International Trade

Chapter 4
 Nature of International trade
 International Trade – is the exchange of goods
and services among nations.

 Imports – are goods and services purchased fro

m other countries.

 Exports – are goods and services sold to other

countries.
 Section 4.1
International Trade
Nature of International Trade

The principle of economic interdepend

ence is fundamental to marketing in a g
lobal environment.
 Interdependence of Nations
 Absolute Advantage - a country has natural resou
rces or talents that allow it to produce an item at t
he lowest possible cost.
China = 80 % silk worm.
Africa= diamonds
Saudi Arabia = oil
 Comparative Advantage – is the value that a natio
n gains by selling what it produces most efficientl
y. Better infrastructure, raw materials, and educat
ed labor force.
 Benefits of International Trade
 Consumers, workers, producers, and nations benefit
from international trade in different ways.
 COMPETITION = lower prices, better products, var
iety of products.

 1/3 of USA profits comes from international trade a

nd foreign investments.
 Workers benefit from higher employment rates
 Section 4.1
International Trade
Nature of International Trade

The Benefits of International Trade

 Government Involvement in Interna
tional Trade
 Balance of Trade – the difference between exports a
nd imports.

 Trade Surplus = nation exports more than imports.

 Trade Deficit = nation imports more than exports.
 Negative Consequences of Trade Deficit = reduces a
nations revenue. More money leaves the country.
Government Involvement in International
Trade
Trade Barriers
Free Trade = commercial exchange betwe
en nations that is conducted on free mark
et principles, without restrictive regulatio
ns.
However, to limit trade, countries impose b
arriers
 Trade Barriers
1) Tariffs
 Tariffs – (sometimes called a duty) is a tax on imports. R
evenue producing tariffs first used around 1913 before in
come taxes..
 Discourage trade or make
prices/competition
fairer = protective tariff.
 Trade Barriers
2) Quotas
 Quotas – limits either the quantity or the monet
ary value of a product that may be imported.
 Sometimes a country may try to improve relati
ons with another country by placing a quota on
itself.
 Trade Barriers
3) Embargos
 Embargos – a total ban on specific goods comin
g into and leaving a country. Can impose an em
bargo for health reasons.
 Grapes in 1989 due to poisoned fruit found duri
ng inspection.
 Mad Cow disease
 Political = CUBA
 Trade Barriers
Political & Economic Consequences
 Protectionism – economic policies to pr

otect domestic industries.

 Protectionism is the opposite of free trade.
 Imposing tariffs and quotas is one method of pr
acticing protectionism.
 Subsidies – subsidizing domestic comp
anies allowing them to be more competi
tive
 Section 4.1
International Trade
Government Involvement in International Trade
Trade Agreements an
d Alliances
World Trade Organization (W
TO)
North American Free Trade Ag
reement (NAFTA)
European Union (EU)
World Trade Organization (WTO
)
A global coalition of nations that ma
kes the rules governing internationa
l trade.
North American Free Trade Agre
ement (NAFTA)
An international trade agreement a
mong the United States, Canada, an
d Mexico.
European Union (EU)
Europe’s trading bloc.
 Trade Agreement and Alliances
Governments make agreements with each other.
1.WORLD TRADE ORGANIZATION (WTO) - 148
members as of Oct 2004.
Reduce tariffs and have a common set of trade rules.

Creates a borderless economy.

Set of rules that are universally accepted

Critics of WTO raise concerns about democracy labo

r rights and the environment.

 Trade Agreement and Alliances
2. NORTH AMERICAN FREE TRADE AGREE
MENT(NAFTA) - 1994 Trade agreement betw
een USA, Canada, and Mexico. To eliminate tra
de barriers and investment restrictions by 2009.
 Immediately tariffs were eliminated on 1000’s of go
ods.
 Trade Agreement and Alliances
3. EUROPEAN UNION (EU) – 1992 Europe’s
trading bloc. 1992 Maastrricht Treaty created
the EU to establish free trade among the me
mber nations.
 Establish and conform to the political, econo
mical, and legal standards.
 In 2004 ten new members joined including P
oland, Hungary, the Czech Republic, and the
Slovak Republic.
 DOING BUSINESS INTERNATION
ALLY
a. Importing: purchasing goods from a foreign cou
ntry
b. Exporting: selling goods to a foreign country
c. Licensing – letting another company use a trade
mark, patent, special formula, company name for a
fee or royalty.
d. Contract manufacturing – hiring a foreign m
anufacturer to make your products, according to y
our specifications.
 DOING BUSINESS INTERNATION
ALLY
e. Joint ventures – a business enterprise
that companies set up together
 Foreign Direct Investment – establishment of
a business in a foreign country
 Multinationals – large corporations that have
several operations in several countries
 Mini-nationals – smaller companies that have
operations in foreign countries.
 Section 4.2
The Global Marketplace
Global Environmental Scan
Political Economic Socio-Cultural Technological
Factors Factors Factors Factors

Government
Stability

Trade Regulations
and Laws
 Section 4.2
The Global Marketplace
Global Environmental Scan
Political Economic Socio-Cultural Technological
Factors Factors Factors Factors

Government
Infrastructure
Stability

Trade Regulations
Labor Force
and Laws

Employee Benefits

Taxes

Standard of Living

Foreign Exchange Rate

Economic Indicators
 Section 4.2
The Global Marketplace
Global Environmental Scan
Political Economic Socio-Cultural Technological
Factors Factors Factors Factors

Government
Infrastructure Language
Stability

Trade Regulations
Labor Force Symbols
and Laws

Employee Benefits Holidays

Taxes Religious Observances

Standard of Living Social Etiquette

Foreign Exchange Rate Business Etiquette

Economic Indicators
 Section 4.2
The Global Marketplace
Global Environmental Scan
Political Economic Socio-Cultural Technological
Factors Factors Factors Factors

Government
Infrastructure Language Measurement Systems
Stability

Trade Regulations
Labor Force Symbols Computers
and Laws

Employee Benefits Holidays Faxes

Taxes Religious Observances Voicemail

Standard of Living Social Etiquette Wireless Phones

Foreign Exchange Rate Business Etiquette Internet

Economic Indicators
 GLOBAL MARKETING STRATEGIES

Globalization – sellin
g the same produ
ct and using the s
ame promotion
methods in all co
untries. (Product
is sold as is)
 How Globalization Works

 Offer the same version of the product

 Find a common need that transcends to dif
ferent cultures
 GLOBAL MARKETING STRATEGI
ES

a. Globalization – selling the same product

and using the same promotion methods in all
countries. (Product is sold as is)

b. Adaptation – the company’s use of an e

xisting product and/or promotion to whic
h changes are made to better suit the char
acteristics of a country or region.
 GLOBAL MARKETING STRATEGI
ES
c. Customization – Creating of an entire
ly new product for a specific foreign
market. e.g. Coca-Cola developed the
Smart brand specifically for the Chin
ese market.
 Section 4.2
The Global Marketplace
Global Environmental Scan

globalization adaptation customization

Selling the same produc A company’s use of an existing
t and using the same pr product or promotion from whi
omotion methods in all ch changes are made to better
countries. suit the characteristics of a co
untry or region.
Creating specifically
designed products or
promotions for certai
n countries or region
s.
Thank You!!!