B USINESS ACTIVITY 3 1 – Market economies 2 – International trade 1 - Assess the benefits of market and mixed market economies 2 – Determine the pros and cons of conducting business internationally 3 – Analyse the factors that may make entering an international market difficult Plenary

M IXED MARKET AND MARKET ECONOMIES ( UNIT 1.4.1)

W HAT IS AN ECONOMIC SYSTEM ? Market economic system Planned economic system Mixed economic system

A DVANTAGES OF A FREE MARKET ECONOMY A variety of goods and services Businesses respond quickly Businesses will innovate There is no taxation

D ISADVANTAGES OF A FREE MARKET ECONOMY Businesses will only produce goods and services that earn a profit Businesses will only sell products to consumers who can afford to pay most for them Resources will only be employed if it is profitable to do so Harmful goods may be produced if it is profitable to do so Some producers and consumers may ignore the harmful effects of their decisions on others and the environment Some firms may dominate the market supply of a particular product

T HE MIXED ECONOMY The government can: Provide services such as education Provide services such as street lighting Employ people who would otherwise be unemployed Provide financial help to important businesses Introduce laws to protect the consumer and the environment Regulate or break-up monopolies

P ROBLEMS CREATED BY GOVERNMENT POLICY Disposable income is reduced due to taxation Increased costs to business of regulation Public sector organisations are often inefficient

I NTERNATIONAL TRADE ( UNIT 1.4.2)

C ONSUMER CHOICE AND OPPORTUNITIES FOR GROWTH Consumer choice Increased competition Business growth Free trade (workforces and technologies anywhere in the world)

A DVANTAGES OF INTERNATIONAL TRADE Specialisation Consumers benefit from imported goods otherwise not available to them Competition Economies of scale Best workforces

D ISADVANTAGES OF INTERNATIONAL TRADE Competition Movement to less well developed economies Global demand may be dominated by certain developed/developing economies Social cost of transport pollution

B ARRIERS TO FREE TRADE Tariffs Subsidies Quotas Embargos

A RGUMENTS FOR TRADE BARRIERS They help protect small businesses and new industries They prevent dumping They prevent over-specialisation by protecting a range of different industries

A RGUMENTS AGAINST TRADE BARRIERS They restrict consumer choice and opportunities for new businesses and business growth They protect inefficient domestic businesses with higher costs and often lower-quality products Other countries will retaliate by introducing their own trade barriers

P ROBLEMS ENTERING NEW MARKETS ABROAD ( UNIT 1.4.3)

E NTERING OVERSEAS MARKETS There may be language barriers Different cultures, customs and tastes will need to be understood The business must comply with different laws, regulations and taxes The business must manage exchange rate risks There are increased risks of non-payment

O VERCOMING PROBLEMS ENTERING OVERSEAS MARKETS A business can use local contacts A business can set up assembly or sales only business units overseas It can enter into a joint venture with an overseas business A business can merge with or takeover an existing business

B USINESS ACTIVITY 3 1 – Market economies 2 – International trade 1 - Assess the benefits of market and mixed economies 2 – Determine the pros and cons of conducting business internationally 3 – Analyse the factors that will make entering international market s difficult Plenary