Describes exports and imports, specialisation and competitive advantage, foreign direct investment (FDI) and business growth, globalisation, and trade liberalisation
Theme 4 Topic 2
International Trade and Globalisation
Manufacturing has changed in the UK in recent times. Low value manufacturing has been offshored and high
value manufacturing is now what we are good at and concentrate on. Our economy is focusing on high end
globally integrated innovations
Additionally, we are strong in:
Knowledge sector
Service sector
High value manufacturing
Exports and Imports
Exports – goods or services produced in the firm’s home market but then sold to a foreign market
Imports – goods or services bought from a foreign country
Trade Deficit – imports are greater than exports
Trade Surplus – exports are greater than imports
The level of imports and exports is affected by many factors such as tariffs, quotas, government regulation, and
exchange rates
Specialisation and Competitive Advantage
Comparative Advantage – a theory that a country should specialise in products or services that it produces
more efficiently than in other countries
Specialisation
Specialisation – focusing on a limited range of goods/services to enable greater efficiency or develop greater
expertise
Countries become more efficient if they specialise in certain goods and services and then trade them with
other countries
It allows them to develop skills and become efficient, perhaps gaining economies of scale
Competitive Advantage
Competitive Advantage – the advantages a firm has over rival products from overseas
By specialising it enables firms to gain a competitive advantage overseas. By focusing on what it does well a
firm can generate success in overseas markets by replicating the business model
Competitive advantage can take the form of:
Highly trained and skilled staff
Intellectual property and patents
Innovation and R&D
Specialisation in production where a business focuses on a limited scope of products can lower unit costs by
both economies of scale and high capacity utilisation
This enables high prices to be charged or higher profits which can lead to business growth
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