INTERNATIONAL MARKETING ECONOMICS

By Elisante Ole Gabriel (Tanzania) Chartered Marketer [email protected]

, www.olegabriel.com

+255-784-455-499

Introduction

 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!

4/27/2020 International Marketing Economics 2

MERCANTILISM THEORY

 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.

4/27/2020 International Marketing Economics 3

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 4/27/2020 International Marketing Economics 4

The Theory of Absolute Advantage (By David Ricado, 1819)

  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.

4/27/2020 International Marketing Economics 5

Heckscher-Ohm Theory (Factor Proportion Theory)

       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’ 4/27/2020 International Marketing Economics 6