Global Analysis

1. Global Analysis Chapter 4

2. 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

3. 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???

4. Benefits of International Trade • Consumers • Producers • Workers • Nations • Competition that the foreign companies offer – encourages high-quality 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 benefit due to increased foreign investment = increased standard of living and options

5. Government Involvement of International Trade • All nations control and monitortheir 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

6. 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

7. Government Involvement of International Trade: Trade Barriers Free trade is favored; however, barriers are placed to limit trade

8. Government Involvement of International Trade: Trade Agreements and Alliances Governments make agreements with each other to establish guidelines

9. Review • Explain the nature of international trade • What are the two key reasons why embargoes are imposed? • What is the common goal or purpose of the WTO, NAFTA, and the EU trade agreements

10. 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?

11. 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

12. 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

13. 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

14. 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

15. PEST Technological Factors • Most basic (voltage) to high tech • Country Profiles – World Factbook • Baidu vs. Google

16. 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

17. Chapter 5 Supply and Demand

18. Demand and Supply • P = Price • Qd = Quantity Demanded • Qs= Quantity Supplied Where is the equilibrium point?

19. Price and Quantity on Y and X axis

20. Equilibrium: Supply and Demand Graphed

21. 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.

22. Non-Price Determinants Demand Supply Number of Suppliers Input prices Future Expectations Technology Taxes and Subsidies Weather conditions (as appropriate) • Number of buyers • Tastes and Preferences • Income • Complementary • Substitutes • Future Expectations

23. Decrease in Demand

24. Increase in Demand

25. Increase in Supply

26. Decrease in Supply

27. What curves and what changes would the following cause? • Increase in number of competitors in an area • Increase in number of buyers of hotdogs in the hotdog roll market • Advertising increase in a competitors good (semi-equal substitute) • Freezing conditions in the south affecting orange crops • Income rises affecting the market for luxury cars • Increase of the cost of wood affecting the market for building sheds • Subsidy provided for wheat affecting the bread market • Price of oil goes down affecting the market for gasoline