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Lecture 2

Lecture 2. Bases of International Marketing. International Trade Theories. Classical Theory Factor Proportion Theory Product Life-Cycle Theory. Classical Theory. Related to trade partners according to economic advantage.

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Lecture 2

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  1. Lecture 2 Bases of International Marketing

  2. International Trade Theories • Classical Theory • Factor Proportion Theory • Product Life-Cycle Theory

  3. Classical Theory • Related to trade partners according to economic advantage. • Produce in domestic when it is cheaper than abroad, import when it is expensive in domestic • Exclude transportation cost, marketing cost, individual firm profits.

  4. Three Situations in Classical Theory • Absolute Advantage • Comparative Advantage • Equal Advantage

  5. Absolute Advantage • One country has cost advantage over another country in producing of one product • And second country has cost advantage over first country in producing of another product • exchange

  6. Comparative Advantage • One country has absolute advantage over another country in the production of all products, trade is better if domestic exchange ratios are dissimilar. • This country has superior advantage

  7. Equal Advantage • When one country has an absolute advantage over another in production of all products but no superior advantage • No difference in exchange ratios

  8. Factor Proportion Theory • Export product: very cheap input is used • Import product: very expensive input is used.

  9. Product Life-cyle Theory

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