Discussion Board Q's Chapter 14-20
Jena43421
Mktg42204ECh01192.pptx1
Chapter 1
Marketing 4220
International Sourcing, Logistics
& Transportation
International Trade
5/21/2015
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International Trade
International Trade Growth
International Trade Milestones
Largest Exporting and Importing Countries
International Trade Drivers
International Trade Theories
International Business Environment
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International Trade Growth 1953 - 2013
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International Trade Milestones
Bretton-Woods Conference (1944)
Creation of the International Monetary Fund (1945)
First General Agreement on Tariffs and Trade (Geneva, 1948)
Multiple reductions on tariffs: GATT’s Kennedy Round (1964-67), Tokyo Round (1973-79) and Uruguay Round (1986-94)
Treaty of Rome (1957)
World Trade Organization (1995)
Creation of the Euro (1999); placed in circulation (2002))
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Major Exporting Countries
| Country | Exports (US$ billions) | Percentage |
| China | 2,048,814 | 11.2% |
| United States | 1,547,283 | 8.4% |
| Germany | 1,407,098 | 7.7% |
| Japan | 798,567 | 4.4% |
| Netherlands | 655,841 | 3.6% |
| France | 569,065 | 3.1% |
| Korea (ROK) | 547,870 | 3.0% |
| Russian Federation | 529,255 | 2.9% |
| Italy | 500,239 | 2.7% |
| Hong Kong, China | 493,366 | 2.7% |
| United Kingdom | 468,370 | 2.6% |
| Canada | 454,840 | 2.5% |
| Belgium | 446,302 | 2.4% |
| Singapore | 408,393 | 2.2% |
| Mexico | 370,915 | 2.0% |
| India | 293,214 | 1.6% |
| Rest of the World | 6,783,568 | 37.0% |
| World | 18,323,000 | 100.0% |
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Major Importing Countries
| Country | Imports (in US$ billions) | Percentage |
| United States | 2,335,375 | 12.6% |
| China | 1,818,069 | 9.8% |
| Germany | 1,167,423 | 6.3% |
| Japan | 885,845 | 4.8% |
| United Kingdom | 680,409 | 3.7% |
| France | 673,709 | 3.6% |
| Netherlands | 590,689 | 3.2% |
| Hong Kong, China | 554,222 | 3.0% |
| Korea, Republic of | 519,584 | 2.8% |
| India | 489,364 | 2.6% |
| Italy | 485,890 | 2.6% |
| Canada | 474,900 | 2.6% |
| Belgium | 434,847 | 2.3% |
| Mexico | 380,477 | 2.0% |
| Singapore | 379,723 | 2.0% |
| Russian Federation | 335,446 | 1.8% |
| ROW | 6,361,028 | 34.3% |
| World | 18,567,000 | 100.0% |
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International Trade Drivers
Cost Drivers
Companies increase their sales worldwide to recover their high investment costs.
Competition Drivers
Companies enter foreign markets to keep up with their competitors, retaliate against them or enter a market first.
Market Drivers
Companies enter foreign markets because their customers expect them to be present in those countries.
Technology Drivers
Companies enter foreign markets because their customers use technology to make purchases from these markets
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Cost Drivers
Automobile production is dominated by 18 companies - (85 percent of all automobiles worldwide)
Automobile production is concentrated in 15 countries - (87 percent of production in the world . . .and yet -
Automobiles are sold in 143 countries.
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Competition Drivers
| The way Carrefour and Wal-Mart split the world | |
| Countries in which both are present | Argentina, Brazil, China, India, Japan. |
| Countries in which only Carrefour is present | Albania, Bahrain, Belgium, Bulgaria, Cyprus, Egypt, France, Georgia, Greece, Indonesia, Iran, Iraq, Italy, Jordan, Kuwait, Lebanon, Macedonia, Monaco, Malaysia, Morocco, Oman, Pakistan, Poland, Portugal ,Qatar, Romania, Saudi Arabia, Spain, Slovakia, Slovenia, Syria, Taiwan, Tunisia, Turkey, United Arab Emirates. |
| Countries in which only Wal-Mart is present | Botswana, Canada, Chile, Costa Rica, Ghana, Guatemala, Honduras, Lesotho, Malawi, Mexico, Mozambique, Namibia, Nicaragua, Nigeria, South Africa, Tanzania, Uganda, United Kingdom, United States, Zambia. |
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Market Drivers
| Number of countries in which selected companies are present | |
| McDonald’s Restaurants | 118 |
| Hilton Hotels | 91 |
| Benetton Stores | 120 |
| Cartier Jewelry Stores | 125 |
| Accor Hotels | 92 |
| Exxon-Mobil Gas Stations | 100+ |
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International Trade Theories
Adam Smith’s Theory of Absolute Advantage
David Ricardo’s Theory of Comparative Advantage
Eli Hecksher and Bertil Ohlin’s Factor Endowment Theory
Raymond Vernon’s International Product Life Cycle Theory
Michael Porter’s Cluster Theory
Yossi Sheffi’s Logistics Cluster Theory
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Theory of Absolute Advantage
If a country can produce a certain good more efficiently than other countries, it will trade with countries that produce other goods more efficiently.
In this case, both countries are using the same amount of labor to produce these alternatives. France will specialize in making wine, and Germany will specialize in making machinery.
| Wine | Machinery | |
| France | 20,000 | 2 |
| Germany | 15,000 | 3 |
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Comparative Advantage Theory
Nations will trade with one another as long as they can produce certain goods relatively more efficiently than one another.
The UK has an absolute advantage in both machinery and wheat. However, in the UK, the relative price of 1 unit of machinery is 5 tons of wheat, and in Brazil, it is 7 tons of wheat.
The nations will trade: If the UK sells 1 unit of machinery to Brazil for 6 units of wheat, both the UK and Brazil are better off. The UK has a comparative advantage in producing machinery, Brazil in growing wheat.
| Country | Tons of Wheat | Units of Machinery |
| UK | 25 | 5 |
| Brazil | 21 | 3 |
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Factor Endowment Theory
A country will enjoy a comparative advantage over other countries if it is naturally endowed with a greater abundance of one of the factors of economic production.
| Country | Abundance | Advantage |
| Argentina | Grazing Land | Beef |
| India | Educated Labor | Call centers |
| USA | Economic system where entrepreneurship is rewarded | Innovation & development of intellectual property |
| Factors of Economic Production |
| 1. Land |
| 2. Labor |
| 3. Capital |
| 4. Entrepreneurship |
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International Product Life Cycle Theory
Over its product life, a product will be manufactured in different countries, in stages, generating trade among these countries.
Stage 1
Product is created in a developed country, using new technology and serving a market need.
Stage 2
As sales grow, competitors begin to make similar products in other developed countries, responding to local needs.
Stage 3
Product manufacturing has become routine, costs need to be reduced and production moves to developing countries.
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Life Cycle Theory Example
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Cluster Theory & Examples
Competitive clusters form when companies in the same industry, as well as their suppliers, concentrate in one geographic area. When this happens, the companies “feed” on each other’s know-how, pushing them to innovate faster. They become so efficient and innovative that they become world-class suppliers.
| Cluster Examples |
| Silicon Valley, California, U.S. – Information technology |
| Sassuolo, Italy – Ceramic tiles |
| Genève, Switzerland – Watches |
| Yiwu, China – Socks & hosiery |
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Logistics Cluster Theory
Logistics clusters form when logistics companies concentrate in one geographic area. When this happens, the companies allow manufacturers to operate more efficiently, since all the services they need to ship are located in one area.
The logistics suppliers, even though they are competitors, actually help each other attract new customers.
| Logistics Cluster Examples |
| Singapore |
| Memphis, USA |
| Rotterdam, The Netherlands |
| Zaragoza, Spain |
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International Business Environment
To be successful in international logistics, not only is it important to have an understanding of logistics, but also fundamental to understand the international environment.
This can be achieved by a) learning a foreign language, b) taking courses in international economics, international finance, inter-cultural communications and international marketing, c) traveling frequently, d) meeting foreign nationals, and e) making an effort to understand the current environment in foreign countries.
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