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Marketing - Chapter 4 - International Trade
Transcript of Marketing - Chapter 4 - 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
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.
Saudi Arabia: Oil
Japan: Electronics and automobiles
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
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
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:
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
Where's the Beef (1984)
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
Trade regulations and agreements
Other laws that impact a company's operation
Infrastructure (roads, communication, energy plants)
Labor force: quality; cost; education level
Standard of Living
Foreign exchange rate
Holidays and religious observances
Social and Business Etiquette
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.)
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 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.
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