INTERNATIONAL MARKETING ECONOMICS

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INTERNATIONAL MARKETING ECONOMICS

• By
• Elisante Ole Gabriel (Tanzania)
• Chartered Marketer
• egabriel_at_edenconsult.net, www.olegabriel.com
• 255-784-455-499

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Introduction

• There is always a reason to enter in to
  international Business
• The purpose of theories in to simplify reality so
  that the basic elements of Logic can be seen
• Logic helps to justify your position/argument
• Between 1500 1800 the doctrine of mercantilism
  theory prevailed
• The classical theory emerged due to absolute and
  comparative advantages. Cost is the yard-stick!

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MERCANTILISM THEORY

• The nation can maximize wealth by maximizing the
  gap between export and imports (Trade Surplus)
• There is a need to stimulate exports and restrict
  imports
• The major weakness of this theory is that it
  focused mainly one the needs and operations of
  the Government than the individual.

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CLASSICLA THEORY

• There are two branches for this
• Theory of Absolute Advantage By A. Smith (1776)
• Countries with high level of efficiency can
  produce the same products as others with fewer
  labour-hours (Efficiency Absolute Advantage)
• Division of labour is necessary
• In this theory, the source of the said advantage
  is not explained

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The Theory of Absolute Advantage(By David
Ricado, 1819)

• His is a development of the work by Smith on
  absolute advantage
• Ricado posed a question what will happne if a
  country has the absolute advantage in both
  products?
• In any case there is always a possibilioty that,
  the country might be more efficient in one
  product when compared with the other country
  comparative advantage.

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Heckscher-Ohm Theory(Factor Proportion Theory)

• It is an expansion of Classical theory
• Why a country is comparatively efficient on a
  certain product?
• Eli Heckscher and Brtil Ohlin, asserted that this
  is due to a difference on endowment, labour and
  capital
• Capital is considered as important as labour
• Why then Tanzania is not capitalizing on this
  theory?
• There are about four assumptions to this theory.
  These include 2X2X2 (Products, products and
  factors of production)
• Consider the relatively abundant factor