Transcript PRESENTATION NAME - Greene Central School District

Global Analysis
Chapter 4
Nature of International Trade
• What are some items you have seen that
were made or manufactured in some other
country?
• Marketplace existence
– The need for trade
• International trade
– The exchange of G’s & S’s among nations
– Imports
• Purchased from other countries
– Exports
• Sold to other countries
– Controlled by the governments involved
Interdependence of Nations
• Write down 1 commodity that you believe we generally
purchase as an import.
– Top Imports
– Why have imports?
• Unique resources and capabilities
• Absolute advantage
– Occurs when a country has natural resources or talents that allow it to
produce an item at the lowest cost possible
» China – produces 80% of all silk = absolute advantage
• Comparative advantage
– The value that a nation gains by selling what it produces most
efficiently
» Well suited for their country – low skilled labor???
Benefits of International Trade
• Consumers
• Producers
• Workers
• Competition that the foreign
companies offer – encourages highquality and low prices
• Producers can expand by conducting
operations in other countries – 1/3 of
profit of US businesses
• Can lead to higher employment rates
home and abroad
– Toyota = over 50million jobs in US
• Nations
• Nations benefit due to increased
foreign investment = increased
standard of living and options
Government Involvement of
International Trade
• All nations control and monitor their
trade
• United States
– Monitors imports through the customs
division of the U.S. Treasury Department
– Imports subject to search and review
– Exports (and international traveling) must
meet customs requirements
Government Involvement of
International Trade
• Balance of Trade
– The difference in value between exports and imports of
a nation (AKA Net exports)
– Positive Balance of Trade = Surplus
– Negative Balance of Trade = Deficit
• US = largest exporter AND large trade deficit
• Consequences
– Reduction in GDP
– Debt
– Increased unemployment
– To survive, US relies on foreign investors to buy US Securities
Government Involvement of
International Trade: Trade Barriers
Free trade is favored; however, barriers are placed to limit trade
Tariff
Quota
Embargo
• AKA duty
• A tax on imports
• Used to produce
revenue
• Minimal in US
• Limits quantity or
value of a product that
may be imported
• Purpose: to control
quantity imported for
domestic competition
• Also can be used
strategically to
improve relations
(limit exports)
• Total ban on specific goods coming in
or out
• US embargoed Chilean grapes in
1989 (1 wk)
• Political differences
• US lifted its 30 year embargo with
Vietnam in 1994
Protective tariff
• Generally high
• Purpose: to increase
price of imports for
domestic competition
• Protectionism
• Restriction of imports in order
to protect domestic industries
• Subsidies
• Gov’t funds to industries to
compete
• Most noted: agriculture
• Excess to export at low cost
Government Involvement of International
Trade: Trade Agreements and Alliances
Governments make agreements with each other to establish guidelines
World Trade Organization (WTO)
North American Free Trade
Agreement (NAFTA)
European Union (EU)
• Coalition of nations that makes
rules governing international trade
• WTO was created to police the
agreements by GATT (General
Agreement on Tariffs and Trade)
• Supporters believe globalization
and expansion of trade increased
wealth
• Maintained and expanded
through a borderless
economy
• Minimizing trade wars
• Critics are concerned with
democracy, labor rights,
environment
• An international trade
agreement among the
US, Canada, and Mexico
• Main goal: get rid of all
trade barriers and
investment restrictions
among the three by 2009
• Canada and Mexico were
top purchasers of US
exports in 2010 (32.2%)
• Canada and Mexico were
2nd & 3rd top importers to
US in 2010 (26.5%)
• Created to establish
free trade among
member nations,
single currency
(Euro), and a central
bank
• Everything that the
EU does is founded
on treaties,
voluntarily and
democratically
agreed by all
member countries.
Review
1. Explain the nature of international trade
2. What are the two key reasons why
embargoes are imposed?
3. What is the common goal or purpose of
the WTO, NAFTA, and the EU trade
agreements
Global Environmental Scan
• Environmental scan involves looking at the
outside influences that may have an impact on
an organization.
– (PEST)
– How would you use those factors to evaluate a
country’s marketing opportunities and threats?
PEST
Political Factors
– Government stability
• Changes in the government=reluctant investors
–Madagascar
– Trade regulations and laws
• Reduced tariffs, laws to protect intellectual property,
increase in percentage of business ownership
allowed by foreign investors
–China
PEST
Economic Factors
• Infrastructure
– Telephone service, roads, energy plants,
telecommunication
• Bad for some companies, good for others?
• Labor Force
– Quality and cost of labor: education and skills,
customary wages, employment laws
• Employee Benefits
– Most countries require companies to provide/pay
PEST
Economic Factors
• Taxes
– On property and profit (reduced for a specified time?)
• Standard of Living
– Income to sustain the company (products)
• Foreign Exchange Rate
– Changes daily
PEST
Socio-cultural Factors
• Cross cultural analysis
− Language and symbols
−Differences in language and customs,
symbols
− China: 4=Death, sets of 6 or 8 instead
− Holidays and Religious Observances
− India= Cow is sacred – McDonald’s
− Social and Business Etiquette
− Gift giving expectations vs. illegal
PEST
Technological Factors
• Most basic (voltage) to high tech
– Country Profiles – World Factbook
– Baidu vs. Google
Global Marketing Strategies
• In planning and making decisions about
the marketing mix, global marketers
need to consider all the factors analyzed
for the environmental scan (PEST)
• Globalization
– Selling the same product and using the
same promotion methods in all countries
• Small portion can get away with this = global
brand recognition (Coke, MS)
• Adaptation
• Customization
Chapter 5
Supply and Demand
Demand and Supply
• P = Price
• Qd = Quantity
Demanded
• Qs= Quantity Supplied
Where is the equilibrium
point?
Price and Quantity on Y and X axis
Equilibrium:
Supply and Demand Graphed
Demand and Supply
• Full curve is
considered
Demand and/or
Supply. Each
point is
considered the
quantity
demanded or
quantity
supplied at that
particular price.
Non-Price Determinants
Demand
•
•
•
•
•
•
Number of buyers
Tastes and Preferences
Income
Complementary
Substitutes
Future Expectations
Supply
•
•
•
•
•
•
Number of Suppliers
Input prices
Future Expectations
Technology
Taxes and Subsidies
Weather conditions (as
appropriate)
Decrease in Demand
Increase in Demand
Increase in Supply
Decrease in Supply
What curves and what changes
would the following cause?
1. Increase in number of
competitors in an area
2. Increase in number of
buyers of hotdogs in
the hotdog roll market
3. Advertising increase in
a competitors good
(semi-equal substitute)
4. Freezing conditions in
the south affecting
orange crops
5. Income rises affecting the
market for luxury cars
6. Increase of the cost of
wood affecting the market
for building sheds
7. Subsidy provided for
wheat affecting the bread
market
8. Price of oil goes down
affecting the market for
gasoline