International Trade

1
International Trade
Section 4.1
Government Involvement in International Trade
Defining Trade Barrier Terms
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2
The Global Marketplace
Key Terms licensing contract manufacturing joint
venture foreign direct investment
(FDI) multinationals mini-nationals globalization
adaptation customization

• Objectives
• List forms of international trade
• Identify political, economic, socio-cultural, and
  technological factors that affect international
  business
• Suggest global marketing strategies

Marketing Essentials Chapter 4, Section 4.2
3
The Global Marketplace

• Study Organizer
• Create a chart like this one to list factors that
  affect international business.

Marketing Essentials Chapter 4, Section 4.2
4
Domestic vs International

• Businesses operate both domestically and
  internationally
• Domestic of or pertaining to one's own or a
  particular country Ex domestic trade
• Internationally between or among nations
  involving two or more nations international trade

5
International Business Activities

• Trade agreements by governments set the
  guidelines for business to operate in the global
  marketplace
• International trade business activities include
• Importing
• Exporting
• Licensing
• Contract manufacturing
• Joint ventures
• Foreign direct investment

Marketing Essentials Chapter 4, Section 4.2
6

• Each International activity has different
• levels of risk (financial commitment)
• levels of controls
• Profit potentials
• What does this Chart tell you about exporting?

7
Importing

• Importing purchasing goods from another country
• Imported products (brought into the country) must
  meet the same standards as domestic products for
  that country
• Ex Items from India must meet US domestic
  standards
• Rules governing importing are complex
• U.S. businesses hire customs brokers to keep the
  business within the import laws and procedures
• Quotas can limit entry of certain goods. Once
  the quota is reached, no more may enter
• Used on agriculture, food products, and other
  items into U.S. to limit the number of items
  imported

8
Exporting

• Exporting to ship (commodities) to other
  countries or places for sale, exchange, etc.
• Domestic companies enter the global marketplace
  with minimal risk and control when exporting
• These companies can get help from the U.S.
  government in their trade

9
Licensing

• Licensing X letting another company use one of
  the following for a fee or royalty
• Trademark
• Patent
• Special formula
• Company name
• Intellectual property

10
Contract Manufacturing

• Contract manufacturing X involves hiring a
  foreign manufacturer to make your products,
  according to your specifications
• The finished goods are sold in that country or
  exported (back or other countries)
• Benefits
• Lower wages, lower costs
• Drawbacks
• risk is that production information can be lost
  or stolen in the production countries

11
Contract Manufacturing

• Examples Foreign company makes the product
  using the information or guidelines provided by
  the licensor
• licensor has gained entry at minimal risk (your
  name ruined if product fails in other country)
• A franchise is a different kind of licensing
  where private investors can operate under the
  company name

12
Joint Venture

• A joint venture X A business enterprise that
  different companies set up together
• often, the venture involves a domestic company
  and a foreign company
• Some countries do not allow foreign investors to
  own 100 of a business (local partner required)
• Local partners know the market and procedures for
  conducting business

13
Foreign direct Investment

• A foreign direct investment (FDI) X is the
  establishment of a business in a foreign country.
  This process can include
• Setting up a small office in another country
• Acquisitions of existing foreign companies
• Constructing manufacturing plants and retail
  stores abroad

14
Global Marketing Strategies

• In planning and making decisions regarding the
  4Ps, global marketers consider three strategies
• Globalization
• Adaptation
• Customization

Marketing Essentials Chapter 4, Section 4.2
15
Globalization

• Globalization X is selling the same product and
  using the same promotion methods in all
  countries. Examples would be
• Coca-Cola
• Nike
• Only a small portion of product can use this
  strategy
• This is possible because they have uncovered a
  need that transcends different cultures
• Have a global brand recognition

Marketing Essentials Chapter 4, Section 4.2
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Adaptation

• Adaptation X is a companys use of an existing
  product/promotion to which changes are made to
  better suit the characteristics of a country or
  cultural differences.
• Products and promotions can be changed to better
  fit languages or cultural boundaries
• Ex In Sweden advertising to children is
  prohibited so McDonalds has no children in their
  ads
• Sometimes brand names are changed
• Pricing is changed to be comparable to local
  products

Marketing Essentials Chapter 4, Section 4.2
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Customization

• Customization X involves creating specially
  designed products or promotions for certain
  countries or regions

Marketing Essentials Chapter 4, Section 4.2
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The Global Marketplace