International Marketing

Kapil Khandelwal
Version 1.0
International Marketing

“IM is the multinational process of planning and

executing the conception , pricing, promotion and
distribution of ideas, goods and services to create
exchange that satisfy individual and organizational
objective.”
- AMA (American Marketing Association)

IM is the performance of business of activities

designed to plan, price, promote and direct the flow
of a company’s goods and services to consumer or
users in more than one nation.
IM Task

Foreign
Environment
(Uncontrollable
• Political/legal force Domestic (Controllable)
• Culture force Environment • Price
• Geography and (Uncontrollable) • Product
infrastructure • Political/Legal forces • Promotion
• Structure of • Competitive structure • Channels of
Distribution • Economic climate Distribution
• Level of Technology
• Competitive force
• Economic force
Benefits of IM
 Survival
 Sales and Profits
 Diversification
 Inflation and Price Moderation
 Employment
 Standards of living
Trade Balance
trade deficit - An economic condition in
which a nation imports more than it exports

trade surplus - An economic condition

in which a nation exports more than it imports

balance of trade - The aggregation of buying

(importing) and selling (exporting) by both
sides leads to the country-level trade surplus
or deficit.
Trade Theories
classical trade theories - major
theories typically studied consist of
mercantilism, absolute advantage, and
comparative advantage

modern trade theories - major

theories typically studied consist of
product life cycle, strategic trade, and
national competitive advantage
Absolute Advantage
 Producing a good with fewer inputs (capital, labor,
land, raw materials, etc.) per unit of output than other
countries

 If input prices are the same in two countries, the

country with an absolute advantage in a good will have
a lower unit cost of production for that good

 Adam Smith, The Wealth of Nations, 1776

 A country should produce and export products in
which it has an absolute advantage

 A country should import products in which it has an

absolute disadvantage
Absolute Advantage: Problems
 What about a country (like the U.S.) that has an
absolute advantage in most products?
 How can it possibly produce enough of everything to
satisfy the whole world?
 As production increased, competition for scarce inputs
would drive up production costs, taking away many
absolute advantages

 What about a country (like Nepal) that has an

absolute disadvantage in nearly all products?
 Why should its resources sit around unused?
 As production fell, prices of inputs would fall, lowering
production costs and creating some absolute advantages
Comparative Advantage
 Producing a good at a lower inputs than another
country
 Inputs used in the production of one good aren’t
available for the production of other goods
 When a country produces a good, what does it give up
in foregone production of other goods?

 David Ricardo, The Principles of Political Economy

and Taxation, 1817
 A country should produce and export products in
which it has a comparative advantage and least
comparative disadvantage
 A country should import products in which it has an
comparative disadvantage and least comparative
advantage
Numerical Example
 Which country has an
absolute advantage in USA Japan
 Computer production?
 Automobile production? Computer 20 10

 Which country has a Automobile 10 20

comparative advantage in
 Computer production? Computer 20 10
 Automobile production?
Automobile 30 20
More on Comparative Advantage

 Even a country at an absolute disadvantage in

everything will have a comparative advantage in
something

 Each country specializes in the production and

export of what it does relatively well