International Specialization & Interdependence

By Lais, Ramneek, Zuher

• Thus, a country cannot specialize in a particular item independently

• Resources from other countries in any form may be needed

• Eg. Bangladesh cannot specialize in clothing without importing machinery

• Integration of specialization & interdependence contributes to globalization

• Supply and demand cycle can be used to explain how

How do interdependence & specialization affect a country's economy?

• Interdependence and Specialization go hand in hand

• Interdependence is the result of specialization

• Eg. A specialist in gold jewelry cannot usually obtain gold by itself

Some Terminology:

Interdependence

Relationship between Interdependence & Specialization

Reasons For Interdependence

What is Interdependence?

• Resources are unevenly distributed

• No one country has all the resources it needs

• Each country must trade with others

• This results in a world of global economic interdependence

• Each country depends upon and is depended upon by other countries

• Importing and exporting goods highly contributes to global interdependence

• Some countries are rich in natural resources but lack productions means and some are vice versa
• Resource rich countries : Venezuela, Brazil, Australia
• Countries with scarce resources : Japan, South Korea, Singapore

• Interdependence is extremely important in the modern era

Effects of Interdependence

Looking At Japan

• New information technologies, reduction of transportation costs

• Free Trade Associations ( NAFTA, EFTA)

• International Division of labor

• World's 3rd largest economy

• Inadequate natural resources

• Heavy reliance on imported raw materials (oil, metals etc.)

• Large exporter of automobiles, electronics i.e. manufactured goods

Foreign Direct Investment (FDI):

Effects Of Interdependence

Environmental Impact

When a business establishes a presence in the foreign market by investing capital and securing ownership of a factory, subsidiary, or other facility there.

Natural disaster negatively affects the gathering of a resource

Decrease in the manufacturing and/or distribution of several products

More Terminology:

Specialization

Multiple vs Single Specialization

Opportunity Cost

China

Iceland

Exports:

Exports:

Different types of fish

• Electrical and other machinery
• Data processing equipment
• Apparel
• Textiles
• Iron and Steel
• Optical and Medical Equipment

Specialization

• Business or area focuses on the production of a limited scope of products or services

• Done to gain greater degrees of productive efficiency

• Example: McDonald's specializes on fast-food

International specialization is extremely dependent on the local market/exporting:

How do businesses/countries succeed?

Goals and Objectives

• What, Where, How, When, Who

• Investment and Profit

• Employees and Foreign Representatives

Preferences and Risks

• Balancing risks and return

• Priority countries

• Adaptation

Observe Competitors:

• Innovation

• Price

• Quality

Resources and Capabilities

• Maximizing production and decreasing cost

• Manufacturer/Labour Force

• Distribution and Transportation

Comprehend Domestic/Foreign Cultures

• Financial Status

• Push and Pull factors (initial triggers)

• Accidentally getting involved

International Specialization & Interdependence