4.1.2 - INTERNATIONAL TRADE and BUSINESS GROWTH

Question 1

EXPORTS

Answer 1

• EXPORTING -> MOST Common ROUTE for FIRM INTO the INTERNATIONAL MARKET as it’s the EASIEST Mode of Entry
• EXPORTING has Become EASIER owing to TRADE LIBERALISATION which has REDUCED TARIFFS and QUOTAS that may Otherwise have LIMITED the IMPORTS into a country

Question 2

IMPORTS

Answer 2

IMPORTS are the GOODS & SERVICE that are BROUGHT into ONE COUNTRY from another
MANY countries TRY to LIMIT the IMPORTATION of GOODS by PLACING TRADE BARRIERS in the way

Question 3

What is SPECIALISATION?

Answer 3

the PROCESS of CONCENTRATING ON and BECOMING EXPERT in a PARTICULAR SUBJECT or SKILL

Question 4

SPECIALISATION & COMPARTIVE ADVANAGE - India Example

Answer 4

• a COUNTRY may decide to SPECIALISE in a PARTICULAR INDUSTRY or SECTOR
• e.g. INDIA specialises in IT due to a HUGE Number of IT Graduates from it’s Uni’s
• means they can SET UP Call CENTRES for OVERSEAS COMPANIES STAFFED by ENGLISH SPEAKING GRADUATES who are on LOW WAGES compared to require in UK

Question 5

What are 4 BENEFITS to INDIA of SPECIALISATION?

Answer 5

• INCREASED PRODUCTIVITY + OUTPUT = REDUCED Average COSTS and EOS
• as MORE RESORUCES are DEVOTED to the INDUSTRY rather than being SPREAD OUT the scale of Production can be INCREASED to GAIN EOS
• this GIVES the Call Service Industry Comparative Advanatage over the next best country
• the INCREASED PRODUCTIVITY –> GDP GROWTH & INCREASING SALES will Boost ECONOMIC GROWTH

Question 6

What are 3 DOWNSIDES of SPECIALISATION?

Answer 6

• a COUNTRY may Become OVER RELIANT On ONE INDUSTRY and this Doesn’t 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

Question 7

What is FDI?

Answer 7

Foreign Direct Investment - this means that a BUSINESS from ONE COUNTRY Decides to ESTABLISH THEMSELVES in ANOTHER COUNTRY

Question 8

FDI and BUSINESS GROWTH

Answer 8

FDI may Decide to BUILD FACTORIES or OTHER BUSINESS Premsis –> CREATES JOBS for the HOST NATION e.g. Microsoft have set up in India