International trade

Question 1

free trade to UK businesses and their stakeholders

Answer 1

Free Trade – Benefits:
For UK Businesses:

Larger export markets → more revenue.
E.g. UK car manufacturers like Jaguar Land Rover exporting to EU/US.
Access to cheaper imports → lower input costs for production.
For Consumers:

Lower prices due to global competition.
Greater choice of goods and services.
For Employees:

Can lead to job creation in export-driven industries.
For Shareholders:

Higher profits from international sales and efficiency.

Free Trade – Drawbacks:
For Local/Smaller Businesses:

More competition from cheaper foreign goods.
Risk of being undercut by overseas producers.
For Employees:

Job losses in sectors like steel or textiles due to cheap imports.

Question 2

protectionism to UK businesses and their stakeholders

Answer 2

Protectionism – Benefits:
For Domestic Firms:

Tariffs/quotas reduce foreign competition, allowing UK firms to survive/grow.
For Workers:

Helps protect jobs in vulnerable sectors (e.g. UK steel, agriculture).
For Government:

Tariff revenue can be reinvested.

Protectionism – Drawbacks:
For Businesses Using Imports:

Higher input costs (e.g. food, electronics components).
For Consumers:

Higher prices and less choice.
Risk of retaliation: Other countries may impose tariffs on UK exports, harming exporters.

Question 3

challenges to UK businesses of developing new international markets for their products

Answer 3

1. Cultural Differences
   Marketing, branding, and product use may differ (e.g. packaging colours, dietary preferences).

E.g. Tesco struggled to adapt in the US (Fresh & Easy) due to different shopping habits.

2. Legal and Regulatory Barriers
   New markets mean adapting to local tax laws, employment rules, and product regulations.
   Adds complexity and compliance costs.
3. Logistics and Supply Chain
   Managing longer lead times, customs procedures, and transport reliability.
   Can increase costs and delays.
4. Currency Fluctuations
   Exchange rate changes affect profit margins and pricing.
   E.g. Post-Brexit GBP depreciation raised import costs for many UK firms.
5. Local Competition
   Established firms may have brand loyalty, local knowledge, and economies of scale.
   UK businesses are often at a disadvantage.
6. High Initial Investment
   Expanding abroad requires significant resources: market research, staff, marketing, legal advice.

Question 4

Evaluate the decision of a business to develop new international markets for its products

Answer 4

Potential Benefits (Pros):
Increased Revenue & Growth
Access to fast-growing markets (e.g. India, Southeast Asia).
E.g. BrewDog and Greggs exploring international franchises.

Diversification
Reduces reliance on UK market → spreads risk (economic, political, demand-based).

Economies of Scale
Larger production can reduce unit costs.

First-Mover Advantage
Entering an untapped or less saturated market can give long-term brand loyalty.

Potential Drawbacks (Cons):

High Risk and Uncertainty
New markets bring regulatory, cultural, and economic risks.
E.g. Tesco’s failed US venture cost £1.2 billion.

High Costs
Expansion involves R&D, marketing, recruitment, distribution, legal advice.

Dilution of Focus
May distract from core UK operations or spread management too thin.

Brand Risks
If the brand fails abroad, it may damage reputation globally.