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

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1. Advantages of being in a trading bloc:

  • 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
  • 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
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2. What is a benefit of global sourcing?

  • Potentially significant labour cost reductions
  • Higher risk of loss of intellectual know-how
  • Impact on existing workers
  • The cost of training the new workers

3. 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

4. Definition of globalisation?

  • "If everyone decided to travel around the globe"
  • "When a business successfully enters every single market on the globe"
  • "The increased freedom and capacity of individuals and firms to undertake economic transactions with residents of other countries on a global scale"
  • "The decreased freedom and capacity of individuals and firms to undertake economic transactions with residents of other countries and operate on a global scale"

5. What is backwards innovation?

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