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20 Cards in this Set
- Front
- Back
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What are push and pull factors when considering why a business may want to trade internationally? |
Push factors : are things which push a business towards an international company and away from trading in their home country Pull factors : are attributes of the international country which draw the firm in |
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Give some advantages of push and pull factors when considering why a business such as Tesco would want to trade internationally in places such as China. |
Push factors : The UK population size is only 59 million and there are currently many similar business' operating in the UK, For example Morrisons and ASDA. Pull factors : China's population is very large (1.3 billion) therefore Tesco would have many more potential sales. China has a large middle class and Tesco wouldn't be under any restrictions. |
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In UNIT 3 (International Business) the term BIGLIFE is used. What does this mean? |
BIGLIFE describes the factors which prompt international trade. It stands for : B - Benefits of emerging markets (A country which traditionally has low incomes but has potential to grow and offer opportunities for a business. I - Innovations in multiple markets (Businesses will attempt to gain first mover advantage by launching a new product in as many markets as possible) G - Global sourcing (Businesses can source cheaper goods and labour from overseas which attracts a business to move their. Cheaper goods and labour means higher profit. L - Limited growth in domestic market (This means the businesses home market is saturated meaning too full of competition so a business will move overseas to look for growth opportunities. I - Improvements in transport and communication (New technology has improved transport and communication making it easier to advertise, sell online and distribute) F - Foreign competition in home market (Cheaper overseas rivals can take market share from firms, forcing them out of their home market) E - Extension of the product lifestyle (When a product enters the maturity/decline stage of the product in their home country, they look to introduce the product to new markets and countries. |
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Some businesses fail when they attempt to trade internationally. Why do you think this happens? |
Some examples for reasons for failure include: - Customer spending powers and tastes differ in each country. - Could be economic crisis (Eg Recession) - Could be large domestic competition - Could be different laws in each country - Businesses sometimes can have ignorance to local culture. |
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What are the meanings for the following phrases? : Trade liberalization Free trade Protectionism |
Trade liberalization - This is reducing the barriers to free trade and removing protectionism. Free trade - This means there are no barriers to trade and no restrictions. Protectionism - This means using barriers to trade (tariffs, quotas, subsidies) to protect local economy. |
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Name the three types of protectionism and what they do/mean. |
Tariff - This is a tax placed on imported goods by the government. This then adds money onto the final price of the goods making foreign goods seem less competitive. Quota - This is a limit set by the government on how much of a certain product can be imported. Firms are limited on how much of a certain product they can sell overseas. Subsidy - Funding or help given by the government to support the domestic industry. Could prevent another country from competing with domestic businesses. |
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Why do some countries use protectionism? |
- Protect domestic industries - Protect domestic jobs - Protect necessities/essentials - Protect from dumping - Balance of payments (Exports > Imports) |
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What are some problems with protectionism? |
- Tariffs increase final prices for the customers, making goods more expensive for people. - Could lead to retaliation from other countries leading to trade wars. |
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There are many benefits to free trade for consumers, firms and the government. What are they. |
Consumers : Cheaper foreign goods, Good quality goods, More choice of goods. Firms : Sell to a bigger market, cheaper raw materials, Competition makes firms more productive and efficient. Government : Help make better relations between countries, Gain more tax revenue and the living standards of the economy rise. |
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What are trading blocs? |
Trading blocs are a group of countries that have either reduced trading or no trading barriers/restrictions between the members. |
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Name some examples of trading blocs around the world and what their rules are. |
European Union : Members of this TB include France, Germany, Portugal, Sweden, England, Ireland, Poland and Spain (Total of 28 Countries). The rules include eliminating internal barriers and agreeing on common external barriers. NAFTA : Members include Canada, Mexico and the USA. The rules are eliminating internal barriers but maintaining independent external barriers. ASEAN : Members include Cambodia, Vietnam, Philippines, Malaysia (Total of 10 Countries). This TB is a free trade area. |
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Name some examples of benefits of trading blocs. |
Benefits for customers : No tariffs meaning cheaper goods and lower prices. More choice as more foreign businesses operating in your market for cheap prices. Benefits for exporters : Access to a larger market (tariff reduction) more sales and jobs. Reduces quotas so high amounts of goods can be exported into countries. Benefits for importers/local businesses : No tariffs, cheaper costs, lowers prices to customers. No border controls (Fast delivery time) Benefits for the economy : Encourages specialization, greater efficiency, high GPD, more jobs. |
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Name some examples of problems with trading blocs. |
Possible losers : More competition for domestic markets which could lead to loss of domestic jobs and businesses. Regional protectionism : Trading blocs don't promote free trade globally and its viewed as regional protectionism. Could lead to trading disputes between blocs. Costly to save struggling neighbors : Can be costly yo an economy to contribute to the running of a trading bloc and rescuing struggling members. |
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Who and what is the WTO? |
The WTO (World Trade Organisation) is an international body whose purpose is to promote free trade by persuading countries to abolish import tariffs and any other barriers. There are 161 members of the WTO who deal with the rules of trade between nations, have a goal to help exporters and importers trade internationally and settle trade disputes. |
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What are the main benefits and problems with the WTO? |
Benefits : Promotes peace, Makes life much easier, Provides more choice of products for customers, Disputes are handled constructively, Freer trade cuts costs of living and trade stimulate economic growth. Problems : The WTO is controlled by the rich and powerful who can sometimes mainly aim decisions in favor of richer countries. The WTO can also be considered slow and ineffective and dumping isn't deterred. |
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What are the advantages of trading with China and India in relation to their population size? |
China : China's Population size is over 1.3 billion. There are many people in Poverty, they have a growing middle class. Implications of this mean less jobs, more potential sales for businesses, more competition within China and issues such as 1 child policy. India : India's population size is over 1.2 billion people and should increase to over 1.6 billion by 2050. 50% of the population are under 25 yrs old and 65% of the population are under 35 yrs old. The implications of this include a large work force (relatively cheap) and a larger target market for businesses to sell to. |
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What are the advantages of trading with China and India in relation to their economic growth/power. |
China : Averaged of 8-9% for the last 30 years. Implications of growth in middle class (more spending power) Government investment in technology and reduction of poverty. India : Grown rapidly 5-11% per year. Currently slowed down to 7%. Implications of this are as the output increase Indian people have more spending power (growing middle class) making them able to buy more luxury and normal goods. Indian firms are growing/investing and competing and wages are starting to rise in India. |
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What are the advantages of trading with China and India in relation to imports and exports. |
China : Main manufacturers of toys, electricals, textiles and shoes (Exports). Mainly import petrol, Iron-Ore, Gold and Copper. India : Mainly manufacture Iron and steel, Gold, cars (Exports). Mainly import cotton, jewellery, flowers. |
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What are the advantages of trading with China and India in relation to increased purchasing power. |
China : They have a growing middle class however there's a big divide between the rich and poor. Rising incomes and purchasing power. India : Many millionaires in India but also many in poverty. Many different dialects and religions. Also many vegetarians and lots of hard working people. This means the marketing mix need to be adjusted to the market in India. |
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What are the advantages of trading with China and India in relation to foreign investment. |
China : Investment has gone to other developing countries. 68% of China's investment goes to Asia. Inward (128bn) Outward (613bn) India : Inward (23m) Outward (7000m) |
