Product/Market conditions that may prompt a business to trade internationally

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1. Give some examples of trading blocs:

  • BFC, NFFC, & SMO
  • PTO, the BU, & AZEAN
  • The EU, ASEAN, & NAFTA
  • EQ, HTO, & TSFC
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2. Advantages of being in a trading bloc:

  • The benefits of free trade between countries in different blocs are lost
  • Products cost more for consumers because efficient producers from outside the bloc may have tariffs added to them
  • Firms inside the bloc are protected from cheaper imports from outside e.g. EU shoe industry from China/Vietnam imports
  • It reduces the beneficial effects of specialisation

3. Why would Protectionism be negative in the long term?

  • It can be expensive for a business to upkeep
  • It weakens the protected industry because there would be no reason to innovate due to lack of competitors
  • The revenue from tariffs may become too big for the government
  • It means that business will get less revenue

4. What is backwards innovation?

  • Innovating in developed markets and distributing in developing markets e.g. computer
  • Strategy of innovating in developing markets and then distributing in developed markets e.g. wind-up radios
  • Innovation by walking backwards
  • Producing products backwards

5. What is the definition of offshoring?

  • Purchasing products from a different country
  • The relocation of a business process from one county to another
  • Distributing products in a different country than the one you produce in
  • Producing products on a boat off shore

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