LECTURE 2

INTERNATIONAL MARKETING
Causes of Growth and Benefits
 INTERNATIONAL MARKETING
Causes of Growth and Benefits
• Ricardo: Foreign Trade increases the country’s riches - the real
income is higher with free trade than without it.
 INTERNATIONAL MARKETING
Causes of Growth and Benefits
• Ricardo: Foreign Trade increases the country’s riches - the real
income is higher with free trade than without it.
• Law of Competitive Advantage (or Law of Competitive Costs).
 INTERNATIONAL MARKETING
Causes of Growth and Benefits
• Ricardo: Foreign Trade increases the country’s riches - the real
income is higher with free trade than without it.
• Law of Competitive Advantage (or Law of Competitive Costs).
• Heckscher Ohlin Factor Proportions Model: Combines Capital with
Labour. Therefore, India would export Labour Intensive Products,
while the USA would export Capital Intensive Products. In short,
each country’s product mis and the commodity composition and the
geographical pattern of its trade is determined by International
differences in Factor Proportions.
 INTERNATIONAL MARKETING
Causes of Growth and Benefits
• Ricardo: Foreign Trade increases the country’s riches - the real
income is higher with free trade than without it.
• Law of Competitive Advantage (or Law of Competitive Costs).
• Heckscher Ohlin Factor Proportions Model: Combines Capital with
Labour. Therefore, India would export Labour Intensive Products,
while the USA would export Capital Intensive Products. In short,
each country’s product mis and the commodity composition and the
geographical pattern of its trade is determined by International
differences in Factor Proportions.
• Leontief found in an empirical study in 1953 that the US Imports
were Capital Intensive, and Exports Labour Intensive. Why?
 INTERNATIONAL MARKETING
Causes of Growth and Benefits
• Ricardo: Foreign Trade increases the country’s riches - the real
income is higher with free trade than without it.
• Law of Competitive Advantage (or Law of Competitive Costs).
• Heckscher Ohlin Factor Proportions Model: Combines Capital with
Labour. Therefore, India would export Labour Intensive Products,
while the USA would export Capital Intensive Products. In short,
each country’s product mis and the commodity composition and the
geographical pattern of its trade is determined by International
differences in Factor Proportions.
• Leontief found in an empirical study in 1953 that the US Imports
were Capital Intensive, and Exports Labour Intensive. Why?
• Linder’s Per Capita Income Theory in International Trade.
INTERNATIONAL MARKETING
Effects of Trade Barriers
 INTERNATIONAL MARKETING
Effects of Trade Barriers
• Maslow’s Hierarchy of Needs: People are motivated to perform by
a desire to satisfy a set of internal needs. This is based on the
following assumptions:
• People are wanting beings whose needs can influence their behaviour
• A person’s needs are arranged in an order of importance
• The needs move to the next level of hierarchy only when the lower level
need is at least marginally satisfied
 INTERNATIONAL MARKETING
Needs of the Global Market
• Maslow’s Hierarchy of Needs: People are motivated to perform by
a desire to satisfy a set of internal needs. This is based on the
following assumptions:
• People are wanting beings whose needs can influence their behaviour
• A person’s needs are arranged in an order of importance
• The needs move to the next level of hierarchy only when the lower level
need is at least marginally satisfied
• Humans being creatures of Need, move from basic needs of
Nourishment, Shelter and Clothing to Wants, or relatively non
essentials. These vary from culture to culture
 INTERNATIONAL MARKETING
Needs of the Global Market
• Maslow’s Hierarchy of Needs: People are motivated to perform by
a desire to satisfy a set of internal needs. This is based on the
following assumptions:
• People are wanting beings whose needs can influence their behaviour
• A person’s needs are arranged in an order of importance
• The needs move to the next level of hierarchy only when the lower level
need is at least marginally satisfied
• Humans being creatures of Need, move from basic needs of
Nourishment, Shelter and Clothing to Wants, or relatively non
essentials. These vary from culture to culture.
• The Marketer is constantly dealing with the culture of the Market
 INTERNATIONAL MARKETING
Needs of the Global Market
• Maslow’s Hierarchy of Needs: People are motivated to perform by a
desire to satisfy a set of internal needs. This is based on the following
assumptions:
• People are wanting beings whose needs can influence their behaviour
• A person’s needs are arranged in an order of importance
• The needs move to the next level of hierarchy only when the lower level need is
at least marginally satisfied
• Humans being creatures of Need, move from basic needs of
Nourishment, Shelter and Clothing to Wants, or relatively non
essentials. These vary from culture to culture.
• The Marketer is constantly dealing with the culture of the Market
• The Promo message, and the Product itself, thus has to be adapted to
suit these varying cultures for the Exporter to stay in the game!
INTERNATIONAL MARKETING
International Trade Barriers
 INTERNATIONAL MARKETING
International Trade Barriers
• To encourage development of domestic industry and protect
existing industry, the Government introduces such barriers to Trade
as Tariffs, Quotas, Boycotts, Monetary Barriers and Non Tariff
Barriers. Barriers are imposed against foreign business entering the
country.

• WHAT ARE THE EFFECTS OF SUCH BARRIERS?

 INTERNATIONAL MARKETING
Effects of Trade Barriers
• TARIFFS:

• Incease: Inflationary Pressures

– Special Interest Privileges
– Government Control and Political Interference in Economic
matters
– Number of Tariffs (Tariffs beget Tariffs!)
 INTERNATIONAL MARKETING
Effects of Trade Barriers
• TARIFFS:

• Incease: Inflationary Pressures

– Special Interest Privileges
– Government Control and Political Interference in Economic
matters
– Number of Tariffs (Tariffs beget Tariffs!)
Weaken: Balance of Payment positions
– Supply and Demand patterns
– International Understanding (they start Trade Wars)
 INTERNATIONAL MARKETING
Effects of Trade Barriers
• TARIFFS:

• Incease: Inflationary Pressures

– Special Interest Privileges
– Government Control and Political Interference in Economic
matters
– Number of Tariffs (Tariffs beget Tariffs!)
Weaken: Balance of Payment positions
– Supply and Demand patterns
– International Understanding (they start Trade Wars)
• Restrict: Manufacturers’ Supply Sources
– Choices available to the ultimate Consumer
– COMPETITION!!!!
 INTERNATIONAL MARKETING
Effects of Trade Barriers
• Quotas:
– Quotas put an absolute restriction to a specific item that can be
imported. Quotas tend to increase the price to the Consumer,
just like a Tariff.
 INTERNATIONAL MARKETING
Effects of Trade Barriers
• Quotas:
– Quotas put an absolute restriction to a specific item that can be
imported. Quotas tend to increase the price to the Consumer,
just like a Tariff.
• Voluntary Export Restrictions:
– These restrictions are set up by the Exporting Country but are in
fact “enforced” by the Importing Country, under threat of stiffer
quotas.
 INTERNATIONAL MARKETING
Effects of Trade Barriers
• Quotas:
– Quotas put an absolute restriction to a specific item that can be
imported. Quotas tend to increase the price to the Consumer,
just like a Tariff.
• Voluntary Export Restrictions:
– These restrictions are set up by the Exporting Country but are in
fact “enforced” by the Importing Country, under threat of stiffer
quotas.
• Boycott:
– A Government Boycott is an absolute restriction against the
Purchase and Importation of certain goods from certain
countries. Boycotts can be formal or informal.
 INTERNATIONAL MARKETING
Effects of Trade Barriers
• Other Barriers:

– Monetary Barriers:
• Blocked Currency, Differential Exchange Rates, Government
Approvals for Exchange withdrawals, etc.
 INTERNATIONAL MARKETING
Effects of Trade Barriers
• Other Barriers:

– Monetary Barriers:
• Blocked Currency, Differential Exchange Rates, Government
Approvals for Exchange withdrawals, etc.

– Non Tariff Barriers:

• Standards, Local Content Restrictions, etc.