International Trade & Business Growth (Edexcel A Level Business)

Business Specialisation & Competitive Advantage

Imports and Exports 

• Businesses that trade internationally import and export goods/services

  • Imports are goods and services bought by people and businesses in one country from another country

    • In 2022, the UK’s biggest import was cars valued at approximately £3.25 billion

  • Exports are goods and services sold by domestic businesses to people or businesses in other countries

    • In 2022, China’s biggest export was smartphone manufacturing valued at approximately $21.4 billion

• Exports generate extra revenue for businesses selling their goods abroad

• Imports result in money leaving the country which generates extra revenue for foreign businesses

Specialisation and Competitive Advantage 

• Specialisation occurs when a country/business decides to focus on producing a particular good/service

  • Businesses specialise when they focus on a specific goods/services e.g. Apple focus on the production of technological products and services

  • Countries can also specialise on a narrow range of goods and services e.g. Ghana specialises in cocoa and gold 

• Specialisation can increase the quantity and quality of goods and services. This has many benefits including; 

  • Lower unit costs due to Economies of scale  as costs are spread over a large output 

  • Lower unit costs allow the business to lower prices for consumers leading to more sales

  • If businesses do not lower their selling price, then due to the lower costs they are able to to increase their profit margins

  • Any excess output can be sold abroad as exports 

• When businesses specialise, it can also help them to gain a competitive advantage

  • If they can increase the value added on their goods/services, this can help to gain an edge over their competitors

  • An example of a competitive advantage includes having access to local markets, resources and materials that competitors do not have access to

FDI & Business Growth

• Foreign Direct Investment (FDI) is investment by foreign firms which results in more than 10% share of ownership of domestic firms

• Businesses typically grow through FDI as mergers, takeovers, partnerships or joint ventures are created with a foreign business in order to enter new markets

  • E.g. EE was formed in 2012 as a joint venture between the French company Orange and the German company T-Mobile, allowing greater share of the UK market 

• Countries benefit from FDI as this can lead to

  • Increased economic growth as there is an inflow of money into the country

  • Increased job opportunities as businesses expand operations

  • Access to knowledge and expertise from foreign investors

• Inward FDI occurs when a foreign business invests in the local economy

  • E.g. In 2017, Kenya opened the Kenya Standard Gauge Railway line built by Chinese investors 

• Outward FDI occurs when a domestic business expands its operations to a foreign country

  • E.g. Dyson has moved its manufacturing from the UK to Malaysia, China and the Philippines