Sending (goods or services) to another country for sale.
Bringing (goods or services) into a country from abroad for sale.
Trade barriers:
Many governments try to limit the importation of goods by placing trade barriers in the way.
Tariffs:
Taxes that are imposed on imports.
The World Trade Organisation has been driving tariffs around the world down.
Much talk about how the UK will have to play by WTO rules if we leave the EU without agreement on free access to the Single Market.
Click on the picture for the result of a 'no deal' Brexit:
Non tariff barriers:
1. A quota (physical limit) on the number of imported goods.
2. Specifying rules about packaging, quality, safety or ingredients.
Methods of entering international markets:
Business routes to international markets. Details here.
Direct exporting:
Indirect exporting:
Overseas agent or distributor: details here.
Overseas distributor: details here.
Licencing and franchising: details here.
This is also known as foreign direct investment (FDI).
FDI is the most complicated, costly and risky form of investment in a country.
FDI is investing by setting up operations or buying assets in another country.
The UN considers FDI to have occured where a firm takes an equity stake of 10% in a foreign enterprise.
A firm may prefer FDI over exporting or licencing for many reasons.
1. Managers want to maintain close control over operations in other countries.
2. A firm wants to protect its intellectual property.
3. A firm wants to be close to its consumers.
4. Its products incur high transportation and logistics costs.
5. It faces trade barriers or political opposition.
Nissan’s Sunderland plant opened in 1986 and has produced almost 9 million cars since then.
One in three British cars are produced in Sunderland, which is the UK’s largest car plant of all time.
In addition, 80% of production from Sunderland is exported to over 130 international markets.
More than 2 million Qashqai’s have been built in Sunderland in less than 10 years.
In addition to the 7,000 direct employees at Sunderland, the plant supports a further 28,000 British automotive supply chain jobs.
To date, Nissan has invested more than £3.7 billion in FDI in Sunderland.
A joint venture would involve FDI: details here.
Set up an overseas operation: details here.
Horizontal FDI:
Taking over or opening operations which are the same as in the home country.
Spanish bank Sabadell took over British Bank TSB in 2015.
Vertical FDI:
Where one firm is seeking to obtain materials or support for its own products or services.
Click on picture:
Other forms of FDI.
Strategic alliances.
Such as Star Alliance, the largest airline codeshare alliance in the world. Details here.
Potential benefits of FDI:
Access to new markets.
Cheaper manufacturing facilities.
Possible problems with FDI:
Not understanding the market.
Possible government interference.
Click on the headline:
Theft of intellectual property.
Accusations of unethical business activities causing reputational damage.
Click on the headline:
Lego in China:
The link between specialisation and competitive advantage:
Specialisation means a business concentrates on a specific range of products or services.
Click on the headline:
This results in greater efficiency, allowing for goods and services to be produced at a lower unit cost.
This allows businesses to lower prices or increase profit margins.
Competitive advantages (Michael Porter, 'Competitive Advantage' 1985).
A business should specialise in what it does well and adds value.
A business may have particular resources that it can use wherever it operates:
Resources such as a successful business model.
Highly trained and specialised staff.
Intellectual property.
A business may have gained access to local markets, local resources and materials.
