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4.1.2 International trade and business growth - Coggle Diagram
4.1.2 International trade and business growth
Trade
Imports
an in-land purchase of a good or service made overseas
Exports
the sale of an in-land good or service sold overseas
containerisation
A system of freight transport for use in sea shipping that has reduced the transport cost of moving thousands of different goods across the globe. It has been a catalyst for globalisation.
significance
can be handled anywhere in world + ships, port equipment etc adjusts to handling them with optimum efficiency + with big economies of scale
manufactures can optimise packaging to git into container to lower unit costs of transportation
by lowering costs of trade containerisation = encouraged specialisation + expansion of global chains
specialisation
The process by which individuals, businesses and economies concentrate as creating and selling these goods and services they product the most effectively and cost effectively
Advantages
increase output + efficiency
economies of scale
goods + services can be produced more cheaplyi
increase competitive advantage
competition amongst producers helps lower prices + drive innovation - benefits domestic + foreign consumers
disadvantages
over-reliance on one area of economy
fluctuating commodity prices
overspecialisation can lead to severe structural unemployment if demand should fall
Comparative advantage
if two countries each specialise in the product with the lowest opportunity cost, and trade; the real incomes will increase
limitations
does not include transport costs
negative externalities of trade such as pollution not included in cost of production
domestic producers in some countries are at a cost disadvantage
FDI
when a foreign company starts operating in another country
benefits
provides new employment opportunities that may not have been possible otherwise since foreign firms provide necessary investment
can stimulate economy via multiplier effect: newly employed workers spend wages in rest of economy = boosts incomes of others + increases tax revenues for government = faster economic growth
benefits economy by introducing new + better tech (may not be available before)
if investing company hires local workers, skills of workers will improve
disadvantages
can lead to exploitation of less developed countries, particularly in terms of poor working conditions, low wages + environmental damage