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Global Analysis

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

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Global Analysis

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  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

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