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 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

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
Tariff
Quota
Embargo
AKA duty
A tax on imports
Used to produce revenue
Minimal in US
Protective tariff
Generally high
Purpose: to increase price of imports for domestic competition
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
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

8. Governments make agreements with each other to establish guidelines
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.

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
International trade is the exchange of G’s & S’s between nations
Two reasons are health reasons, as in contaminated products, and political or diplomatic reasons
The common goal of all three agreements is to establish trade guidelines and set up trading alliances

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?
PEST – Political, economic, socio-cultural, and technological

11. PEST Political Factors Government stability Trade regulations and laws
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
Madagascar – Political influence article that have changed the country, investments, etc.
China – 2007 production using lead in the paint on the toys that were making kids sick

12. PEST Economic Factors Infrastructure Labor Force Employee Benefits
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
Assuming a bad infrastructure – bad = inability to expand, operate efficiently, etc. Good= companies who create infrastructure can blossom (construction workers, road pavers, etc.)

13. PEST Economic Factors Taxes Standard of Living Foreign Exchange Rate
On property and profit (reduced for a specified time?)
Standard of Living
Income to sustain the company (products)
Foreign Exchange Rate
Changes daily
NY is offering 10 years of tax free operations if you open a business in NYS (given some stipulations)
Standard of living: you cannot sell bottled water for $1.50 in Madagascar when their daily wage is $2.
Foreign Exchange: depending if importing or exporting, exchange rates can be beneficial

14. Socio-cultural Factors
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
**McDonald’s has chicken, fish, and vegetarian options in India to accommodate their cultural beliefs
**It is expected that lavish gifts will be given in the Far East; however, it is illegal to give gifts in the US as it is deemed a bribe

15. Technological Factors
PEST
Technological Factors
Most basic (voltage) to high tech
Country Profiles – World Factbook
Baidu vs. Google
World Factbook – communications – look through, choose, and see differences between countries
Baidu is the primary search engine in China. It is quite sensored and China had blocked Google for some time. Google agreed to have some restrictions to enter the market in China; however, banned has since been lifted. Baidu currently has more than 50% of the market share

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
Adaptation: Alterations to accommodate the culture
Customization: a brand new product, promotion, etc for the country/culture

17. Chapter 5
Supply and Demand

18. Demand and Supply P = Price Qd = Quantity Demanded
Qs= Quantity Supplied
Where is the equilibrium point?
Equilibrium occurs at $65 where Qd and Qs are equal at 3400 units.

19. Price and Quantity on Y and X axis
Price is on Y axis in $15 increments
Quantity is on x axis in 1000 unit increments

20. Equilibrium: Supply and Demand Graphed
Qd and Qs plotted given different price levels.
The higher the price, the more producers are willing to supply and the less the consumers are willing to buy
The lower the price, the more consumers are willing to buy and the less producers are willing to supply.
Given more supply in the market = overage (a price above equilibrium)
Given more demand in the market = shortage (a price below equilibrium)

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 buyers
Tastes and Preferences
Income
Complementary
Substitutes
Future Expectations
Number of Suppliers
Input prices
Future Expectations
Technology
Taxes and Subsidies
Weather conditions (as appropriate)
Price will never change the demand or supply curve
The determinants of demand or supply will alter their respective curves

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
Increase in supply curve
Increase in demand for hotdog rolls
Decrease in demand
Decrease in supply
Increase in demand for luxury cars
Decrease in supply for sheds
Increase in supply in the bread market
Increase in demand for gasoline, decrease in supply for supply (could be the same price, but different quantity depending on the amount of change of each) I did not state expected price. 