trade theories
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pptTRANSCRIPT
Slide 1Orientation
Ethnocentric
Name of Institution
Orientation
Products manufactured in home country with separate product adaptations for different markets Product Decisions made by individual subsidiaries
Name of Institution
Market Focus
Consolidation of operations on regional basis Gains from Economies of Scale
Orientation
Regiocentric
Marketing Mix Decisions
Product Standardization within regions but not beyond them On regional basis
Name of Institution
Orientation
Geocentric
Globalization of marketing mix decisions with local variations Joint decision making across firms global operations
Name of Institution
Trade Theories
- Trade would create migration of jobs overseas and higher unemployment and lower living standards.
- International Trade Theory has shaped the economic policy of many nations for last 50 years and are drivers of formation of WTO, EU, NAFTA etc.
Free Trade
Common sense---
Easy to understand.
-Difficult to understand
Why buy products which a country is able to produce for itself
(US exports of space craft and import of textiles.)
*
Climate and natural resources endowment explain why Ghana exports cocoa
Brazil –coffee
S.A. ---oil
-Japan exports automobile, consumer electronics, machines.
Switzerland--- Chemicals, Pharma Products, watches etc.
*
-Measures wealth of a nation by the accumulated treasures.
-Wealth in the form of gold.
-Promoting exports discouraging imports
(Concise history of economic thought-mercantilism to monetarism)
*
Adam Smith
Real wealth of a nation is measured by the level of improvement in the quality of living
Per capita income
*
Theory of Comparative Advantage(David Ricardo)
*
and trade the good that they produce most efficiently,
relative to other goods they produce.
– A comparative advantage means that no matter how
good (or bad) you are at producing stuff, there's
always something that you're best (or least worst) at
doing.
something.
everything
The H-O theorem
A nation will export the commodity whose production requires the intensive use of the nation’s relatively abundant (and therefore, cheap) factor and import the commodity whose production requires the intensive use of the nation’s relatively scarce (and therefore, expensive) factor.
*
Theory of International Product Life Cycle (Raymond Vernon)
Pattern of International Product Life Cycle depends upon the market size of innovating firm.
Large Size market- mass production and economies of scale.
Small size- establishment, marketing and production in other cost effective countries.
*
Porter’s Diamond Model
Name of Institution
Name of Institution
Implications for Managers
--Helps a firm to understand and decide where to locate its various production activities
----- Firms involved in international trade can and do exert influence on the govt. policy and vice versa.
*
Ethnocentric
Name of Institution
Orientation
Products manufactured in home country with separate product adaptations for different markets Product Decisions made by individual subsidiaries
Name of Institution
Market Focus
Consolidation of operations on regional basis Gains from Economies of Scale
Orientation
Regiocentric
Marketing Mix Decisions
Product Standardization within regions but not beyond them On regional basis
Name of Institution
Orientation
Geocentric
Globalization of marketing mix decisions with local variations Joint decision making across firms global operations
Name of Institution
Trade Theories
- Trade would create migration of jobs overseas and higher unemployment and lower living standards.
- International Trade Theory has shaped the economic policy of many nations for last 50 years and are drivers of formation of WTO, EU, NAFTA etc.
Free Trade
Common sense---
Easy to understand.
-Difficult to understand
Why buy products which a country is able to produce for itself
(US exports of space craft and import of textiles.)
*
Climate and natural resources endowment explain why Ghana exports cocoa
Brazil –coffee
S.A. ---oil
-Japan exports automobile, consumer electronics, machines.
Switzerland--- Chemicals, Pharma Products, watches etc.
*
-Measures wealth of a nation by the accumulated treasures.
-Wealth in the form of gold.
-Promoting exports discouraging imports
(Concise history of economic thought-mercantilism to monetarism)
*
Adam Smith
Real wealth of a nation is measured by the level of improvement in the quality of living
Per capita income
*
Theory of Comparative Advantage(David Ricardo)
*
and trade the good that they produce most efficiently,
relative to other goods they produce.
– A comparative advantage means that no matter how
good (or bad) you are at producing stuff, there's
always something that you're best (or least worst) at
doing.
something.
everything
The H-O theorem
A nation will export the commodity whose production requires the intensive use of the nation’s relatively abundant (and therefore, cheap) factor and import the commodity whose production requires the intensive use of the nation’s relatively scarce (and therefore, expensive) factor.
*
Theory of International Product Life Cycle (Raymond Vernon)
Pattern of International Product Life Cycle depends upon the market size of innovating firm.
Large Size market- mass production and economies of scale.
Small size- establishment, marketing and production in other cost effective countries.
*
Porter’s Diamond Model
Name of Institution
Name of Institution
Implications for Managers
--Helps a firm to understand and decide where to locate its various production activities
----- Firms involved in international trade can and do exert influence on the govt. policy and vice versa.
*