Int Mkt-Final Paper

8/6/2019 Int Mkt-Final Paper

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Table of Content

1. Introduction2. Marketing

3. Global Trade

4. Global Marketing

5. Opportunities and Challenges in International Marketing

5.1. Adapting the Environment

5.2. Global Consumers Their needs and motivations

5.3. Participants in the Global Market

6. Geographical Perspectives on International Marketing

7. The Historical Dimension

8. Global Division

9. World Trade Organization

10. International Monetary Fund

11. The World Bank

12. The Importance of International Trade

13. The Impact of Trade and Investment

13.1. The Effect of Import / Export Activities13.2. The Effect of International Investments

14. Trade Barriers and Restrictions of Imports

15. Export Promotion Efforts

16. Executive Summary

17. Bibliography

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1. INTRODUCTION

As it was already mentioned in the executive summary in this report our group,

consisting of four group members, examined the rise of international marketing and

international trade. In the following report the reader will be presented with the pros

and cons of companies trading internationally and thus being involved in the

international trade.

Our group considers the topic of the report to be vital nowadays, moreover,

this topic is of utmost importance to us because we all are currently getting a

magisterial degree in International Marketing and Management. We hope that the

report will provide the reader with thorough information on the stated topics.

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2. MARKETING

Over the last couple of decades the term marketing has gained overallpopularity in all the countries all over the world. The concept of what marketing is - is

clear to everyone, however when one is asked to define it tends to be rather difficult.

This is due to the fact that this concept is very broad and multi-sided.

For the sake of this paper we would describe marketing as the wide range of

activities involved in making sure that the firm is continuing to meet the needs of its

customers and is getting value in return. It is very significant to point out that

marketing deals mainly with the promotion of products, especially advertising and

branding. However, in professional usage the term has a wider meaning of thepractice and science of trading. The American Marketing Association (AMA) states,

"Marketing is an organizational function and a set of processes for creating,

communicating and delivering value to customers and for managing customer

relationships in ways that advantage the organization and its stakeholders." The

scientific study of marketing is a wide and greatly interrelated subject with far-

reaching academic publications. Marketing methods are also connected with many of

the social sciences, particularly psychology, sociology, economics, and anthropology

(Keegan, 2002).

On the whole, the best way to look at Marketing as at the analysis which

includes finding out what groups of potential customers (so to say markets) are, what

groups of customers a company prefers to provide for (target markets), what their

needs are, what products or services a company could develop to meet their needs,

how the customers might prefer to utilize the products and services, what the

competitors are doing and how they are doing that, what pricing strategy should be

used and how the products and services should be distributed to the target markets.

Marketing is, obviously, an inventive and creative industry, which includes

advertising, distribution and selling. As it was already mentioned above marketing is

concerned with forecasting what the consumers want and provide them with this.

This is usually done by the means of marketing and market researches. Various

methods of market research are used to find out information about markets, target

markets and their needs, competitors, etc. The kind of a market research a company

chooses to carry out depends mainly on the type of the company, its size, structure,

its market niche and target audience as well as other parameters.

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3. GLOBAL TRADE

The international trade has been present throughout much of history, centuriesago there already had been sea routes called Silk Road, Amber Road, and others

discovered to move the good from continent to continent. Though, the

global/international trade reached its peak of the economic, social, and political

importance in recent centuries (Carter, 1988).

When thinking about it, we see, that today, we simply cannot imagine our lives

without Global/International trade. We are very used to being able to purchase the

products made in different countries in every corner of the world right around the

corner from our houses. Why this is so? There have been many fundamental forces,concepts and theories which have come into sight as giving political clarification to

the development of international trade. The theoretical approaches to this issue are

the theory of comparative advantage described in the book Wealth of Nations (Adam

Smith) and David Ricardo), the product trade cycle (Raymond Vernon) and The

Business Orientation (Howard Perlmutter), and many other smaller theories.

Lower we would like to present you and briefly describe the factors that had a

major impact on the international trade system, they are:

Industrialization

Advanced transportation

Advanced communication

Globalization

Multinational corporations

Outsourcing

Industrialization had forever changed the perception people and about the

world. Its major accomplishment was to replace the human work-force with powerful

machines. Technology has been one of the single most powerful driving forces to

internationalism. This invention has helped the world to see that there are many

tasks that can be accomplished faster but also remotely (not requiring one to

supervise the jobs at all times). The advance of transportation technologies has also

made it very easy for the nations to trade. If it used to be that one had to travel for

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month to get somewhere, today the transportation to even the most remote parts of

the world may take somewhat around ten hours.

This, of course, does not apply only to people but also to the goods. It is needless to

say that the breakthrough in the filed of communications had also marked a

breakthrough in the world business and thus the world trade (Keegan, 2002). Not

only today making a contract is as simple that it does not even require the parties to

be present, but the good, when being transported, can be traced all throughout its

way from the seller to the buyer. The next factor mentioned in the list- the

globalization that had broke the boundaries between the countries, thus creating the

ground for the global trade. Furthermore, the creation of multinational corporations

and outsourcing are the factors that cannot be forgotten when talking about the

development of the global trade (Keegan, 2002).

Today, International trade is a major source of financial revenue for any nation

that is considered a world power as well as that is not so strong. Without international

trade, nations would be limited to the goods and services produced within their own

borders, and, of course, many of the nations would not survive.

Without a shadow of doubt, the global trade is beneficiary for all the countries.

However, it also has its drawbacks and makes the parties face some difficulties and

risks. To begin with, we would like to present the economic risks of the global trade.First of all, the insolvency of the buyer is always a chance, the risks seems to be

even stronger when remembering that the buyer and the seller are some time

situated on the opposite sides of the Atlantics and it is very hard for the seller to be

fully updated about the buyers financial situation. The next risk is a risk of extended

default that is the failure of the buyer to pay the amount due within six months after

the due date. What is more is that there are always risks of non-acceptance of the

products by the buyer or by the buyers country, and the risk of surrendering

economic sovereignty. Finally, there is always a risk of the changes in the rate of

exchange. This problem is eliminated when both of the countries have the same

currencies, however it is of the utmost importance for those countries that do not

(Firat, Dholakia, Venkatesh, 1995).

Moreover, when trading internationally there are some political risks that you

may find lower. To begin with, there is a risk of cancellation or non-renewal of export

or import licenses. In the todays unstable world there is also always a risk of war and

of expropriation or confiscation of the importer's company. Such risks as the

imposition of an import ban after the shipment of the goods and the transfer risk.

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Finally, when trading internationally, one should also be ready for the possible

Influence of political parties in importer's company.

4. GLOBAL MARKETING

In the above section we have provided an insight into the reasons for

development of the international trade. It comes without saying that with the rapid

development of international trade international/global marketing has also developed.

Thus, we find it appropriate to devote the following section to global marketing.

Whether an organization markets its goods and services locally or internationally, the

definition of marketing still applies. However, the scope of marketing is broadened

when the organization decides to sell across international boundaries, this being first

and foremost due to the several other scopes which the organization has to give anexplanation for (Doole, Lowe, 2001).

The work of people involved in marketing is complicated indeed. There are as

many views as there are people, thus it is very difficult to find ways to come up with a

product and then present it in the best way, moreover, make it attractive for sorts of

people. Today, the task has become even more complex. If before the concern of

marketing was to insure the success of a given product in a particular area, now

when developing a new product different marketing strategies should be developed

for promoting this product in different countries.This means that organizations have to study the foreign market, develop

products or services that satisfy customer needs and wants in those markets

overseas, develop the "correct" marketing mix and please its own objectives as well

as giving customer satisfaction on a continuing basis. What is more is that

organizations have to also take into consideration the cultural differences when

marketing the product in various regions of the world.

Culture is a problematic issue for many marketers since it is essentially

unformulated and often difficult to comprehend. One may infringe the cultural normsof another country without even being informed of this. In addition, people from

different cultures may feel uncomfortable in each others presence without knowing

exactly what they should be doing, this applies also to working together. Another big

issue when conducting marketing internationally is the language. Language is also a

big part of the culture and without knowing the language of the particular region

success in it cannot be achieved (Cateora, 1999).

Thus, as it can be seen from the stated above, global marketing is a very

time-and-assets-worthy process, however it puts forward the issues that not everycompany would be able to overcome. This means that before going international,

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each company should analyze its current situation as well as resources and see if it

would be possible to invest the time and money needed to go overseas.

5.OPPORTUNITIES AND CHALLENGES IN INTERNATIONAL MARKETING

In order to achieve prosperity, companies need to prepare themselves to the

sudden changes in the world. Continuous adaption to the changing world

environment is necessary to obtain and retain leadership. Agressive response is

needed for the country to remain a player in the world economy. Not only countries

need to respond with innovation and creativity governments and individuals need to

do it as well.

The growth of global business activities increase opportunities for the

company. In some cases, international activities can be crucial for the company to

survive. Expanding their activitites, firms benefit from reaching many more customers

further from their domestic markets. As nowadays the production is very flexible,

plants can be shifted from one country to another and suppliers can be found in

every part of the world. Cooperativeness between companies is increasing, because

all parties can put out their major strengths and then emerge with better services,

products and ideas. This all would be hard to achieve alone.

5.1 Adapting to the environment

Seeking for international opportunity needs very careful exploration.

Knowledge of global developments and understanding what they mean is crucial to

cope with the changes. Being globally aware means to be objective and tolerant of

cultural differences. We have to acquire the knowledge of cultures, history, World

Market potentials and global economic, social and political trends. In order for a

company to be successful, adapting to an international market is a must, which is

one of the key facets in marketing concept. Even though the need for adaption is well

understood among many executives, it is often believed that international customers

are the same as dealt with in the homecountry. Lack of consumer acceptance leads

to inefficiency, sometimes it can even lead to corporate failure.

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5.2. Global consumers their needs and motivations

Understanding the human needs is critical for effective targeted marketing.

Although, this task is not always that easy. Often consumers are not aware of their

underlying motivations that determine their behaviour.Effective strategic marketing

requires an understanding of how consumers experience a brand.

One of the main drivers to move towards global marketing is that consumers

needs are becoming more alike all around the world. Yet, big differences occur in

various regions of the world. These differences acquire different marketing and

pricing strategies. Nevertheless, looking beyond the rational, to understanding the

emotional, is critical to really understanding the consumers in every part of the

world. Marketers and consumers respond to brands differently. That`s why the ability

to address and understand consumers motivation and needs is crucial in todays

marketing. Similarities and differences between markets must be understood in order

to leverage economies of scale and avoid inappropriate products and their

positioning

5.3. Participants in the global market

Many companies do not participate in the global market. It is often believed by

managers that only large multinational corporations should carry out international

marketing, as there are some very large corporations active in the world market. But

this is not completely true smaller firms are major players as well:

50% of German exports are created by firms with 19 or fewer employees

Nearly 97% of U.S exporters are small and medium-sized enterprises

2/3 of U.S exporters have less than 20 employees

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A decade ago such evolution for small companies was unthinkable. Small

companies kept production close to home. Foreign presence of the companies help

to increase sales and it gives companies access to new technology and marketing

ideas.

Operating overseas is essential to stay competitive in the domestic market. This way

companies gain experience in different kind of manufacturing techniques.

''A lot of small companies are forced into the international marketplace just to stay

alive,''( Kenneth S. Flamm, a Brookings Institution economist.)

So knowing that small companies play a big role as well, there are still some firms

and industries that are not participating in the world market. It is crucial for these

companies to understand that isolation is impossible in today`s trade environment.

Most companies are still affected by the political and economic developments in the

international marketplace. Even if not wanted, they do get caught in the global

business affairs. Some industries recognize that it is needed to adjust yourself

internationally. For example, lets look at technologically advanced industries they

have forged global relationships to stay in the game. In some industries companies

have been unable to adjust, which leads to extinction of firms and even entire

industries. (For example: VCR-s in the U.S.)

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6. GEOGRAPHICAL PERSPECTIVES ON INTERNATIONAL MARKETING

The globalization of business has made geography an irreplacable part for thestudy of international marketing. Without putting emphasis on geography, critical

information about the world, in which business occurs in, will be missing. As the

studies of business are changing rapidly over time, so are the studies of geography.

It has become an analytical approach to answer important questions.

Geography answers Where? , Why?, How? questions. For example: Why

are things located where they are? Howdo different plaaces relate to each other?

Explaining these questions we can analyze the geographical aspects which also

engage in international marketing. Geography answers questions that relate to the

location, which is also connected to the economical activity.

Geogrpahy itself has a very rich tradition going back to old times. Nowadays

geography has become more familiar to people, because there has been an

emphasis on five fundamental themes, which help to provide answers to

geographical questions. Experiences have shown that these five themes provide a

good means to introduce geographic perspective to students.

Those themes are:

1.) Location

2.) Place

3.) Interaction

4.) Movement

5.) Region

It is said that the value of a place is a product of 3 factors: location, location and

location. So from this statement we can see how important the location is to the

international marketing. When there is an urge to conduct business outside the local

areas, it is very important to learn about the location and its characteristics.

Businessmen nowadays as well back in the days, learn about different regions and

areas in order to explore potential marketplaces.

But it is important to notice, that the fixed location is not the only thing that has to be

mentioned. Of much greater importance is the location relative to other features.

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Illustrating example: Estonia an attractive trade partner in the Northern Europe

Estonia is a country in northern Europe in the Baltic region. It is bordered to the north

by Finland across the Gulf of Finland, to the west by Sweden, to the south by Latvia,and to the east by the Russian Federation.Proximity to the Scandinavian markets,

location between the East and West this is a perfect example where the location of

a country plays an important role in the country`s economy. Estonia may be a small

country - but it has a great deal to offer to foreign markets or international

businesspersons. The Baltic- Sea region with its inter-connecting waterways has

been a major transport corridor inside the region as well as with the rest of the world

since the Hanseatic days back in the 1600-s. Nowadays many different transits

across Estonia and the Port of Tallinn boasts one of the largest cargo volumes,

acting as a logistic networks between East and West as well as North and South.The

country has one of the most liberal trade and investment laws in the world the Wall

Street Journals Index of Economic Freedom for 2003 rates Estonia 6th in the world

in terms of ease of doing business.

Understanding how the location influences business is crucial for the international

marketing. Without knowing clearly an enterprise`s location in relation with its

suppliers and competitors, it is unlikely to succeed. With this example we see, how

the location plays a significant role in the country`s economy.

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http://en.wikipedia.org/wiki/Gulf_of_Finlandhttp://en.wikipedia.org/wiki/Swedenhttp://en.wikipedia.org/wiki/Latviahttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Gulf_of_Finlandhttp://en.wikipedia.org/wiki/Swedenhttp://en.wikipedia.org/wiki/Latviahttp://en.wikipedia.org/wiki/Russia


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7. THE HISTORICAL DIMENSION

The historical development of international trade

The history shows us that international trade started with the Etruscans,

Phoenicians ,Egyptians, Chinese , Spaniards and Portuguese . But the pioneer of the

international trade was The Roman Empire, which had introduced the world with the

real aim of trade between nations.

As we known throughout history, the Roman Empire used to conquer

territories and take them under the custody in all aspects (regime, law, currency). All

those matters influenced the international trade inside the Roman Empire.

The Romans had emphasized the so cold "Pax Romana" or Roman Peace. The Pax

Romana ensured that traders were able to travel safely on the ways that were built,

maintained and secured by the Roman Army and its allies . The main goal was to

carry out business transactions without any problem and make sure that the traders

are secured. The Roman Empire had to develop a systematic law system and

central- location markets through the relevant cities, as well as an excellent

communication system that led an early version of the "Pony express".

Furthermore, the system helped in reducing business uncertainty that was quitestrong in these times.

As an outcome, the Roman Empire has had extreme success and rapid

growth compared to different civilizations. Unfortunately to the Romans, many allies

turned back on the Roman Empire and helped outsiders in taking over cities and

controlling them. From that point on, the Roman Empire started to lose its main

objective, which was the international business among nations.

Throughout history, European Feudalism became a main function of trade and

marketing all over Europe. Because farmers were frequently deprived of their return,

as a result of incursions by other tribes, they decided to group up and provide for

their own protection. By delivering certain earnings to their protector, they could be

assured in retaining most of their earnings. Feudalism encouraged inner state trading

rather than exporting, because the security issues that farmers could not handle.

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Not all states had suffered from security issues, in southern Italy, for example,

where the vessel transportation was more common, the outside trading was the main

income of merchants. In order to keep up with other nations, international trade

should take a big part in the state's decision making process.

A bad example for this would be China in 1896, in order to finance his summer

residence the emperor took funding from a budget made for developing new ships for

the empire in order to increase the volume of trade between china and Europe. The

result was that China operated in almost isolation, without any transfer of knowledge

from the outside or major inflow of goods as well as without the innovation and

productivity increases which resulted from exposure to international trade.

8. GLOBAL DIVISION

Major developments in international trade after The Second World War

After the Second World War, Europe was divided into two ideology parts

"West "and "East". Those two divisions had a major implication on trade relations inthe world.The Soviet Union , as the leader of the Eastern bloc, had developed its own

economic system ( CMEA , COMECON ), which focused on encouraging strong

relations amongst the members of the Soviet Union and on the other hand,

discouraged trade or any kind of economic cooperation with the west .

The United States, in turn, promoted the "Pax America "or American peace, for the

Western society, driven by the belief that international trade is a key to worldwide

wealth.

The long run international negotiation in many major cities ( London, Geneva,

New-York ), was completed on 24 March1948 in Havana , Cuba , with the signing of

the contract for The International Trade Organization ( ITO ) . This charter was

signed by 53 countries, and it was designed to cover international commercial

policies, domestic business practices, commodity agreements, employment and

reconstruction, economic development and international investment.

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The main goal was to have one constitution that legalizes and facilitates the rules of

International trade. In addition, a general agreement on international tariff and trade

was initiated, with the purpose of reducing tariff between countries and international

institutions, like the World Bank or International Monetary Funds.

In reality many countries refused to sign the contract, because they believed

that the contract will hurt their national sovereignty. As a result, the most forward

looking approach to international trade never came to action.

Later on we will answer the questions, how do those international organizations

bridge the gaps between the nations and what are their major tasks?

9. WORLD TRADE ORGANIZATION

The principle behind the WTO

The World Trade Organization (WTO),is an international body that promotes

and enforces the provisions of trade laws and regulations. The World Trade

Organization has the authority to administer new and existing free trade agreements,to direct world trade practices, and to settle trade disputes among member states.

The WTO was established in 1994 when the members of the General Agreement on

Tariffs and Trade (GATT), a treaty and international trade organization, signed a new

trade contract. The WTO was created to replace the GATT. All of the 128 nations

that were contracting parties to the new GATT pact at the end of 1994 and became

members of the WTO upon renewing the GATT pact. By 2003 the WTO had 146

members.

The WTO is based in Geneva, Switzerland, and is controlled by a GeneralCouncil made up of member states ambassadors who also serve on various

subsidiary and specialist committees. The ministerial conference, which meets every

two years and appoints the WTOs director-general, oversees the General Council.

Since its creation, the WTO had attracted criticism from those concerned on free

trade and economic globalization. Opponents of the WTO argue that the organization

is too powerful, because it can proclaim the laws and regulations of sovereign

nations in violation of trade rules, in effect pressuring nations to change these laws.

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Critics also claim that WTO trade rules do not sufficiently protect workers

rights, the environment, or human health. Some groups claim that the WTO lacks

democratic accountability because its hearings on trade disputes are closed to the

public and press. WTO officials have rejected these arguments, noting that its

member nations, most of which are democracies, wrote the WTO rules and selected

its leadership.

WTO supporters argue that it plays a critical role in helping expand world trade

and raise living standards around the world. As a conclusion, beside the hard critics

that WTO receive, the WTO focuses on its core mission , which is the facilitation of

international trade and investment , while ensuring that effective environment exists

to afford a hearing and successful achievements of the surrounding concerns.

10. INTERNATIONAL MONETARY FUND

The principal behind the IMF

The IMF, founded in 1944, designed to promote and maintain stability and

growth to the international monetary framework. It consists of funding from its

members who paid 25% of the quota in gold or dollars and the rest in local currencies

and is located in Washington D.C. These funds are used to protect countries from

fluctuations in the value of their currencies (e.g. following the worldwide financial

crisis, the IMF has provided Hungary with $25billion in order to stop and stabilize the

value of the Hungarian HUF).The original goal of the IMF was to provide a fixed

exchange rate between nations. The abundance of the US dollar in the 1960s forced

the US to withdraw of the gold standard and lower the value of the dollar which

caused a volatile exchange rate in the 1971. The IMF had allocated many resources

to international liquidity and the facilitation of the international exchange rates.

Changes in the cost of energy as well as debts caused by developing

countries and utterly extended developments of credit in the 1980s, caused

substantial debts which triggered pressure on the IMF. In the 1990s, additional

pressure was caused by financial requirements made by the liberated soviet bloc aswell as former socialist countries.

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After the fall of the Iron Curtain many countries had searched for funds in order to

improve their local economies, which encouraged 12 new countries to join the IMF.

The IMF was pushed to its limits when currency fluctuations met the needs of

the new IMF members. The policy of lending money to countries with very low

interest rates and for semi- long periods have, as well as the changing global

financial needs, has redefined the future purpose of the IMF. In 2005, the IMF had

canceled the debts of 20 of the world's poorest nations in the amount of 3.3bl$.

Supporters of this action claim that accumulating national debts prevent poor

countries from investing in social services thus slowing down their progress in

decreasing poverty and developing further.

This action was criticized by the members of the "G8" claiming that, the

combination of the existing low interest rate in which they borrow money and

corruption within these countries is stopping them from developing further.The IMF's

new orientation may require a second thought about its rules for it has not

experienced new economic conditions such as privatization. Moreover, the

connection between economies and political stability requires different consideration

which might change the mission of the IMF in the future.

11. THE WORLD BANK

The Principal behind the World Bank

The World Bank, located in Washington D.C, also known as The International

Bank for Reconstruction and Development, formed in 1944 to, initially, assist

countries suffering from the consequences of the Second World War, and supporting

global development, has had similar success to that of the IMF.

It has helped, with a great deal of effort, building different economies and

bringing them to join the modern economic frame work.Recently, the World Bank had

started to actively participate in the actions of the IMF to resolve the debt problem of

the developing world and in the future, plans to bring the market economy to former

members of the Eastern Bloc.

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Nowadays, the World Bank invests itself in focusing more on the development

of human capital through investments in education and health.It is now led by Paul

Wolfowitz which believes in investment and dedication to helping people out of the

cycle of poverty through communication between the privet sector organizations and

investors.

12. THE IMPORTANCE OF INTERNATIONAL TRADE

With the example of the U.S. trade performance

The aim of this section is to briefly discuss the importance of a countrys

international trade performance. To give a broader insight in the topic the U. S.

example will be used.

Trade performance is mainly defined by such characteristics as a countrys

international competitiveness , the export / import ratio and by the trade policies that

are used in a certain country. In the world economy the United States of America hasalways played a leading role and people believed that without the help of the country,

other less fortunate nations would have had serious problems in the world of trade.

Following this belief, The U.S. was providing assistance to several countries after the

World War II. During these times, the U.S. domestic firms were somewhat ignored

and they did not receive as much assistance from their government as their foreign

equvivalents.Throughout the 1960s and 1970s the U.S. continued to follow this

strategy, which on the one hand seemed to be very beneficial for the country

because other countries could fully participate in the international trading activities,

but on the other hand the domestic firms were put into the shade.

Caused by the pro-international government policies the U.S. domestic firms

did not feel the urge to enter the international markets. There was a belief that

international markets are too far and too risky to invest in.This general perception

generated a significant gap in international knowledge and experience between the

U.S. and the international firms. Given the lack of interest in the international markets

the U.S. private sector did not concentrate on doing business with international firms.

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This approach was a clear disadvantage for the countrys economy compared to the

domestic firms in countries that were already active in the field of international trade.

In spite of all these regulations and beliefs, the attitude of the firms in the

United States started to change. Companies started to realize the importance of

international trade. Due to the changed way of thinking the country could keep its

leading position in the world economy and the domestic firms had the opportunity to

take their business activities into international dimensions. By widening the

perspective , U.S. firms were able to discover new markets and new customers all

over the world. This also had a positive effect on the growth of supply in the country.

By this example we wanted to show, how important it is for a country to play a

decent role in the field of international trade. Without opening the gates to the new ,

one country would never be able to improve, to innovate.

13. THE IMPACT OF TRADE AND INVESTMENT

13.1. The effect of import / export activities

In this section the main emphasis will be put on the advantages and

disadvantages of a countrys importing and exporting activities. Firstly the

advantages of exporting activities will be discussed.

Exporting is a really important tool for a country to balance its trade

accounts.The overall export rate of a country can affect several things, including

currency values, competitiveness, fiscal and monetary policies. It is also important to

mention that the level of exports is strongly correlated with the level of imports. The

level of exporting activities will define the level of importing activities. One major

advantage of exports is that by increasing the intensity of these activities, one

country can reduce its trade deficit. If a countrys trade deficit exceeds the level of

exports, the country is apparently consuming more than it could produce in the

domestic market. That is why the level of exporting activities is a crucial point in a

countrys economy.

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To give an example:

One billion dollars worth of exports supports the creation, on average, of11,500 jobs. (Michael R. Czinkota,2007)

By growing exporting activities firms can achieve economies of scale, which

plays an important role in increasing effectiveness. In the case of a discovery of a

new market, a firm can find new potential customers, and increase its rate of

production also. Following the logic, this will result in higher profits and lower costs

both in the domestic the the international markets. By diversifying the markets, thefirm can also avoid being dependent on a singular market. By this, an optimal

balance can be established, which will give the customers, the investors and the

managers the impression of a stable and insured company.

Secondly, mentioning the importance of importing activities is also needed. In

a strong and well functioning economy, firms are always competing with each other,

trying to convince the customers to purchase their products.One tool of doing so, is

importing. Due to the imported products a domestic firm should always come up with

some innovative ideas, improvements to maintain the companys market share. From

the customers point of view, importing is a really beneficial activity. They can now

choose from a wider variety of products and services. Lastly it is important to

mention, that the competitive pressure caused by the imported products is forcing the

companies to keep prices low and quality high.

After reading this section one could already have a full understanding of the

effects of export / import activities in a certain country. Yet again, international trade

seems to play a very important role in the well-being of the economy.

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13.2. The effect of International Investment

After the discussion of trading activities within the framework of internationalmarketing, it is also crucial to mention the importance of international investment

activities on the market.In the following section one can have an understanding of the

effects of international investment on the world economy.

Nowadays, investment activities have special attention in a firms life.

Investment continuously grows all around the globe, because by discovering new

foreign markets, companies are able to establish profit efficiency. To bring the U.S.

example once again, due to the growth of foreign direct investment in the country.

almost one in seven U.S. manufacturing employees works for a foreign affiliate,

which is a U.S. firm of which foreign entities own at least 10 percent (Michael R.

Czinkota,2007)

On the one hand, the rising of international investment activities seem to be

very beneficial for a countrys economic achievement, but on the other hand, there is

a fear that one country could get control out of her hands, by depending too much on

foreign owners and investors. An other danger of foreign investments is that some

firms which are not willing to put themselves in the circle of international investment

activities may easily lose their market share in the domestic market caused by the

lack of international knowledge and experience. To avoid a possible overdose of

investment activities there are certain restriction that a company has to go through

before investing in a certain international project. In the United States of America for

example these regulations are enforced by a committee called Committee for Foreign

Investments. (CFIUS) (Michael R. Czinkota,2007) This committee is responsible for

assessing the advantages of the investment from the U.S. point of view.

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To put it in a nutshell foreign investment can be sometimes harmful for the

domestic companies of a country, but in the long-term, the free flow of foreign capital

and innovative ideas enables a country to maintain a constant economic growth,

ceteris paribus.

14. TRADE BARRIERS AND RESTRICTIONS OF IMPORTS

In a time when countries are exposed to the risk of growing trade deficit, as

well as expanding foreign direct investment, restrictions and regulations on importing

activities are necessary. In many cases these regulations are only threats against

foreign importers and are not providing better trading conditions for the exporters in a

given country. In some cases, these restrictions are only created to gain short-term

advantages in the domestic market, but in the long-term, there is no real benefit for

the national economy.

In the U.S. example, international trade is mostly done according to the

national trade laws of the country, which in return many times causes bilateral

conflicts.

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Chart 1


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Although this way of trading might not be universally accepted, the U.S. takes such a

major part in international trading activities that other countries just have to accept

the U.S. trade laws. In general governments have found various different ways to

restrict importing activities.

Here is a list of some of trade barriers:

1. Special Import Authorization 7. Testing,Labeling2. Voluntary Export Restraints 8. Health and Sanitary Prohibitions3. Taxes on Foreign Exchange Deals 9. Taxes on Transport4. Licensing Fees 10. Certification5. Anti-Competetive Practices 11. Consular Invoice Fees6. Country Quotas 12. Export Subsidies

(Michael R. Czinkota,2007)

One commonly used method of restriction is voluntarily import restraints. The

word voluntarily is put into quotation marks because in reality these policies are

made to threat the possible trading partners and to protect the domestic industries.

These regulations will allow the domestic firms to gain advantage over their foreign

equivalent. An other way of restricting imports is to have heavy tariffs on the goods

imported. With this way some companies are put in an insolvable situation regarding

the financing of the goods. High tariffs could be deterrent even for the biggest

international companies. The third option to regulate the system is to initiate nontariff

barriers. These barriers are really difficult to recognize, quantify or to attest. Among

others these barriers could be in the form of preferential treatment for the domestic

companies against the foreign competitors. An other way is to create such rules for

entering the market that would make it almost impossible for the foreign companies

to enter the national business circle. By using these restrictions, domestic firms are

enjoying a certain advantage and can concentrate or domestic competition.

To sum it up, these trade barriers and restrictions might be beneficial for the

domestic companies in the short-term, but in the long term it directly effects the

performance of the economy, the level of innovation and the flow of capital. Taking

these points into consideration, one can not have a firm answer for the question,

whether these regulations are appropriate or not.

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15. EXPORT PROMOTION EFFORTS

In addition to the facts that were mentioned before a country can assist thedomestic market not only by initiationg ristrictions on importing activities, but also by

providing export promotion assistance if necessary.

In many cases export promotion is needed to boost up a countrys domestic

economic activity, to encourage the domestic employment, or to certify the flow of

foreign currency in the country.There are two common forms of export

promotion.Either the government makes such acts with which one can reduce therisk of a business, or the government provides certain subsidies for some of the

domestic companies. The export promotion efforts are initiated to achieve the desired

long-term national competetiveness and economic growth. This sometimes may be

harmful for some companies in the short-term. One example of these activites are

taken from the United States of America . The U.S. Department of Commerce tries to

coordinate the activities of federal agencies all over the country.They try to find a

connection with the firms of the country focusing mainly on the flow of information

and market assistance:

A national network of export assistance centers has been created,capable of

providing one-stop shops for exporters in search of export counseling and financial

assistance. (Michael R. Czinkota,2007)

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In several countries these export promotions are also concentrating on the

support of the private-sector. Altough a major proportion of support goes to the field

of agriculture,recently the focus has also turned to the area of export financing. To

keep a countrys competitiveness in the international market, one has to make sure

that the domestic firms are able to reach the subsidized financing rate of foreign

suppliers. After providing all the requirements for a well functioning economy, one

can still not be sure that the exporting activities will satisfy the needs of the country.

Sometimes banks find domestic markets much safer and profitable. If this happens

they will be not willing to invest in foreign activities, which in return will cause a lack

of confidence in the foreign markets.

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16. EXECUTIVE SUMMARY

The purpose of this report was to examine the concept of marketing focusing

mostly on the global/international marketing as well as the international trade and itssignificance. Research for this report includes a review of current literature on both in

printed and electronic sources. The major findings indicate that working in marketing

today has become even more complex due to the overall globalization of the world.

In addition to that, when trading global the company faces as many risks as it does

opportunities. An other purpose of this report was to give a thorough understanding

in the topic of international trade. Previously several themes were discussed such as

the history of trading, the existence and purpose of several trade institutions and the

causes and effects of trading with a special emphasis on exporting, importing and

investing activities.

After writing the paper one should be able to draw the conclusion. Nowadays

the importance of international trade and investment policies has grown

extraordinarily. All countries have to have a well established harmony between the

domestic- and the international trade. Both short-term and long-term perspectives

were discussed, but in general one can ascertain that without innovation and the flow

of free capital (which is caused by the international trading activities) one country

could not be a major part of the world economy. In addition, one country has to find

the ideal balance between the level of protectionist and the laissez-faire market

attitude. On the one hand too much protection can cause harmful effects in the

economy, but on the other hand if a sovereign state let all the foreign investors

overrun the country, the domestic production can suffer seriously. In order to

establish the smooth functioning of these activities, such organizations as the

International Monetary Fund, the World Bank and the World Trade Organization wereestablished. All these institutions are trying to facilitate the trading activities on the

international market.

For the future, the biggest task is to establish a smooth and well functioning

world economy, where all the participants can have a certain benefit from the trading

activities (following the theory of multilateral negotiations) and government attitudes

towards trade regulations and policies are balanced.

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17. BIBLIOGRAPHY

Cateora, P.R., and Ghauri, P.N. (1999), International Marketing, McGraw-HillPublishing Company, European Edition.

Doole, I. and Lowe, R. (2001), International Marketing Strategy - Analysis,

Development and Implementation, Thomson Learning, 3rd Ed.

Keegan, W.J., (2002), Global Marketing Management, Prentice Hall, 7th Ed.

Carter, S. (1988). Multinational and International Marketing in Constraint

Economies.The Quarterly Review of Marketing, Summer, pg 13-18.

Firat A. F., Dholakia N., Venkatesh A. (1995) Marketing in a Postmodern

World. European, Journal of Marketing Vol 29 No. 1, pg 40-56.

Nonoy Niles, Consumer Needs and Motivations, Accessed on 30th of October

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