To trade in international markets firms need to develop a competitive cost base which will allow them to be attractive to consumers in other markets. Why then is it that trade of this type has increased so much in recent years?
- The increase in the number of trading blocs - such as the EU and NAFTA. These reduce tariffs and other barriers between member states e.g. quotas.
- Costs of production - to sell across the continents a company needs to keep its cost base competitive. In particular labour costs have to be kept low, whilst encouraging high productivity. This has promoted the use of outsourcing to low labour cost economies.
- Corporate policies - to remain competitive businesses need to respond to consumer needs. They therefore need to research, innovate and apply technology. To be ahead of the market normally helps and this requires careful training of employees.
- Liberalisation of trade - such organisation as The World Trade Organisation (WTO) work to remove the barriers that stop free trade. The WTO has set itself the task of: phasing out agreements which offer protection to select group of economies, liberalising trade in agricultural goods, preventing the exploitation of intellectual property rights, opening up markets to tenders from other nations and removing voluntary export restraints. As they are more successful so more countries enter the international environment. Other groupings such as the G20 work to promote world trade.
Read the article G20: Leaders' statement from Seoul summit and then have a go at the questions below. You can either read the article in the window below, or follow the previous link to open the article in a new window.
Produce a summary of the G20 summit identifying ten key strategies to promote international trade.
Firms from the developed countries are building trade links with NIC's - the newly industrialised countries, such as the BRIC countries - Brazil, Russia, Indonesia and China.
Entering overseas markets
Which of the following is NOT a way of entering overseas markets?