have access to
What is Foreign Direct Investment (FDI)?
Is investment by foreign firms which results in more than 10% share of ownership of domestic firms
What do businesses normally do as a result of FDI?
Grow as mergers, takeovers, partnerships or joint ventures in order to enter new markets.
What are the benefits of FDI?
-Increased economic growth as inflow of money into the country
-Increased job opportunities as businesses expand operations
-Access to knowledge and expertise from foreign investors
When does Inward FDI occur?
When a Foreign business invests in the local economy
When does Outward FDI occur?
When a domestic business expands its operations to a foreign country
