International trade and business growth Flashcards
What are imports?
The UK is only a small Island so we need to bring in goods from other countries that we might need. This is called importing.
Some countries specialise in producing certain goods, and with their low labour costs they can make products at more attractive prices than we can in the UK
What are exports?
All countries trade with other countries, they send products abroad. This process is called exporting.
The UK exports: Medical supplies Cars Gas turbines And gold
Define the term specialisation.
Specialisation is the process of concentrating on and becoming expert in a particular subject or skill
In terms of countries it means that a country will have industries in which it leads the world. This may be due to; proximity of raw materials, low labour costs, historical ability or other factors e.g. Belgian chocolate, Scotch whiskey etc.
Explain specialisation and comparative advantage.
A country may decide to specialise in a particular industry or sector
For example India specialises in IT due to a huge number of IT graduates from its universities
This means they can set up call centres for overseas companies staffed by English speaking graduates who are on a fraction of the wages required in the UK
What are the benefits to India of specialisation?
Increased productivity and output, this means reduced average costs and economies of scale
As more resources are devoted to the industry rather than being spread out the scale of production can be increased to gain the EOS
This gives the Indian call service industry comparative advantage over the next best country
The increased productivity will lead to GDP growth and increasing sales will boost economic growth
What is the downside of specialisation?
A country may become over reliant on one industry (eggs in one basket) and this does not spread risk
Other countries may become cheaper in the same industry and it may be harder to compete
If the business grows too big it may suffer from DEOS through lack of communication and co-ordination
Define FDI.
FDI is foreign direct investment – this means that a business from one country decides to establish themselves in another country.
Explain FDI and business growth.
FDI may decide to build factories or other business premises which will create jobs for the host nation e.g. Microsoft, Facebook and Amazon have all setup in India
