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Marketing - Chapter 4 - International Trade

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Kevin Krizan

on 11 October 2018

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Transcript of Marketing - Chapter 4 - International Trade

International Trade is
International Trade
International Trade is a trade of goods, services, ect. between two or more countries ( to export and import).
Exporting and Importing
Meat, poultry, Crude Oils, Electronics are a few imported goods that we sell.
Economy has a big part to play in International Trade as well for example, when we had the oil spill, oil and gas prices when up a large amount.
Country we Trade With
1. China
2. Japan
3. Mexico
International Trade -
The exchange of goods and services among

Imports- Goods and services purchased from other countries.
Exports- Goods and services sold to other countries.

-Most countries do not produce or manufacture all the goods
and services they need.
- This economic interdependence happens because each country possesses unique resources and capabilities.

Canada: Agriculture
Saudi Arabia: Oil
Japan: Electronics and automobiles
Switzerland: Banking
Interdependence of Nations
Absolute Advantage - When a country has natural resources or talents that allow it to produce an item at the lowest cost possible.
Examples: Brazil - Coffee; South Africa - Diamonds; Ecuador - Bananas
Comparative Advantage- The value that a nation gains by selling what it produces most efficiently.
Examples: Japan - automobiles; USA - Entertainment

Consumers benefit from:

- High quality goods with lower prices.
- The variety of goods increases as more producers
market their goods in other countries.
- Have more options when making purchasing decisions.
Benefits of International Trade:

- Workers benefit by higher employment rates both at home and abroad.
- Nations benefit
- Increased foreign investment in a country often improves the standard of living for that country's people.
- Help political alliances
Who does international trade hurt?
In the United States, the customs division of the Treasury Department monitors all imports
Balance of Trade- The difference in value between exports
and imports of a nation.
Positive balance of trade- Exports more than imports
Negative balance of trade- Imports more than exports
Trade Barriers
1. Tariffs
2. Quotas
3. Embargos

Free Trade: trade that is done purely on free market principles, without restrictive regulations
Tariff- A tax on imports.
- May be used to produce revenue for a country.
Protective tariffs- To increase the price of imported goods so that domestic products can compete with them
- Protect domestic jobs and new domestic industries from foreign competition.
Quota - limits the quantity or monetary value of a product that may be imported
Embargo - total ban on specific good coming into and leaving a country.
May be imposed for different reasons
Poisoned or defective goods
Political reasons
Protectionism: a government's establishment of economic policies that restrict imports in order to protect domestic industries. (opposite of free trade)
Trade Agreements and Alliances
North American Free Trade Agreement (NAFTA): an agreement among the United States, Canada, and Mexico. Founded in 1994, its goal is to get rid of all trade barriers between the countries.
European Union (EU)-is Europe's trading alliance.
Single European currency and a central bank.
Relate to fair competitive practices, environmental and safety standards, and security matters.
Countries need to conform to political, economic, and legal standards.
Doing Business Internationally:

Joint Ventures
Contract Manufacturing
Foreign Direct Investment

Must meet the same standards as domestic products.
Imposed by the Food and Drug Administration (FDA).
The rules governing importing are complex (Most business hire a customs broker)
A domestic company that wishes to enter into
the global marketplace with minimal risk and control.
- Involves letting another company use a trademark, patent, special formula, company name, or some intellectual property for a fee or royalty.

- A franchisor grants the franchisee the rights to operate under the company name (for a fee and % of profits)
Ex. - McDonalds, Subway, Wendys
Wendy's Commercial
Where's the Beef (1984)
Contract Manufacturing:
Hiring a foreign manufacturer to make your products, according to your specifications.
The goods are either sold in that country or exported.
The major benefit is lower wages
A downfall is that proprietary information must be given to these companies.
Joint Ventures- A business enterprise that companies set up together.
- In some countries, foreign investors are not permitted to own 100% of a business
- Domestic business partners know the market and procedures for conducting business in their own country.
Example: Toyota and GM -- Geo
Foreign Direct Investment
The establishment of a business in a foreign country.
- Setting up an office
- Acquisitions of existing foreign companies and construction of facilities. Such as manufacturing plants and retail stores. (Sabic)
Multinationals: large corporations that have operations in several countries
Mini-nationals: are mid-size or smaller companies that have operations in foreign countries
Global Environmental Scan:
Political Factors
Economic Factors
Socio-cultural Differences
Technological Levels
Political Factors
Government's stability
Trade regulations and agreements
Other laws that impact a company's operation
Economic Factors
Infrastructure (roads, communication, energy plants)
Labor force: quality; cost; education level
Standard of Living
Foreign exchange rate
Socio-cultural Factors
Holidays and religious observances
Social and Business Etiquette
Technological Factors
Technology levels; Voltage levels; Measurement systems
Global Marketing Strategies
1. Globalization: selling the same product and using the same promotion methods in all countries
(Coke before introduction diet, different flavors, etc.)
United States
2. Adaptation: a company's use of an existing product/promotion to which changes are made to better suit the characteristics of a country
Product Adaptation example
: McDonalds changing the Big Mac (beef patties) to the Maharaja Mac (chicken patties)
Promotional Adaptation example
: Using popular music star from home country to promote the product
Rank↓ Country↓ Imports↓ Date of
— World $ 12,647,000,000,000 2009 est.
— European Union (minus internal trade) $ 1,977,000,000,000[2] 2010 est..
1 United States $ 1,936,000,000,000 2010 est.
2 China $ 1,327,000,000,000 2010 est.
3 Germany $ 1,099,000,000,000 2010 est.
4 Japan $ 639,100,000,000 2010 est.
5 France $ 590,500,000,000 2010 est.
6 United Kingdom $ 561,600,000,000 2010 est.
7 Italy $ 473,100,000,000 2010 est.
- Hong Kong $ 437,000,000,000 2010 est.
8 Netherlands $ 429,000,000,000 2010 est.
9 South Korea $ 422,400,000,000 2010 est.
10 Canada $ 401,000,000,000 2010 est.
3. Customization: creating specially designed products or promotions for certain countries
World of Coke - tasting room
3. Customization - creating specially designed products or promotions for certain countries or regions
Coca Cola - partnered with China academy of Chinese Medical Sciences to create - Yuan Ye "Original Leaf" Tea.

Country Exports

World $17,779,000,000,000
1 China 2,275,000,000,000
— European Union 2,259,000,000,000
2 United States 1,504,000,000,000
3 Germany 1,292,000,000,000
4 Japan 625,000,000,000
5 South Korea 535,500,000,000
6 France 509,100,000,000
— Hong Kong 499,400,000,000
7 Netherlands 488,300,000,000
8 Italy 454,600,000,000
9 United Kingdom 442,000,000,000
10 Canada 408,700,000,000
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