Term 4 Flashcards
International trade definition
Operates in one county but sells to others across borders
Globalisation definition
Increased integration and interdependence of national economies
5 reasons why international trade exists
- reduce costs and efficiency
- facilitate economic growth
- enable specialisation of country
- variety
- Avoid conflict
How does international trade reduce costs
In a larger market, producing more and gain economies of scale
How does international trade facilitate economic growth
Access to an increased pool of customers, thus firms generate more revenue, GDP increase
How does international trade allow specialisation
A country can produce one product/service on high quantity and imports others
How does international trade increase variety
This enables countries to obtain products they can’t produce themselves or only could at a high cost
How does international trade reduce conflict
Nations relying on each other for trade are less likely to encounter conflict
What is the purpose of trade barriers (government POV)
It wills reduce deficit, as nations imports less due to cost of tariffs
Evaluation points of reasons for trade barriers
- Strong currency will make exports less attractive
- Consumers may want to import
Factors to consider when trading internationally
- Language differences
- Exchange rates
- Cultural differences
- Logistics
- Buying habits
3 examples of relationship between globalisation and international trade
- increased communication and awareness of business worldwide increases international trade because it allows investors to access opportunities more easily
- Increased competition, need cheaper resources, causing increase in international trade due to purchasing from abroad
- improvements in infrastructure, increasing international trade as transportation is easier/faster
Free trade definition
Trade without trade barriers
Advantages of free trade
- Reduced business costs (no tariffs)
- Gain EOS more easily due to no quotas
- Increased competitiveness due to more attractive exports
- Cheaper price for customer (no tariffs)
Disadvantages of free trade
- Markets more saturated due to more competition
- Decrease in sustainability/ increase in environmental concerns
- loss of jobs domestically
What is a trade bloc
A group of countries within a particular geographical region that protect themselves from imports from non-members
3 benefits of being part of a trade bloc
- Access to larger market with more customers
- Potential for EOS
- Access to capital from foreign institutions e.g. higher interest rates abroad
Disadvantages of being part of a trade bloc
- Can’t make own deals with other nations, has to abide by trade bloc deals
- Loss of competitiveness if other nations in trade bloc have lower costs eg labour costs
- Free movement of capital could mean domestic firms can be taken over by foreign investors
- Have to follow laws and regulations
Emerging markets definition
A country achieving rapid growth and industrialisation
What is BRICS
Classically thought of emerging markets
Brazil, Russia, India, China, South Africa
Opportunities presented by emerging markets
- Creates new markets, with more customers and higher disposable incomes
- Take advantage of a lack of legal constraints
- Cheaper labour for production
- Production closer to markets they serve so more efficient transport
Threats of emerging markets
- Loss of jobs in developed economies
- Less competitiveness for developed economies firms
- They become more self-sufficient so less reliant on developed economies exports
Digital revolution definition
The shift from analog and mechanical technology to digital technology
Examples of digital technology
- Digital storage of data
- Communication such as email and video conferencing
- Internet to sell, advertise and access bank accounts
The information age definition
A time when large amounts of information is widely available
Impacts of increase in information (eg locations services on google)
- Time sensitive promotions
- Staff planning
- Customer flow improves
- Stock Control
Opportunities of digital revolution
- Cost saving (access info at little cost)
- More efficient advertisement
- Easier to receive feedback and therefore improve operations
Threats of digital revolution
- Constantly updating
- Training costs and time for staff to adapt
- Increase in bad press as publicity is more widely available
Factors that will cause a variation in the impact of the digital revolution
- The market/industry
- How competitions also respond to tech
- Type of product or service being sold
- Budget of the firm
- Demographics of consumers
