1. Global Markets Introduction

2. Introduction
International Trade Growth International Trade Milestones Largest Exporting & Importing Countries International Trade Drivers International Trade Theories The International Business Environment

3. International Trade Growth
2008
Growth in International Trade and Share of Selected Countries (in current U.S.$ billions)
Source: World Trade Organization
1953
1963
1973
1983
1993
2003
2007
Europe
39.4%
47.8%
50.9%
43.5%
45.4%
45.9%
42.4%
United States
18.8%
14.9%
12.3%
11.2%
12.6%
9.8%
8.5%
Japan
1.5%
3.5%
6.4%
8.0%
9.9%
5.2%
China
1.2%
1.3%
1.0%
2.5%
5.9%
8.9%
Rest of the World
39.1%
32.5%
29.4%
36.1%
29.6%
32.0%
35%
World Total 84
157
579
1,838
3,677
7,375
13,619

4. International Trade Milestones
Bretton Woods Conference
1944
1945 International Monetary Fund
1st General Agreement on Tariffs and Trade 1948
1957
Treaty of Rome
World Trade Organization 1995
1999/
2002
Creation of the Euro

5. Largest Exporting Countries (2008)
Rank
Exporting Country
Value
Share 1
Germany
1,326.4
9.5% 2
China
1,217.8
8.7% 3
United States
1,162.5
8.3% 4
Japan
712.8
5.1% 5
France
553.4
4.0% 6
The Netherlands
551.3 7
Italy
491.5
3.5% 8
United Kingdom
437.8
3.1% 9
Belgium
430.8 10
Canada
419.0
3.0% 11
South Korea
371.5
2.7% 12
Russia
355.2
2.5% 13
Hong Kong
349.4 14
Singapore
299.3
2.1% 15
Mexico
272.0
2.0%
Top fifteen exporters
8,950.7
64.1%
Rest of the World
4,999.3
35.9%
Total
13,950.0
100%
Source: World Trade Organization

6. Largest Importing Countries (2008)
Rank
Importing Country
Value
Share 1
United States
2,020.4
14.2% 2
Germany
1,058.6
7.4% 3
China
956.0
6.7% 4
Japan
621.1
4.4% 5
United Kingdom
619.6 6
France
615.2
4.3% 7
Italy
504.5
3.5% 8
The Netherlands
491.6 9
Belgium
413.2
2.9% 10
Canada
389.6
2.7% 11
Spain
372.6
2.6% 12
Hong Kong
370.1 13
South Korea
356.8
2.5% 14
Mexico
296.3
2.1% 15
Singapore
263.2
1.8%
Top fifteen importers
9,348.8
65.6%
Rest of the World
4,895.2
34.4%
Total
14,244.0
100%
Source: World Trade Organization

7. International Trade Drivers
Spread costs over larger number of units and find low- cost suppliers
Cost Driver
Follow competitor to new foreign market or expand market share
Competitive Driver
Increased uniformity of consumer tastes and preferences
Market Driver
Increased access to information and easy access to new customers over the internet
Technology Driver

8. International Trade Theories
When a nation can produce a certain good more efficiently than other countries, it will trade for other products
Adam Smith – Absolute Advantage
Theory
Nations will trade as long as they can produce some goods relatively more efficiently
David Ricardo – Comparative Advantage Theory
A country will enjoy a comparative advantage if it is naturally endowed with many factors of economic production
Heckscher-Ohlin Factor Endowment Theory
During its life cycle, a product will be manufactured in different countries
Raymond Vernon – International Product Life Cycle
It is critical to have similar firms concentrated in one geographic area
Michael Porter – Cluster Theory

9. Smith – Absolute Advantage
The absolute advantage theory states that when a nation can produce a certain type of good more efficiently than other countries, it will trade with countries that produce other goods more efficiently.
Liters of Wine
Units of Machinery
France
20,000 2
Germany
15,000 3
In this case, we assume both countries are using the same amount of labor in the same time frame. France has an absolute advantage in producing wine and Germany has an absolute advantage in producing machinery.
As a result, France will specialize in making wine and Germany in making machinery. They will then trade with each other.

10. Ricardo – Comparative Advantage
The comparative advantage theory states that nations will trade with one another as long as they can produce certain goods relatively more efficiently than one another.
Tons of Wheat
Units of Machinery UK 25 5
Brazil 21 3
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.

11. Heckscher-Ohlin Factor Endowment
The factor endowment theory holds that 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.
Factors of Economic Production
1. Land
2. Labor
3. Capital
4. Entrepreneurship
Country
Abundance
Advantage
Argentina
Grazing Land
Beef
India
Educated Labor
Call centers
USA
Economic system where entrepreneurship is rewarded
Innovation & development of intellectual property

12. International Product Life Cycle
The International Product Life Cycle theory explains that, over its life, a product will be manufactured in different types of countries, in stages, generating trade between these countries.
Stage 1
Product is created in developed country, using new technology and serving a market need.
Stage 2
As sales grow, competitors start to make similar products in other developed countries, responding to local needs.
Stage 3
Manufacturing of product has become routine and costs need to be reduced, and production moves to developing countries.

13. International Product Life Cycle

14. Porter – Cluster Theory
The cluster theory argues that 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.

15. Cluster Theory Cluster Examples:
Silicon Valley, California, U.S. – Information technology
Sassuolo, Italy – Ceramic tiles
Limoges, France – Porcelain
Genève, Switzerland – Watches
Yiwu, China – Socks & hosiery
Elkhart, Indiana, U.S. – Recreational Vehicles

16. International Business Environment
Marketing
Cultures
Finance
Economics
Travel
Language Study
Foreign Contacts

17. International Business Environment
To be successful in international trade management, not only is it important to have an understanding of trade management, but it is also fundamental to understand the international environment.
This can be achieved by learning a foreign language, taking classes in international economics, international finance, inter-cultural communication, and international marketing, but also by traveling frequently, meeting foreign nationals, and making an effort to understand what is happening in foreign countries.