International trade

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What are characteristics of a developed country?
High wages/income, Developed infrastructure, Skilled workforce, Greater consumer spending, Higher standard of living
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What are characteristics of a developing country?
Medium wage, Developing industry, Developing infrastructure, Semi-skilled workforce, Low tech & Agriculture industry
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What are characteristics of a lesser developed country?
Low income, Poor infrastructure, Little industry to none, High tariffs(to raise money), Low consumer spending and Low skilled workers
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Why would a business want to trade internationally?
Extend the product life cycle by selling in new markets, Selling product innovations in multiple markets, Global sourcing, Limited growth in domestic markets foreign competition in home markets, Opening of new markets and Backward innovation
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How can selling internationally extend the product life cycle?
Products can use the international life cycles in order to lengthen the cycle by selling the outdated things abroad eg in India
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What is an example of backward innovation?
The wind up radio
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What is backward innovation?
Taking outdated technology in one economy and putting it into another which works
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What happened with the wind up radios?
They were put into poor areas without electricity. This meant essential education messages can be communicated to the people who need them most.
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How has the wind up radio changed the world?
They're now used throughout Africa and the rest of the developing world, bringing education around HIV/Aids to communities who need it and other health and social info
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What do the WTO attempt to do?
Reduce all forms of protectionism
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What is a tariff?
Tax on imported goods
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What is a quota?
A limit a country puts on its imports
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What are export subsidies?
Where a country gives money to its firms in order to reduce costs and make more competitive to foreign producers
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What are rules and regulations?
Rules on imports to make trade more difficult eq Japan give a specification in Japanese for what cars need to make trade more difficult
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What is low value currency?
When a country artificially puts currency lower so its products are cheaper
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What is trade liberalisation?
Getting rid of of protectionism
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What are advantages of trade liberalisation?
Goods are made more cheaper for consumers, More choice of goods, Increase in competition, Easier to trade, Create more jobs and Reduce firm costs and sell more
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What are limitations of the WTO?
No legal power, Not all countries follow rules and Not all countries are members
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How do we get out of a recession?
Fiscal policy, Monentary policy and Exchange rates
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What is the fiscal policy?
Increase spending to keep economy flowing
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What is momentary policy?
Making interest rates low so houses are cheaper and loans are cheaper do people are more likely to spend money and put it back into the economy
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Why might firms want to market their products internationally?
Increase profits, Spread risk, Unfavourable trading conditions in domestic market & Legal differences
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What has contributed to the increase in international trading?
Increasing size and number of multinationals
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How much of the world market does the British market account for?
3%
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How much bigger is the Chinese market than the British?
20x bigger
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Why is spreading the risk good for a firm?
If they only produce in one country it could cause problems if there is a recession, the more countries they operate in the less vulnerable it is to change
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What happened to Jaguar when the UK went into recession?
They could still sell in China so the effect was less detrimental
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Why does BAT sell in Indonesia?
There are no restrictions on smoking or advertising unlike the UK
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Why are oversea markets different?
Political differences, cultural differences, differences in legislation
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How do costs compare in India to Britain?
40% saving
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How is moving jobs to India globalisation?
It is easy to contact someone on email as it is to contact someone next door
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What is the skill level of India workers compared to British workers?
Indian workers need to have a uni degree to work in a call centre and are a high skilled job
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How does wages compare between call centres and Indian doctors?
People in call centres earn more than doctors and teachers
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What kind of jobs can be outsourced?
Accounting, broad band, manufacturing, and Admin
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Is it ethically acceptable to outsource to Indian call centres?
yes because it is giving Indian workers a job and many businesses need to cut costs or they could go out of business
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Why have many call centres moved to India?
Cheaper, at only £3,000 a year and are highly trained with a degree
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What are problems with oversea call centres?
Different cultures, resentment of job losses in the UK
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Which countries have moved call centres back to the UK?
Powergen and Esure
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What compromise have Norwich union made?
Made customers happy by getting staff in Britain but still not fully shut call centres in india
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What are problems with political differences when selling over seas?
A firm must take into acount the political stability of the country. A change in government could change attitudes towards foreign companies
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What is an example of political problems over seas?
China is stable but has a communist government with state control, joint ventures in China are required and theres a 300% tariff on cars, and they cant own land and have to lease it
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What is the problem with cultural differences when selling oversea?
A product name suitable in one country may have a differnet meaning in another, colours have different meanings
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What is an example for General motors cultural differences?
The Nova ran into trouble in Spain as in spanish "no va" means "doesn't go
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What happened to Nestle when they tried to sell baby food in Africa?
They used the same packaging with a baby on the front with the slogan of the food, so the Africans misunderstood and thought there was ground up babies in the food
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What kind of differences are there in legislation oversea?
Product labelling, Product safety, Environmental impact, Advertising, Religion and prices
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Why is product labelling a problem for selling oversea?
The US laws are more strict than UK laws about the information which should be included on food labels, in America McDonald's have to put the calories on the menu
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Why is environmental impact a problem for selling overseas?
All cars sold in California must be fitted with a catalytic converter meeting standards higher than other places
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Why is advertising a problem for selling overseas?
Cigarette advertising on TV is now outlawed within EU countries
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Why did Mcdonalds have to withdraw from Iceland?
The meat had to be imported because it was too cold for cattle
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What is a problem with market research overseas?
Some cultures such as Japanese aren't truthful about if they don't like products
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What is an example of this?
BSN gave Japanese free samples of Danone yoghurt and asked them to fill in a questionnaire, they gave positive reviews so they went ahead and launched it, but it failed
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What are methods of entering over sea markets?
Exporting, Franchising, Licensing, Direct investment and Joint venture
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What is the method of exporting?
Manufacturing goods at home but selling them abroad,
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What is the method of franchising beneficial?
Quick and relatively easy way of getting into foreign markets and allows the franchiser to have a high degree of control over the marketing of its products
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Who has franshing been benefical to?
Mcdonald's, Pizza Express and Budget rent a car
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What is licensing?
When a firm producers anothers products and uses its brand name, design, patents and expertise under license, the goods do not have to be physically moved abroad
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What is an example of licensing?
Coca Cola license to Cad bury Sweps
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What is a joint venture?
When two companies from separate countries combining their resources
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What are benefits of Joint Ventures?
Risks are shared between 2 firms and the firms can draw on each others strengths
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What is direct investment?
Requires setting up production facilities abroad, by a merger or takeover
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What is an example of direct investment?
Toyota in Derby to get into the single market
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What is an example of a merger?
Tesco in China merged with Hymal
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How much did Seat have to pay China out of its profit?
49% of profit
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Why did Tesco set up in Derby?
To avoid tariffs and get into the single market
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What does BRIC stand for?
Brazil, Russia, India, China
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What is BRIC?
Fast growing economies
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What are some European countries?
UK, Germany, Poland, Hungary, Luxembourg
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What country has the highest income?
Luxembourg - $114,200
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What are some countries in Africa?
Somalia, Ethiopia
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What are some countries in Asia?
India, Pakistan, Bangladesh
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What countries are oil producers?
Qatar, U A E and Kuwait
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What are some countries in South East Asia?
Malaysia and Philippines
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What are methods of selling goods abroad?
Direct sales from the UK, Overseas agent and Overseas subsidaries
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What are direct sales from the UK?
Involve running and exports sales department and sending representatives abroad to meet foreign buyers directly
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What are overseas agents?
Appointed, usually on commission basis to sell the goods on the firms behalf
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What are oversea subsidaries?
Instead of exporting a firm may decide to set up a factory overseas, either to manufacture the whole product, assemble a product or merely a sales outlet to market and sell the product
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What problems do exporters face with international trade?
Difficulty getting market information, Different language and culture, Import regulations (tariffs), Fluctuations in exchange rates, Increased costs of transport, Products need to be adapted to different tastes
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What is the balance of payments?
A record of the financial dealings between economic agents or one country and all other countries
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What are the two sections of the balance of payments?
Current account and Capital account
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What is the equation for the balance of payments?
exports - imports
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What are the two parts to the current account?
Visible and invisible trade
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What is visible trade?
Trade in manufactured goods, primary products, goods that can be seen
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What are examples of visible imports and exports?
Exports- Range Rover and Rolls Royce engines Imports- Matalan and Ugg boots
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What is invisible trade?
Trade of service, a wide variety of services are traded internationally
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What are examples of invisible trade?
Banking service, insurance, shipping and tourism
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What is surplus?
When the balance of trade is positive
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What is a deficit?
When the balance of trade is positive
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What is the capital account?
Refers to the flow of money
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Card 2

Front

What are characteristics of a developing country?

Back

Medium wage, Developing industry, Developing infrastructure, Semi-skilled workforce, Low tech & Agriculture industry

Card 3

Front

What are characteristics of a lesser developed country?

Back

Preview of the front of card 3

Card 4

Front

Why would a business want to trade internationally?

Back

Preview of the front of card 4

Card 5

Front

How can selling internationally extend the product life cycle?

Back

Preview of the front of card 5
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