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Unit 12 International Business ATHE Level 3 Assignment Answer UK
Unit 12 International Business ATHE Level 3 Assignment Answer UK
Unit 12 of the ATHE Level 3 course on International Business unit is designed to provide you with an in-depth understanding of the global business environment, including the opportunities and challenges that arise from operating in an international context. In today’s interconnected world, businesses of all sizes are increasingly operating across borders. This presents a range of unique challenges that require a comprehensive understanding of the global marketplace, cultural differences, and legal and regulatory frameworks. This unit will equip you with the knowledge and skills needed to navigate these challenges and succeed in international business.
Throughout this unit, you will explore key concepts such as globalisation, international trade, and foreign investment, as well as the various strategies that businesses can use to enter and operate in international markets. You will also gain insight into the cultural and ethical considerations that arise when doing business across borders, as well as the various legal and regulatory frameworks that businesses must navigate.
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Below, we will discuss some assignment objectives. These are:
Assignment Objective 1: Understand the nature of international trade.
Explain the key elements required for international trade to benefit both parties.
International trade can benefit both parties involved when certain key elements are present. These key elements include:
- Comparative advantage: Each country should specialize in producing goods and services in which it has a comparative advantage. This means that a country should produce goods or services where it can produce them at a lower opportunity cost than another country.
- Openness: Both countries should be open to international trade and not impose excessive trade barriers, such as tariffs or quotas. This openness can lead to increased competition, innovation, and efficiency.
- Fairness: Trade should be conducted on a fair and level playing field. Both parties should have access to the same information, and there should be no discrimination or unfair advantages given to certain industries or companies.
- Infrastructure: Countries need adequate physical infrastructure, such as roads, ports, and airports, to facilitate the movement of goods and services across borders.
- Legal framework: A well-developed legal framework is necessary to ensure that trade agreements are enforceable and disputes can be resolved in a timely and fair manner.
- Cultural understanding: Understanding cultural differences and norms is important to build trust and establish strong business relationships between parties involved in international trade.
When these key elements are present, international trade can lead to increased economic growth, job creation, and improved standards of living for both parties involved.
Analyse the implications to a named organisation of trading internationally.
Trading internationally can have significant implications for an organization, both positive and negative. Here are some potential implications:
- Increased Market Opportunities: Trading internationally allows an organization to reach a wider audience and tap into new markets that might have more demand for their products or services.
- Diversification of Revenue: Trading internationally can help an organization reduce its dependence on any single market and diversify its sources of revenue. This can help mitigate risks associated with economic downturns in specific regions.
- Economies of Scale: International trade can enable an organization to achieve economies of scale by producing goods or services in larger quantities at a lower cost. This can help the organization achieve cost efficiencies and remain competitive in the global marketplace.
- Access to Resources: Trading internationally can provide an organization with access to new resources, such as raw materials, talent, or technology that might not be available domestically. This can help the organization improve its product or service offerings.
- Exchange Rate Fluctuations: Trading internationally exposes an organization to exchange rate fluctuations, which can impact the value of their transactions and profits.
- Political and Legal Risks: International trade involves dealing with different legal and regulatory environments, and political risks that can arise from changes in government policies, tariffs, or trade agreements.
- Supply Chain Disruptions: Trading internationally can expose an organization to supply chain disruptions such as transportation delays, logistics challenges, or customs issues. These can lead to increased costs and loss of revenue.
- Cultural Differences: International trade involves dealing with people from different cultures, which can lead to communication challenges, misunderstandings, and cultural clashes.
Explain trade deficits and surpluses.
Trade deficit and surplus refer to the difference between a country’s exports and imports of goods and services.
A trade deficit occurs when a country imports more goods and services than it exports, meaning that the country is buying more goods and services from other countries than it is selling to them. This results in a negative balance of trade, where more money is flowing out of the country than is flowing in. A trade deficit can occur for a variety of reasons, such as a lack of domestic production, higher demand for imported goods, or a strong domestic currency that makes exports more expensive.
On the other hand, a trade surplus occurs when a country exports more goods and services than it imports. This means that the country is selling more goods and services to other countries than it is buying from them, resulting in a positive balance of trade where more money is flowing into the country than is flowing out. A trade surplus can occur for several reasons, such as a strong domestic production capacity, a weak domestic currency that makes exports cheaper, or lower domestic demand for imported goods.
Both trade deficits and surpluses have their own advantages and disadvantages. Trade deficits can lead to a buildup of foreign debt and a loss of domestic jobs, but they can also provide access to cheaper imported goods and can help to stimulate economic growth by increasing demand. Trade surpluses can increase domestic employment and income, but they can also lead to trade tensions with other countries and can result in a buildup of foreign exchange reserves.
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Assignment Objective 2: Understand the impact of exchange rates on a business.
Analyse how exchange rate fluctuations affect the price of imports and exports for a named organisation.
Exchange rate fluctuations can have a significant impact on the price of imports and exports for an organization. Let’s take the example of Apple Inc, a multinational technology company headquartered in California, USA.
Apple Inc is known for its range of consumer electronics products such as iPhones, iPads, and Macs, which are manufactured in different parts of the world and then sold globally. As a result, exchange rate fluctuations can affect both the cost of production and the price of its products.
When the value of the US dollar (USD) appreciates against other currencies, such as the Chinese yuan (CNY) or the euro (EUR), it becomes more expensive for Apple to import components and raw materials from these countries. This can increase the cost of production, which may eventually lead to higher prices for its products. In contrast, when the USD depreciates against these currencies, it becomes cheaper for Apple to import these materials, which can result in lower production costs and potentially lower prices for its products.
On the other hand, exchange rate fluctuations can also impact the prices of Apple’s exports. When the USD appreciates against foreign currencies, such as the Japanese yen (JPY) or the British pound (GBP), it makes Apple’s products more expensive for customers in these countries. This can result in lower demand for Apple’s products in these markets. Conversely, when the USD depreciates against these currencies, Apple’s products become cheaper for customers in these markets, potentially leading to increased demand and higher sales.
Explain how an organisation can reduce the risk of exchange rate fluctuations.
Exchange rate fluctuations can pose a significant risk to organizations involved in international trade or investment. The value of currencies can change rapidly, and this can lead to unexpected gains or losses. To reduce the risk of exchange rate fluctuations, an organization can consider the following strategies:
- Hedging: Hedging involves using financial instruments to protect against currency risk. Organizations can use techniques such as forward contracts, options, and swaps to hedge against adverse exchange rate movements.
- Diversification: Diversification is a strategy that involves spreading risk across different currencies or investments. By diversifying their investments across different currencies, organizations can reduce their exposure to exchange rate fluctuations.
- Currency matching: Currency matching involves matching the currency of the organization’s assets with the currency of its liabilities. This can help reduce the impact of exchange rate fluctuations on the organization’s financial position.
- Pricing strategy: Organizations can adjust their pricing strategy to reflect changes in exchange rates. For example, if the value of the organization’s home currency appreciates, it may become more expensive for foreign customers to purchase its products. In this case, the organization could consider adjusting its prices to remain competitive.
- Location strategy: Organizations can also consider locating their operations in countries where the local currency is stable or pegged to a stable currency. This can help reduce the risk of exchange rate fluctuations affecting the organization’s operations.
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Assignment Objective 3: Understand the nature of trade agreements between countries.
Describe two international trade agreements.
Sure, here are two examples of international trade agreements:
North American Free Trade Agreement (NAFTA):
- NAFTA is a trade agreement between the United States, Canada, and Mexico. It was signed in 1994 and aimed to eliminate tariffs and trade barriers between the three countries. The agreement created the world’s largest free trade area, covering more than 470 million people and generating over $1 trillion in trade. NAFTA has been controversial, with critics arguing that it led to job losses and wage stagnation in the United States. However, proponents argue that it boosted economic growth in all three countries and increased competitiveness in the global marketplace.
Trans-Pacific Partnership (TPP):
- The TPP was a trade agreement between 12 Pacific Rim countries, including the United States, Japan, Australia, Canada, and Mexico. The agreement was signed in 2016 but was never implemented due to the withdrawal of the United States under the Trump administration. The TPP aimed to create a free trade area that would cover 40% of the world’s economy. It aimed to reduce tariffs, eliminate non-tariff barriers, and establish common standards for trade among the participating countries. Supporters of the TPP argued that it would boost economic growth and create jobs, while opponents argued that it would lead to job losses and harm the environment.
Explain the role of the World Trade Organisation.
The World Trade Organization (WTO) is an international organization that facilitates trade between its member countries. Its main function is to promote free and fair trade by providing a forum for negotiating and implementing trade agreements, resolving disputes, and monitoring the trade policies of its members.
The WTO was established in 1995 to replace the General Agreement on Tariffs and Trade (GATT), which had been in place since 1948. It has over 160 member countries, making it one of the most influential international organizations in the world.
One of the key roles of the WTO is to negotiate and implement trade agreements among its members. These agreements cover a wide range of issues, including the reduction of tariffs and other barriers to trade, the protection of intellectual property rights, and the regulation of services trade.
Another important role of the WTO is to provide a forum for resolving disputes between member countries. When a dispute arises, the parties can bring it to the WTO for mediation and adjudication. The WTO has a dispute settlement mechanism that allows for the resolution of disputes in a timely and effective manner.
The WTO also monitors the trade policies of its members to ensure that they are in compliance with the rules and agreements of the organization. It conducts regular reviews of its members’ trade policies and provides technical assistance to help countries implement WTO agreements.
Assignment Objective 4: Understand barriers to trading internationally.
Explain how and why governments seek to restrict trade between countries.
Governments may seek to restrict trade between countries for various reasons, such as protecting domestic industries, promoting national security interests, enforcing labor and environmental standards, and responding to unfair trade practices by other countries.
Here are some common ways governments restrict trade between countries:
- Tariffs: Governments may impose taxes on imported goods to make them more expensive and less competitive compared to domestically produced goods. This protectionist measure aims to protect domestic industries from foreign competition.
- Quotas: Governments may set limits on the quantity of goods that can be imported from other countries. This measure is designed to protect domestic industries from being overwhelmed by foreign competitors.
- Embargoes: Governments may impose a ban on imports or exports of certain goods to or from specific countries. This restriction can be used as a tool for political or diplomatic reasons, such as expressing disapproval of another country’s actions or policies.
- Subsidies: Governments may provide financial assistance or other incentives to domestic producers to help them compete against foreign producers. This measure aims to support domestic industries and make them more competitive.
- Regulations: Governments may set standards for the quality, safety, or environmental impact of imported goods, making it more difficult or expensive for foreign producers to meet those standards. This measure can protect domestic industries and consumers, but it can also create barriers to trade.
Explain the operational barriers to trading internationally for a named organisation.
- Language and cultural differences: Different countries and regions have different languages, cultural practices, and business norms. This can create communication challenges, misunderstandings, and difficulties in building relationships with international partners.
- Tariffs and trade barriers: Tariffs, quotas, and other trade barriers can make it more expensive or difficult for organizations to trade internationally. This can lead to reduced profitability or a higher cost of goods sold.
- Compliance with local laws and regulations: Companies must comply with a range of local laws and regulations when trading internationally, such as customs regulations, tax laws, and product safety standards. Failure to comply can result in penalties or even the seizure of goods.
- Logistics and transportation: Shipping goods internationally can be complex and costly, with challenges such as different time zones, customs procedures, and varying transportation infrastructures. This can increase lead times and delivery costs.
- Payment and currency risks: Trading internationally can expose companies to payment risks, such as non-payment or payment delays. Additionally, exchange rate fluctuations can affect the profitability of international sales.
- Political and economic instability: Political and economic instability in a country can pose significant risks to international trade, including the potential for sudden changes in regulations, currency devaluations, or other disruptions.
These are just a few examples of the operational barriers that can make international trade challenging for organizations. Each company may face unique challenges, and it’s important to carefully evaluate the risks and benefits of international trade before expanding operations globally.
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