Final answer:
Foreign trade often follows foreign direct investment. It is typically more costly and risky than making a direct investment. Hiring sales representatives and dispersing production activities are common strategies in international trade.
Step-by-step explanation:
Foreign trade and foreign direct investment (FDI) are closely related. Historically, foreign trade has followed foreign direct investment. This means that when a firm makes a direct investment in a foreign country, it often leads to an increase in trade between the two countries. For example, when a multinational corporation establishes a manufacturing plant in a foreign country, it will likely import raw materials and components from its home country and export finished products back to its home country or other markets.
Foreign trade and FDI have different characteristics in terms of cost and risk. Foreign trade is typically more costly and risky than making a direct investment into foreign markets. This is because foreign trade involves various costs such as transportation, tariffs, and customs duties, as well as the risk of fluctuations in exchange rates and trade barriers imposed by governments.
When a firm wants to develop international trade, hiring sales representatives to live in overseas markets is often a first step. These representatives can help establish relationships with local customers, navigate cultural differences, and understand the market dynamics. However, this is not the case for every firm, as some may choose to rely on other distribution channels or partnerships with local companies.
In recent years, there has been a trend for international firms to disperse their production systems to locations close to available resources. This is driven by factors such as fewer government barriers to trade, increased competition from globalizing firms, and advancements in production and communications technology. These changes have enabled firms to take advantage of cost efficiencies, access to specialized resources, and shorter supply chains.
In summary, all of the statements above are true. Historically, foreign trade has followed foreign direct investment. Foreign trade is typically more costly and risky than making a direct investment. Hiring sales representatives can be a first step in developing international trade. The dispersion of production activities is a common strategy for international firms in response to changes in the global business environment.