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 totheir capabilities.

Benefits of international trade1. 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 countries3. Workers benefit from increased trade which can lead to higher employment4. Nations benefit from increased foreign investment which often improves

standard of living for the people of that country

Government InvolvementBalance of trade – difference between what a country exports to what it imports

trade deficit – causes US to be a debtor nation, can increaseunemployment 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 sothat 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 usedfor 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 providedby licensor.

special type of licensing is franchising.

Contract manufacturing – hiring a foreign manufacturer to make yourproducts according to your specifications. Finished goods can besold and / or exported.

Pros: lower wages Cons: company must give up info

Joint Ventures – business enterprise that companies set up together. Somecountries foreign investors are not allowed to own 100% of a company so they need to find local investors

Global Environmental ScanPolitical 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 tothat market segment