Transcript Global Analysis

Global Analysis
International Trade – exchange of goods and services among nations
Imports – goods and services purchased from another country
Exports – goods and services sold to another country
Absolute advantage – occurs when a country has natural resources or talents that
allow it to produce an item at the lowest cost possible
Comparative advantage – value a nation gains by selling what it produces most
efficiently . It is also when they specialize in products or services well suited to
their capabilities.
Benefits of international trade
1. Consumers benefit in the form of lower prices, and variety of goods and
services.
2. Producers benefit from being able to expand their business by conducting
operations in other countries
3. Workers benefit from increased trade which can lead to higher employment
4. Nations benefit from increased foreign investment which often improves
standard of living for the people of that country
Government Involvement
Balance of trade – difference between what a country exports to what it imports
trade deficit – causes US to be a debtor nation, can increase
unemployment as jobs leave country
Free Trade – exchanges between nations that is conducted on free market
principles, without restrictions or regulations
Tariff – tax on imports (very low)
protective tariff – high tax; used to increase price of imported goods so
that domestic company’s can compete
Quota – limits either quantity or monetary value of product that can be imported
Embargo – total ban on specific goods coming into or leaving country. Can be used
for health or political reasons
Trade Agreements and Alliances
World Trade Organization ( WTO)
North American Free Trade Agreement (NAFTA)
European Union (EU)
Project : You are to look up each. Tell who is involved and what are the rules and
regulations, and the functions of each.
Doing Business Internationally
Exporting – enter global market with minimal risk and control
Licensing – letting another company use trademark, patent, special
formula, company name, or other intellectual property for a fee
foreign company makes product using info and guidelines provided
by licensor.
special type of licensing is franchising.
Contract manufacturing – hiring a foreign manufacturer to make your
products according to your specifications. Finished goods can be
sold and / or exported.
Pros: lower wages
Cons: company must give up info
Joint Ventures – business enterprise that companies set up together. Some
countries foreign investors are not allowed to own 100% of a
company so they need to find local investors
Global Environmental Scan
Political Factors – government stability, trade regulations and agreements, and
any laws that can impact operation
Economic Factors – look at infrastructure, labor force, employee benefits, taxes,
standard of living, foreign exchange rate
Socio-Cultural Factors – must be aware of cultural diversity and value system.
Need to look at language and symbols, holidays and religious
observations, social and business etiquette.
Technological Factors – need to look at use of computers, faxes, voice mail,
cell phones, and the internet.
Project : Take the country you used for project. Go to CIA World Fact Book, and click on
Guide to Country Comparisons. Tell me number of cell phone users, internet users,
life expectancy rate in your country and the US.
Global Marketing Strategies
Globalization – selling same product and use same promotion methods in all
countries
Adaptation – study characteristics of country and find ways to target
customers with similar needs and wants. Sometimes requires
companies to change the product or change the promotion.
Customization – creating specially designed products or promotions for
certain countries or regions. Product or service become unique to
that market segment