Chapter 4 international

marketing strategies
(Part 1)

Presented by Hekma Slim

LEARNING OBJECTIVES

1 Explore some of the factors within the international trade

environment that influence business.

2 Investigate some of the economic, legal, political, social,

cultural, and technological barriers to international business.
THE ROLE OF INTERNATIONAL BUSINESS 1
International Business
• Buying, selling, and trading of goods and services
across national boundaries

Why Nations Trade

• Absolute advantage (only source or producer, most efficient)

• Comparative advantage (a country specializes in certain products)

• Outsourcing
Some nations have a monopoly on the production of a
particular resource or product. Such a monopoly, or absolute
advantage, exists when a country is the only source of an
item, the only producer of an item, or the most efficient
producer of an item.

Most international trade is based on comparative

advantage, which occurs when a country specializes in
products that it can supply more efficiently or at a lower cost
than it can produce other items.

U.S. companies are increasingly outsourcing, or transferring

manufacturing and other tasks to countries where labor and
supplies are less expensive.
OUTSOURCING

Many companies choose to outsource manufacturing to factories in Asia due

to lower costs of labor.

©Roberto Westbrook/Blend Images

THE ROLE OF INTERNATIONAL BUSINESS 2
Trade between Countries
• Exporting
• Importing

Balance of Trade
> difference in value between its exports and imports

• Trade deficit (negative balance of trade)

• Trade surplus (positive balance of trade)
• Balance of payments (difference bet. the flow of
money into and out of a country)
TABLE 1 U.S. TRADE DEFICIT
(IN BILLIONS OF DOLLARS)

1990 2000 2010 2011 2012 2013 2014 2015 2016 2017

Export 535. 1,075.3 1,853.6 2,127.0 2,219.0 2,279.9 2,343.2 2,230.3 2,212.1 2,427
s 2

Import 616. 1,447.8 2,348.3 2,675.6 2,755.8 2,758.3 2,851.5 2,712.6 2,712.6 2,900
s 1

Trade
surplus
/ deficit

Source: U.S. Bureau of the Census, Foreign Trade Division, “U.S. Trade in Goods and Services—Balance of
Payments (BOP) Basis,” March 7, 2018 www.census.gov/foreigntrade/statistics/historical/gands.pdf (accessed April 1,
2018).
FIGURE 1 U.S. EXPORTS TO CHINA
(MILLIONS OF U.S. DOLLARS)

Source: U.S. Census Bureau, “Trade in Goods with China,” https://www.census.gov/foreign-trade/balance/c5700.html (accessed
April 7, 2018).

Access the text alternative for these images.

INTERNATIONAL TRADE BARRIERS 1
Economic Barriers
• Economic development
• Industrialized nations economically advanced countries such
as the United States, Japan, Great Britain, and Canada.

• Less-developed countries are in general poorer and less

economically advanced than those in North America and
Europe

• Infrastructure
• Physical facilities that support activities such as:
• Railroads, highways, ports, airfields, utilities, power plants, schools,
hospitals, communication systems, and commercial distribution
systems
INTERNATIONAL TRADE BARRIERS 2
Economic Barriers
The ratio at which one nation’s currency can be exchanged
for another nation’s currency is the exchange rate.
Exchange rates vary daily and can be found in newspapers
and through many sites on the Internet.
• U.S. dollar is most frequently used in international
trade, with 81% of all trade financed in U.S. dollars
• Governments may intentionally alter the value of
their currencies through fiscal policy
INTERNATIONAL TRADE BARRIERS 3
Ethical, Legal, and Political Barriers
• Laws and regulations
• Differ in other countries

• Restrictions on currency

• Copyright and patent laws

• Some countries fail to honor U.S. laws may be less strict than
the U.S.
INTERNATIONAL TRADE BARRIERS 4
Ethical, Legal, and Political Barriers continued
• An import tariff is a tax levied by a nation on goods
imported into the country.
• A fixed tariff is a specific amount of money levied on
each unit of a product brought into the country, while
an
• ad valorem tariff is based on the value of the item.
• Exchange controls restrict the amount of currency that can be
bought or sold. Some countries control their foreign trade by
forcing businesspeople to buy and sell foreign products
through a central bank.
A quota limits the number of units of a particular product that
can be imported into a country. A quota may be established by
voluntary agreement or by government decree.

An embargo prohibits trade in a particular product. Embargoes

are generally directed at specific goods or countries and may be
established for political, economic, health, or religious reasons.

Dumping, when a country or business sells products at less

than what it costs to produce them. Dumping is relatively difficult
to prove, but even the suspicion of dumping can lead to the
imposition of quotas or tariffs.
INTERNATIONAL TRADE BARRIERS 5
Ethical, Legal, and Political Barriers continued
• Political barriers
• Unlike legal issues, political considerations are seldom written
down and often change rapidly.

• cartel, a group of firms or nations that agrees to act as a

monopoly and not compete with each other, to generate a
competitive advantage in world markets.
POLITICAL BARRIERS

Political instability in many nations has led to an influx of refugees. The potential
for political turmoil is a substantial risk businesses face when expanding
overseas.

©Sk Hasan Ali/Shutterstock

INTERNATIONAL TRADE BARRIERS 6
Social and Cultural Barriers
• Cultural barriers may include
• differing languages,

• differing practices as related to medical procedures,

• and different conceptions of gender and sexuality. These

barriers can lead to serious miscommunications between
parties with differing cultural backgrounds.
• Companies engaged in foreign trade must observe the
national and religious holidays and local customs of the host
country. In many Islamic countries, for example, workers
expect to take a break at certain times of the day to observe
religious rites.
Social and Cultural Barriers
• Differences in spoken and written language
• Differences in body language and personal space
• Family roles differ in different societies
• Perceptions of time differ in other nations
• National and religious holidays and customs must be
respected
• Most nations use the metric system
 TABLE 2 CULTURAL BEHAVIORAL DIFFERENCES

Gestures Viewed as Rude or

Country
Unacceptable
Japan, Hong Kong, Middle East Summoning with the index finger
Middle and Far East Pointing with index finger
Thailand, Japan, France Sitting with soles of shoes showing
Brazil, Germany Forming a circle with fingers (the “O.K.” sign in
the United States)
Japan Winking means “I love you”
Buddhist countries Patting someone on the head

Source: Adapted from Judie Haynes, “Communicating with Gestures,” EverythingESL (n.d.),
www.everythingesl.net/inservices/body_language.php (accessed April 7, 2017).
INTERNATIONAL TRADE BARRIERS 7
Technological Barriers

Technology affects all of us. Technology can

catapult a business to success or destroy it.

Technology is a much more broader concept than

many people today think it is. It is the application of
knowledge to the world that allows people to affect
their environment by controlling or changing it.

Lack of technological infrastructure can create

opportunities for business
 A government may impose a(n) _____ on imported
goods, thereby increasing their cost to the consumer
and pressuring them to buy domestic products.
QUESTION 1

A. Embargo
B. Tariff
C. Quota
D. Exchange Limit

©McGraw-Hill Education.
 QUESTION 2

1. Watch this video and mention the main concepts

you think they are important
Video Linkhttps://www.youtube.com/watch?
v=pDT0i0zrXew

©McGraw-Hill Education.
 EverythingBaby is a producer of baby formula and has formed an
advisory committee to determine the benefits of exporting to the
Nigerian market. In your opinion, what is the most important
factor they should take into consideration before taking action?
QUESTION 3

A. Cost
B. Place
C. Location
D. Culture
E. Government regulation

©McGraw-Hill Education.
THANK YOU