Transcript INTERNATIONAL MARKETING ECONOMICS

INTERNATIONAL
MARKETING ECONOMICS
By
Elisante Ole Gabriel (Tanzania)
Chartered Marketer
[email protected], www.olegabriel.com
+255-784-455-499
Introduction
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There is always a reason to enter in to international
Business
The purpose of theories in to simplify reality so that
the basic elements of Logic can be seen
Logic helps to justify your position/argument
Between 1500 – 1800 the doctrine of mercantilism
theory prevailed
The classical theory emerged due to absolute and
comparative advantages. Cost is the yard-stick!
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MERCANTILISM THEORY
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The nation can maximize wealth by
maximizing the gap between export and
imports (Trade Surplus)
There is a need to stimulate exports and restrict
imports
The major weakness of this theory is that it
focused mainly one the needs and operations
of the Government than the individual.
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CLASSICLA THEORY
There are two branches for this:
 Theory of Absolute Advantage: By A. Smith (1776)
 Countries with high level of efficiency can produce
the same products as others with fewer labour-hours
(Efficiency Absolute Advantage)
 Division of labour is necessary
 In this theory, the source of the said advantage is not
explained
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The Theory of Absolute Advantage
(By David Ricado, 1819)
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His is a development of the work by Smith on
absolute advantage
Ricado posed a question ‘what will happne if a
country has the absolute advantage in both
products?’
In any case there is always a possibilioty that,
the country might be more efficient in one
product when compared with the other country
– comparative advantage.
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Heckscher-Ohm Theory
(Factor Proportion Theory)
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It is an expansion of Classical theory
Why a country is comparatively efficient on a certain
product?
Eli Heckscher and Brtil Ohlin, asserted that this is
due to a difference on endowment, labour and capital
Capital is considered as important as labour
Why then Tanzania is not capitalizing on this theory?
There are about four assumptions to this theory.
These include; 2X2X2 (Products, products and
factors of production)
Consider the ‘relatively abundant factor’
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