ADVANTAGES OF WORLD TRADE Develop economy, create wealth Increase output of goods, enable countries to exploit comparative advantages Consumers benefit from wider choices and lower prices Increase opportunities for market expansion and specialization
INTERNATIONAL BUSINESS ADVANTAGES OF WORLD TRADE Develop economy, create wealth Increase output of goods, enable countries to exploit comparative advantages Consumers benefit from wider choices and lower prices Increase opportunities for market expansion and specialization FACTORS LEADING TO EFFICIENT PRODUCTION OF SOME CERTAIN GOODS IN DIFFERENT COUNTRIES Climate Natural resources Geographical location Feature of working population Technological development Economic mechanism & policies changes of factors Changes of production ability THEORETICAL BACKGROUND FOR INTERNATIONAL TRADE Theory of absolute advantages by Adam Smith - Absolute advantage: ability to produce some goods most effectively (oil in Saudi Arabia, coffee in Brazil, diamond in South Africa…) THEORETICAL BACKGROUND (cont.) Theory of comparative advantage by David Ricardo - Comparative advantage: ability to produce some goods more cheaply than others (e.g China has comp advantages in producing labor-intensive goods, the USAin making capital-intensive goods & farming produce…) THEORETICAL BACKGROUND (cont.) Absolute and/or comparative advantages: Effective production of certain goods Low costs, High productivity High output Good quality High specialization and international exchange REASONS FOR GOV CONTROL OF FOREIGN TRADE Gain benefit from trade surplus Ensure trade balance Protect infant or important domestic industries from competition Maintain national basic skills Avoid structural unemployment and negative reactions from the public and labour unions React against restrictions imposed by other nations Ensure national security and independence GOV CONTROL METHODS Export encouragement - Offer subsidies to exports - Organize trade promotion missions - Provide marketing information - Offer tax benefits or incentives - Apply for preferential trade clauses - Joint inter trade organizations: GATT, APEC, WTO… - Sign common trade expansion agreements GOV CONTROL METHODS (cont.) Import restriction or protectionism Non-tariff barriers Tariff barriers + Complicated procedures +Import duties +Quotas +Cultural and social difference +Economic difference (Gov involvement) +Legal and political difference (local-content law and business-practice law) GOV CONTROL METHODS (cont.) Disadvantages of protectionism - Favor producers, not consumers - Limit competition and production effectiveness - Increase prices to consumers - Cause frictions between nations “Globalization “Globalizationisisone oneof ofthe theten ten most mostimportant importanttrends trendsaffecting affecting the thefuture futureof ofthe theworld” world” (John (JohnNaisbett) Naisbett) DEVELOPMENT OF MULTINATIONAL FIRMS Multinational corporation is a company that designs, produces and markets products in many countries (the highest involvement in international business) DEVELOPMENT OF MULTINATIONAL FIRMS - ADVANTAGES - - - For the firm Expand business opportunities, production and market scales Exploit comp advantages to improve production efficiency Develop global philosophy of management, marketing and production For the local country - Promote technology transfer, new skill training, investments and job creation THANK YOU FOR LISTENING! ... in many countries (the highest involvement in international business) DEVELOPMENT OF MULTINATIONAL FIRMS - ADVANTAGES - - - For the firm Expand business opportunities, production and market... of certain goods Low costs, High productivity High output Good quality High specialization and international exchange REASONS FOR GOV CONTROL OF FOREIGN TRADE Gain benefit from... difference +Economic difference (Gov involvement) +Legal and political difference (local-content law and business- practice law) GOV CONTROL METHODS (cont.) Disadvantages of protectionism - Favor producers,