International Trade & Business Growth (Edexcel A Level Business): Revision Note
Exam code: 9BS0
Business specialisation and competitive advantage
As businesses grow, many look beyond their domestic market to trade internationally, whether by buying and selling goods abroad or investing directly in operations overseas
Imports and exports
Imports are goods and services bought by people and businesses in one country from another country
Example
In 2024, the UK’s biggest import was cars, valued at approximately £38.4bn
Exports are goods and services sold by domestic businesses to people or businesses in other countries
Example
In 2023, China’s biggest export was smartphone manufacturing, valued at approximately $136.95bn
Exports generate extra revenue for businesses selling their goods abroad
Imports result in money leaving the country, which generates extra revenue for foreign businesses
Examiner Tips and Tricks
Don't assume exports are automatically "good" for a business or country and imports are automatically "bad" - this is a common oversimplification. Importing raw materials or components can give a business access to cheaper or higher-quality inputs than are available domestically, and consumers benefit from a wider range of goods at competitive prices. A strong evaluative answer weighs the specific costs and benefits of trade for the business or country in the case study, rather than treating imports as inherently negative
Specialisation and competitive advantage
Specialisation occurs when a country/business decides to focus on producing a particular good/service
Examples of specialisation
Businesses specialise when they focus on a specific good/service
Example
Apple focuses on the production of technological products and services
Countries can also specialise in a narrow range of goods and services
Example
Ghana specialises in cocoa and gold
How specialisation leads to competitive advantage
Specialisation can increase the quantity and quality of goods and services produced
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 increase their profit margins
Any excess output can be sold abroad as exports
When businesses specialise, it can also help them 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 is having access to markets, resources and materials that competitors do not have access to
Specialisation also carries risks
Structural unemployment can result if a specialised industry declines and workers lack transferable skills
Over-reliance on a narrow range of goods leaves a business or country vulnerable if demand falls or prices become volatile
Example
Ghana's heavy reliance on cocoa exports leaves its economy exposed to fluctuations in global cocoa prices, which fell sharply in 2024/25 after a period of record highs
Foreign direct investment and business growth
Foreign direct investment (FDI) is investment by foreign firms that results in more than a 10% share of ownership in 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
Example
EE was formed in 2012 as a joint venture between the French company Orange and the German company T-Mobile, allowing access to a greater share of the UK market
Countries benefit from FDI, as it 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
Example
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
Example
Dyson has moved its manufacturing from the UK to Malaysia, China and the Philippines
FDI also carries risks for the recipient country
Profit repatriation
Profits generated may be sent back to the investor's home country rather than reinvested locally
Loss of control
Domestic industries may become dependent on foreign ownership and decision-making
Example
Concerns have been raised about Chinese investment in African infrastructure projects, including the Kenya Standard Gauge Railway, creating significant debt obligations for host governments
Case Study
Marchwood Precision
Marchwood Precision is a Greater Manchester-based manufacturer that specialises exclusively in surgical instruments for orthopaedic surgery, a niche it has focused on since being founded thirty years ago.
By concentrating on a narrow range of highly specialised products, Marchwood has built up expertise that few competitors can match, giving it a genuine competitive advantage in a field where precision and reliability matter more than price.
This specialisation has allowed Marchwood to export to hospitals and medical suppliers in over forty countries, with exports now accounting for most of its revenue. To fund further growth, Marchwood recently accepted a 15% investment from a large American medical devices company, a form of inward FDI that gave Marchwood access to new expertise and a stronger balance sheet without losing overall control.
Using this investment, Marchwood opened a small assembly and distribution facility in India, an example of outward FDI, allowing it to serve the growing South and East Asian markets more quickly and at a lower cost than exporting instruments individually from the UK
Examiner Tips and Tricks
When discussing FDI or specialisation, always link the benefit or risk back to the specific business or country in the case study, rather than describing the concept generically. A country reliant on a single export is affected very differently by a price shock than one with a diversified economy
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