CHAPTER 1: EVOLUTION OF of a country, or country-based.

INTERNATIONAL TRADE - theories include, mercantilism, absolute advantage,

comparative advantage, and Heckscher-Ohlin.
World Trade Organization (WTO)
- By the mid-twentieth century, theories began to shift
- only global international organization dealing with
to explain trade from a firm. These are referred to as
the rules of trade between nations.
modern and are firm-based or company-based.
- Goal: to ensure that trade flows as smoothly,
predictably, and freely as possible and to help Modern Firm-Based
producers of goods and services. - theories include country similarity, product life cycle,
global strategic rivalry, and Porter’s national
Roles of WTO:
• operates global system of trade rules
competitive advantage.
• acts as forum for negotiating trade agreements ➢ The evolution of what is recognized as the Standard
• settles trade disputes between its members Theory of International Trade goes back to the years when
• supports the needs of developing countries
Adam Smith’s Wealth of Nations and David Ricardo’s
- functions primarily as the forum for trade Principles of Economics were published. The theory is
negotiations between countries. a classical, country-based international trade theory
- Primary purpose: to open trade for the benefit of all. that states that a country’s wealth is determined by its
- precursor of the General Agreement on Tariffs and holding of gold and silver.
Trade (GATT) established by multilateral treaty of 23
Theory of Free Trade
countries in 1947 after World Ward II.
- Smith and Ricardo herald this formulation.
- head quartered in Geneva, Switzerland. Has 164
- As opposed to the mercantilist policies of protection,
members and 22 countries are in the process of
was championed by both Smith & Ricardo as a route
acceding to it.
to achieve production efficiency at a global level.
- Officially, each council, committee, or working party
elects its own chairperson. Division of labor
- separation of a work process into a number of tasks,
However, to ensure a good distribution of
with each tasks performed by a separate person to
appointments over all these bodies, informal
boost productivity, efficiency, and enhance
consultations are held to produce consensus on slates
specialization.
of chairpersons in three groups:
1. those directly involving the General Council •Trade Surplus- amount by which the value of a
(including the bodies reporting to the Trade country’s export exceeds the cost of its import.
Negotiations Committee); •Industrial Capitalism- second phase of capitalism in
2. those reporting to the Goods Council which industries/factories became the dominant
3. those reporting to the Services Council factor in the production of goods.
•Free Trade- individuals benefit from a greater choice
Ngozi Okonjo-Iweala
of affordable goods.
- former finance minister of Nigeria and a former
•Mercantilism- restricts imports and reduces the
World Bank senior executive of 25 years.
choices available to consumer.
- first woman and the first African to serve as director-
•Absolute- country’s inherent ability to produce
general of the WTO (effective March 1, 2021).
specific goods efficiently and effectively at a relatively
- Priorities: Bridging the broken trust amongst
lower marginal cost, lesser workforce, lesser time, and
members of the WTO and updating the rules to meet
lessen cost without compromising the quality.
the twenty-first century realities.
•Comparative- country’s capability to produce the
LESSON 1.1: EVOLUTION OF INTERNATIONAL TRADE specific good at lower marginal cost and opportunity
THEORY cost compared to other countries.
Classical •Marginal- cost incurred in producing an additional
- main historical theories and are from the perspective unit of a product.
•Opportunity cost- value you will get from an was developed in Babylonia, too.
alternative that you did not choose. - People used to exchange their goods for weapons,
tea, spices, food items, and human skulls. Another
➢ The Standards Theory of International Trade has
popular item used for exchange was salt.
evolved into the Theory of International Trade and
Commercial Policy, still considered to be the one of LESSON 1.3: ORIGIN OF MONEY
the oldest branches of economic thought. CHINA
• 1000 BC
LESSON 1.2: BARTER
- First recognizable metal coins
- direct trade/exchange of good and services
- Earliest currency of 8th century BC- miniature hoes
ADVANTAGE:
and billhooks
• Does not involve money • Very simple
• 770 BC
DISADVANTAGES:
- miniature replicas of tools and weapons in bronze
• Finding people • No standard measure of value
used as medium of exchange.
• Time consuming • Good are perishable
- small bronze celts and bronze rings played monetary
➢ The invention of money did not put an end to role
bartering services. Monetary crises fueled the revival - Due to impracticality, these tiny daggers, spades, and
of this system, and the current recession has once hoes, were abandoned for objects in the shape of a
again set a stage for its comeback. There are now circle (These objects became the first coins).
swap markets and online auctions. • 700 BC
- moved from coins to paper money
HISTORY OF BARTER INTERNATIONAL TRADE
• EARLY HUMANS LYDIA (Europe)
- The early had very little needs. They used leaves and • First region of the world to use an industrial facility
animal skin as clothes, and ate vegetables, fruits, fish, to manufacture coins
and animal meat. There was no need for exchange of - Minting: process of making a coin by stamping
goods, as their needs were limited. metal.
• FORMATION OF GROUPS • 600 BC
- As the number of people increase, the early humans - Started using paper money; King Alyattes minted the
had to travel long distances to find food and started first official non-standardized electrum currency, coins
forming groups. The member of each group stayed from electrum.
together while traveling and hunting. refraining from • 550 BC
any interaction with other groups. - King Croesus produced a bimetallic system of pure
- Gradually, however, intergroup interaction started, gold and pure silver coins.
and this paved the way for a system of trading. - Croeseid: type of coin, which was minted in Sardis by
• CULTIVATION AND FARMING King Croesus. It’s credited with issuing the first true
- After years of nomadic life, people started settling gold coins with standardized purity and world’s first
down in areas, where they began growing plants and bimetallic monetary system.
raising farm animals. As cultivation and farming
CANADA
flourished, people then had enough time to spend on - First paper currency. The colonial government
other work, like pottery, carpentry, weaving, and the issued IOUs (promissory notes) that traded as a
like. They started trading surplus goods and the currency
system of trade flourished. - Early 17th century: According to Adam Shortt, the
• EVOLUTION OF THEBARTERSYSTEM first regular system of exchange in Canada occurred in
- The history of bartering can be traced back to 6000 Tadoussac.
BC. The barter system was introduced by the tribes of • QUEBEC
Mesopotamia, then adopted by the Phoenicians who - First colonial settlement on St. Lawrence River was
bartered their goods to people in other cities located established by Samuel de Champlain in 1608.
across the oceans. An improved system of bartering
- Beaver pelt: one universally accepted medium of ancestors were already trading with China, Japan,
exchange in the infant colony. Borneo, and the Moluccas. The Spaniards ruled the
Philippines for 300 years. The cobs or macuquinas
- Silver and Cooper coins designed especially for the
(silver coins) of colonial mints were the earliest coins.
colonies was minted in 1670.
- Barrilla: worth about one centavo and it’s first coin
- Mid 1600s: Spanish dollars represent the first
distinctive Canadian coins. struck in the country as ordered by the Royalty of
- 1685: Jacques de Meulles came up with the card Spain.
money, which served as money in Canada and just as - Gold coins with portrait of Queen Isabela were
coin in France. minted in Manila. Silver pesos with the profile of
- 1711: All debts and contract in Canada became Alfonso XIII were the last coins minted in Spain.
payable in monnoye de France. - El Banco Espanol Filipino de Isabel II: first paper
- Bills of exchange: drawn on the Treasury were used money.
for payments of expenses.
REVOLUTIONARY PERIOD
• Legal tender- currency, such as coin and paper - PH Republic of 1898 under General Emilio Aguinaldo
money, is valid and sufficient for payments of debts. issued its own coins and paper currency backed by the
• Inflation- increases in prices, reducing purchasing country’s natural resources.
power of money. - At the Malolos arsenal, two types of two-centavo
copper coins were struck. One-peso and five-peso
FRANCE
- Livre: was the currency of the Kingdom of France revolutionary notes printed as Republika Filipina
and its predecessor state of West Francia (1781-1794). Papel Moneda de Un Peso and Cinco Pesos were
freely circulated.
• 1722: Copper were introduced, but they were not
well received by merchants. Notes issued by private AMERICAN PERIOD
individuals also circulated as money. - With the coming of the Americans in 1898, modern
- The government issued promissory notes called banking, currency, and credit systems were instituted
ordonnances (replaced later by card money) and making the Philippines one of the most prosperous
treasury notes called acquits countries in East Asia. With the gold standard,
countries agreed to convert paper money into a fixed
amount of gold per unit of currency.
- Gold Standard: monetary system where a countries
or paper money has value directly linked to gold.
- Coins issued under the system bore the designs of
Filipino engraver and artist, Melecio Figueroa.
- The renaming of El Banco Espanol Filipino to Bank of
the PH Islands in 1912 paved the way for the use of
English from Spanish.

LESSON 1.4: HISTORY OF PH CURRENCY THE JAPANESE OCCUPATION

PRE-HISPANIC ERA - Two kinds of notes circulated in the country during
- Barter was the means of trade long before the this period. The Japanese Occupation orces issued
Spaniards came to the Philippines. However, the war notes in high denominations. These war notes
inconvenience of the barter system led to the had no back up reserves, thus, Filipinos dubbed it as
adoption of a specific medium of exchange; the “Mickey Mouse” money.
cowries, a form of currency in the world then. - Guerrilla Notes: Issued by different provinces and
- Barter rings made in gold were the first local form of municipalities through their local currency boards.
coinage called piloncitos.
THE PHILIPPINE REPUBLIC
SPANISH ERA - The country used old treasury certificates as
- When the Spaniards came to the Philippines, our currency overprinted with the word “Victory”: A
nation in command of its destiny is the message • Direct Carrier Billing (DCB)- enter your phone
reflected in the evolution of Philippine money under number on a payment page or in an app and the
the Philippine Republic. payment will then be added to your phone bill.
• Central Bank of the Philippines
MODES OF INTERNET PAYMENT
- Established in 1949.
• Wireless Application Protocol- most common facility
- First currencies issued were the English series notes
on smartphones through a more limited- capacity.
printed by the Thomas de la Rue & Co., Ltd., in
• AutoPay- payments to credit cards or other bills, are
England
scheduled to be automatically paid on a certain date
- US Bureau of Mint, a government agency, minted the
from funds of the payee with a certain bank.
first coins.
• Payment by Links- most commonly referring to a
- Ang Bagong Lipunan (ABL): printed at the Security
button/link sent in an email, txt message, or over
Printing Plant were circulated starting 1978.
social media to process a transaction for a specified
- 1983: Flora and Fauna coin was issued.
merchant.
- New Design Series issued in 1985 replaced the ABL
• Neobank- umbrella term for the new generation of
series. Ten years later, new set of coins and notes
cutting edge, fully digital banking services.
were issued (Bangko Sentral ng Pilipinas).
LESSON 1.6: VIRTUAL CURRENCY
LESSON 1.5: MOBILE PAYMENTS & INTERNET
• Cryptocurrency- also called “digital gold or
PAYMENTS
“altcoins”, are any type of digital unit that is used as a
• MOBILE/INTERNET PAYMENTS- money rendered for medium of exchange or a form of digitally stored
a product or service through a portable electronic value generated by agreement within the community
device. of virtual currency users
• POINT OF SALE (POS) - place, such as checkout • Fiat Currency- real currency, coins and paper money
counter of a store, where customer makes the issued and printed by the central bank of a country.
payment for goods or services • E-Money- digital representation of fiat currency
stored in digital wallets or e-wallets.
MODES OF MOBILE PAYMENT
• Virtual currency- stored digitally, would still need to
• Near Field Communication- allows contactless
be converted first to PH peso, then transferred to a
payments using close-proximity radio frequency
destination wallet or be withdrawn as cash.
identification.
• Blockchain- special kind of database, a distributed
• Sound Wave-based- uses advanced, ultra-low
ledger or a global ledger built on a data structure
power, wireless transmission technology.
known as blocks
• Magnetic Secure Transmission- uses magnetic
• Cryptography- process of protecting information by
signal to process payment using secure tokenization
using codes for security
system.
• Mobile/Digital Wallet- work through complex ➢ The more users a coin has, the more useful it
encryption and tokenization to process specific becomes, and the higher its prices goes. But when a
transactions. coin falls out favor, there’s nothing to stop it from
• Quick Response (QR)- codes are the trademark of going to zero.
type of matrix barcode readable by smartphones used
• China has already developed a Central Bank-backed
in e-commerce to process payments.
crypto.
➢ Advantage:
• The cryptocoin market is decentralized, but
a. stores large volume of data
cryptocurrency exchange websites, are centralized.
b. scanned from a screen, not just paper
c. read even if part of the code is damaged THE TOP 6 5-STAR CRYPTOCURRENCIES
d. safer because information can be encrypted • Ether/Ethereum (ETH)
• Short Messaging Service (SMS)- paying for products • Bitcoin (BTC)
or services via a text message. • 0'>Ripple (XRP)
• Stellar (XLM)
• Cardano(ADA)
• Dogecoin (DOGE)
CHAPTER 2.1: INTERNATIONAL TRADE THEORIES economy politics to ensure that the state is enriched
by increasing the entry of gold and silver.
International trade theories
- various theories that analyze and explain the ➢ Countries employed a policy of protectionism; the
patterns and mechanisms of international trade. country tried to protect the export industries that
- deal how countries exchange goods and services and brings in gold and silver.
help countries in deciding what should be exported ➢ New nation-states practiced colonization where
and imported. one country takes control of another country or
- initially company-based and were called classical region. These nation-states expanded their wealth by
theories. using their colonies around the world in an effort to
control more trade and amass more wealth.
Trade- concept of exchanging goods and services
between two people. FACTORS OF PRODUCTION
International trade- concept of this exchange between 1. Natural resource (LAND)- things found in nature
people or entities in two different countries. such as land, trees and mines.
2. Labor- work performed by a person for monetary
Classical economists- oriented primarily toward
growth economics. Main concern: explain how the consideration.
3. Capital Goods- goods which are produced by
“wealth of nations” could be increased.
economic system and used as inputs in production of
Main points of Classic Theories of International Trade: further goods and services.
a. Trade is an important stimulator of economic ➢ Capital - money or funds used to purchase
growth. the goods used in production process.
b. Trade tends to promote greater international and 4. Entrepreneurship- the entrepreneur is the one that
domestic equality. combines the factors in correct proportion and
c. Trade helps countries to achieve development. mobilizes them.
d. In a world of free trade, international prices and
costs of productions determine how much a country Neo-mercantilism- combines protectionism through
should trade in order to maximize its national tariffs and import barriers and domestic industry
welfare. protection through subsidies and tax exemptions.
e. In order to promote growth and development, self- Free trade
reliance based on partial or complete isolation is - international trade is free from barriers such as
asserted to be economically inferior to participation tariffs, quotas or other restrictions and can flourish on
in a world of free unlimited trade. its natural growth free from government interference.
➢ In the mid-twentieth century, economists shifted - allowed for liberation which would pave the way for
from country-based to firm-based or company-based freely initiated trade and engage maximum possible
theories, which were called modern theories. number of people.
- useful and can help with international trade by Adam Smith- who gave currency to the term. He
helping a business determine the right country to viewed mercantilism as not freely initiated and did
expand into and make goods more efficiently. not bring benefits to all parties. He refuted the
CHAPTER 2.2: MERCANTILISM general notion that the Wealth of Nations should be
measured by the country’s treasury.
➢ “Commercial Revolution” saw the transition from
local economies to national economies, from
feudalism to capitalism, and from rudimentary trade
to a globally larger international trade.

Mercantilism
- also known as “bullionism”, it’s the goal of the
• Laissez-fair economics is theory that restricts CHAPTER 2.3: THEORY OF ABSOLUTE ADVANTAGE
government intervention in the economy. • Absolute Advantage- producer can produce a good
• Specialization- method of production whereby an or service better, faster, and more efficiently, at a
entity focuses on the production of limited numbers greater volume and with fewer resources than others.
of goods to gain a greater degree of efficiency. • Marginal Cost- incurred in producing an additional
• Economies of scale- when increasing output leads to unit of product.
lower long-run average costs. Increase Size: More
efficient. ➢ Adam Smith- founder of modern economics;
father of economics.
➢ Jean-Baptiste Colbert- considered as more
- credited with using the word mercantilism first and
profound influence on development of mercantilism
that his book The Wealth of Nations marked the birth
in France, where it was known as “Colbertism.” He
of modern capitalism.
carried out the program of economic reconstruction.
➢ Sir William Petty- posited that surplus gain is • Capitalism (free market economy/free enterprise
fundamental originator of expanded reproduction, economy)- an economic system, where most means of
which is conditional on capital accumulation. production are privately owned, and production is
• Expanded reproduction- model in which a guided, and income distributed largely through the
capitalist economy smoothly reproduces itself. operation of markets.
➢ Philipp Wilheim von Hornick- in his Austria Over
Modern Capitalism- emerged as a result of the
All, If She Only Will of 1684, detailed nine-point
appearance of the physiocrats in France. The
program of what he deemed effective national
physiocrats were a group of economists who believed
economy, which sums up the tenets of mercantilism
that wealth of nations was derived solely from
comprehensively.
agriculture.
➢ Antoine de Montchretien- published book titled “A
Tract on Political Economy” in which he laid great Physiocracy (Introduced by Dupont de Nemours)
emphasis on development of agriculture and - first well-developed theory of economics. It
described it as basis of all wealth. immediately preceded the first modern school,
➢ Sir Thomas Mun- wrote a pamphlet, A Discourse of classical economics. Physiocrats believe that the
Trade, where mercantilism was called commercial wealth of nation lies in the size of its net product.
system or mercantile system.
Net Product- measure of income generated in
➢ Richard Cantillon- considered by many to be the production process, is the value of outputs minus the
first economic theorist. He emphasized the need of value of inputs.
importing raw materials and exporting finished
products to maintain a favorable balance of trade. ➢ Smith recommended leaving economic decisions to
free play of self-regulating market forces, with the
Physiocrats- believed that agriculture was the source
state playing a highly limited role.
of all wealth and that agricultural products should be
highly priced.
- Advocating adherence to the supposed natural order
of social institutions, they also stressed the
importance of free trade.

Price-specie-flow mechanism of David Hume. ➢ The Theory of Absolute Advantage believes that
● illustrate how trade imbalances can self-correct and countries should produce and export such products
adjust under the gold standard. which they have an absolute advantage on and
import those goods that they produce relatively less
➢ Giovanni Botero and Antonio Serra- did not
efficiently and at a higher cost
directly touch on mercantilism but developed theories
using the city as unit of analysis and finding ● Theory of absolute advantage, Theory of
development to be result of industrialization. international trade, and Theory of economic
development are closely interwoven and interlinked. stabilizing the economy.
● Free trade promotes international division of labor - developed the law of diminishing marginal returns,
through specialization in the production and which states that there’s a point in production where
exchange of such commodities, in case of w/c they the increased output is no longer worth the additional
command some absolute advantage. Specialization input.
increases productivity through technical and
● In older economic terms, comparative advantage
organizational innovations.
has been opposed by mercantilism and economic
● Vent for surplus doctrine, which advocates nations
socialism.
exchanging their overproduction for other goods
which are in demand in other countries, results in the CHAPTER 2.5: HECHSCHER-OHLIN THEORY
fullest utilization of the idle productive capacity. - David Ricardo’s theory of comparative advantage
● Additional beneficial aspects of international trade posits that countries export the goods they have
is it transfer knowledge and technology between abundant production factors for, while they import
different nations. goods for which they have scarce production factors,
which determine the comparative advantage of a
country.
- Based on a country’s production factors- land, labor,
& capital; hence, the theory is also called the factor
proportions theory or the resources and trade
theory.

➢ Eli Hecksher and his student Bertil Ohlin studied

CHAPTER 2.4: THEORY OF COMPARATIVE
how country could gain comparative advantage by
ADVANTAGE
producing products that utilized factors that were in
● Comparative Advantage- producer can produce a
abundance in the country.
good or service at a lower opportunity cost than
- Heckscher and Ohlin determined that the
others.
cost of any factor or resource was a function of supply
● Opportunity cost- what is lost or missed out on
and demand
when choosing one possibility over another.
● Countries with cheap labor would specialize in
➢ Adam Smith was among the first to put in writing labor-intensive industries, while countries with large
the theory of comparative advantage, but the theory pools of capital would specialize in capital-intensive
of comparative advantage was formulated by David industries.
Ricardo. ● International trade can improve economic
- For Smith, specialization and division of labor efficiency, but that trade will also cause a
provided the base for lowering labor costs, which redistribution of income between different factors of
ensured comparative advantage for a country. production.
● Industrial capitalism- economic system in which
trade, industry, and capital are privately controlled
and operated for profit.
● Comparative advantage warranted complete
specialization in specific commodity with a
comparative advantage in terms of labor hours used
per unit of output.
➢ David Ricardo- after reading Adam Smith’s Wealth
of Nations, he became an economists
- developed monetarism, theory or practice of
controlling the supply of money as chief method of
 space, and the like)
c. Investments in education (knowledge and research
on universities)
d. Technology e. Infrastructure

CHAPTER 3.1: PORTER’S NATIONAL COMPETITIVE 2.Local market demand conditions

ADVANTAGE THEORY - He believed that a creative domestic market is critical
to ensuring ongoing innovation, thereby creating a
● Absolute Advantage- about the advantage a country sustainable competitive advantage.
has if it can produce the greatest quantity of a - Demanding consumers force companies to
particular good at lesser marginal cost with better companies to continuously innovate, thus creating a
quality. sustainable competitive advantage in their respective
● Comparative Advantage- producing a particular industries.
good at lower marginal cost and lower opportunity
3.Local suppliers and complementary industries
cost.
- large global firms benefit from having strong and
● Competitive Advantage- ability of the country or efficient supporting and related industries to provide
company to offer greater value to customers, either from having strong and efficient supporting and
by means of lower prices, or offering more benefits related industries to provide the inputs required by the
and services at the same price industry.

4.Local firm characteristics

- strategies help in setting new goals, the structure
helps in managing operations, and rivalry helps in
generating innovation.
Michael Porter - A healthy level of rivalry between domestic firms
- introduced a new model in his book, The will spur innovations, competitiveness, and growth in
Competitive Advantage of Nations, known as Porter’s the domestic and global fronts
diamond.
- Porter’s theory stated that a nation’s ➢ Porter also noted that governments and
competitiveness in an industry depends on the chance play a part in the national competitiveness
capacity of the industry to innovate and upgrade. of industries.

PORTER’S FOUR STAGES OF DEVELOPMENT:

1.Development based on (production) factors
2.Development based on investments (capital)
3.Development based on innovation (creativity)
4.Development based growth On and Prosperity
(economic grown and development)
COMPETITIVE ADVANTAGE CHAIN VALUE
PORTER’S FOUR DETERMINANTS IN PORTER’S - shows how a company attains competitive
DIAMOND MODEL: advantage through its main activities that provide cost
1.Local market resources and capabilities advantage and support activities that will provide the
- He recognized the value of factors proportions theory firm quality advantage.
which considers a nations resources as key factors in
determining what products a country will export or
import.

➢ Porter added to these basic production factors a

new list of advanced factors:
a. Human resources (skilled labor)
b. Material resources (natural resources, vegetation,
 CHAPTER 3.3: PRODUCT LIFE CYCLE THEORY

● Life cycle- series of stages through which a living

thing passes from the beginning of its life until its
death.
● Product life cycle- length of time a product is
introduced in the market until it is removed from
CHAPTER 3.2: COUNTRY SIMILARITY THEORY shelves.

Traditional trade theories speak of differences in PRODUCT LIFE CYCLE THEORY

resources and demand or supply conditions as a - marketing strategy developed by Raymond Vernon
necessary condition for trade between countries. in 1966 to explain the pattern of international trade
and foreign direct investment that follows the product
● Country Similarity Theory- built upon similarities or
life cycle.
identical features of nations for them to trade with
- Vernon explained that from the invention of product
each other.
to its demise due to lack of demand, a product goes
- developed by Swedish economist Steffan Linder,
through four stages:
tried to explain the concept of intra-industry trade
between and among countries with identical a. At the introduction stage, the underlying goal is to
characteristics. gain widespread product awareness and brand
recognition and big money is spent on distribution
Following features common to certain countries will
and promotion, but sales is low and profitability is
make them trade with each other:
negative.
- stage of development - savings rates
Two price-setting strategies at this stage:
- per capita income - natural resources
1. Price skimming- charging an initially high price and
- geographical features - cultural milieu
gradually reducing the price as the market grows.
- political and economic interests
2. Price penetration- charging low price to
TYPES OF TRADES: “penetrate” the market and capture market share,
● Inte-industry trade- exchange of goods produced in before increasing prices in relation to market growth.
different industries among countries.
b. At the growth stage, sales usually grows
● Intra-industry trade- exchange of goods produced in
exponentially, and profitability reaches the highest
same industry.
level.
➢ To determine the similarity of countries, the Geert-
c. At the maturity stage, stage increase continues in a
Hofstede model is a tool that was developed to
decreasing pattern, product differentiation and
compare countries. This model uses six dimensions to
generating brand awareness become a must, and
compare countries:
retaining customer brand loyalty is the key.
a. Power distance- Is power in the country distributed
- Saturation is a challenge in maturity stage. Market
unequally?
saturation happens when a specific market no longer
b. Individualism- degree of interdependence of the
demands a product or service, or when the entire
members of a society.
market has no new demand.
c. Masculinity- want to be the best versus liking what
you do (feminine). d. A product enters the decline stage when no
d. Uncertainty avoidance- Are members of society amount of marketing or promotion can prevent the
feeling threatened by unknown situations? sales figures from declining.
e. Long-term orientation- society has links with the
past and deals with the challenges of the present and
future.
f. Indulgence- Do members of society control their
impulses and desires?
 ● Copyright- exclusive legal right to reproduce or
distribute the matter and form of something.

➢ Economies of scale- proportionate saving in costs

(cost advantage) gained by increased volume of
production.
- Cost advantage is a result of spreading the total
● Product life cycle management (PLM)- process of fixed overhead cost among a greater number of units
managing a product’s life cycle from inception, produced, which reduces the unit fixed cost for the
through design and manufacturing, to sales, service, product
and eventually, retirement.

CHAPTER 3.4: GLOBAL STRATEGIC RIVALTRY THEORY

TWO ECONOMIES OF SCALE:
● Competitive advantage- way that a firm can obtain a. Internal economies of scale: refers to economies
a sustainable edge over competitors and break down that are unique to a firm.
the barriers to entry in particular industry. b. External economies of scale: refers to economies of
scale enjoyed by an entire industry.
GLOBAL STRATEGIC RIVALTRY THEORY
- theory forwarded in 1980 by Paul Krugman and ● Experience- produce competitive advantage over
Kelvin Lancaster that focused on multinational those without experience in any endeavor.
corporations (MNCs) and how they get a competitive
advantage over other firms in their industry.

● Barriers to entry- obstacles a new firm may face

when trying to enter into an industry or a new market.
- These barriers to entry are the following:
a. research and development
b. ownership of intellectual property rights
c. economies of scale
d. unique business processes or methods
e. extensive experience in industry or exploiting the
experience curve
f. control of resources or favorable access to raw
materials.

● Research and development- activities engaged in by

companies for the invention of new products or
services to remain competitive.
● Intellectual property- a creation of the mind, a work
or invention that is the result of creativity, such as a
manuscript or design, to which one has rights and for
which one may apply for a patent, copyright,
trademark, brand name, and the like.
● Patent- exclusive right granted for a new, inventive,
and useful product, or technical improvement to an
existing invention. Used for licensing.
● Trademark/brand name- a word or logo that
distinguishes your business goods or services from
those of other traders. Used for franchising.
 the SF model based on specific factors - territory or
terrain (T) (terra means land), labor (L), and capital
(K).
➢Mobile factor is one that can be used in producing
different products like labor.
➢Specific factor is one that can only be used for a
particular product like steel.
- Land - Capital
QF= QF (T,L)
Where: QF-Output of food
T-territory/terrain(land)
OTHER THEORIES OF INTERNATIONAL TRADE L-labor employed
CHAPTER 4.1: SPECIFIC FACTOR MODEL
QMP= QMP (K,L)
➢Trade raises real income of trading countries. Where: QMP-output of manufactured product
➢Real income is simply inflation-adjusted income, K-capital stock
the amount of disposable income available to L-labor employed
consumers.
➢The gross national income (GNI) is the sum of the
goods and services produced within a particular
country
Richard Jones and Paul Samuelson
➢There are at least two reasons why trade has an ➢ When labor moves from food to manufactured
important influence upon the income distribution: A. product, food production falls while output of the
Resources (production factors) cannot be transferred manufactured product rises.
immediately and without costs from one industry to ➢The law of diminishing marginal returns is a
another. theory in economics that predicts that after some
B. Industries use different factors and a change in the optimal level of capacity is reached, adding an
production factors and increase for others. additional factor of production will actually result in
smaller increases in output.
➢Goods are produced using a mix of the factors
➢A country rich in a particular factor of production
of production- land, labor, and capital will produce products using that factor of production
➢A factor of production is any resources used by to increase its national income.
firms to produce goods and services

➢Specific Factor (SF) model was originally advanced

by Jacob Viner and it’s a variant of Ricardian model.
➢The Ricardian model of trade was developed by
David Ricardo, the first formal model of international
CHAPTER 4.2: STANDARD MODEL OF TRADE
trade.
-by Paul Krugman and Maurice Obstfeld
- The modern version of the Ricardian model assumes
-implies the existence of the relative global demand
that owners (countries) of factors of production for
and supply.
products that are in demand would receive an
-exchange rate can be determined by the intersection
increasing part of the world’s global income.
between the two curves which is called the
➢The SF model is sometimes referred to as the
equilibrium.
Ricardo- Viner model.
➢The model was later developed and formalized Global demand - amount of money consumers plan to
mathematically by Ronald Jones and Paul spend on goods and services at given prices in a given
Samuelson, two American economists, who elaborate period
Total demand consist of: Terms of trade (TOT)- relative price of exports in
1. Personal consumption expenditures terms of imports.
2. Gross private domestic investment
3. Gross government spending
4. Net export
Net exports - measure of a nation’s total trade
➢ Net export = Total exports - Total imports

Market equilibrium
* The relationship between TOT, total price of
- Intersection of the global demand curve and global
production, and a country’s welfare is direct.
supply curve. National product and level of prices are
on the level on which buyer are willing to buy what CHAPTER 4.3: LEONTIEF PARADOX
enterprise are ready to sell - showed that in the international division of labor,
Aggregate demand Curve the US specialized in labor intensive rather than
- Shows how many goods and services consumers are capital intensive goods.
willing to buy at different total price level. Global
➢ ACCORDING TO HECKSCHER OHLIN THEORY
demand changes the level of price inversely.
Supply curve - Each country exports the commodity which
- Represents the relationship between price and intensively uses its abundant factor meaning that a
quantity supplied country rich in a particular resource should be
- Quantity supplied (supply curve) is a exporting products that will use that resource and
function of price. importing products made from resources that the
country lacks.
➢Standard trade model - general model that includes - First serious attempt to test the H-o theory was
the Ricardian model, Specific factors model and made by Wassily W. Leontief in 1953 when he studied
Heckscher-Ohlin model. the US economy closely.
➢Production Possibility Frontier (PPF)- determines - H-O theory predicts that the US would export more
the relative supply since it shows what the country is capital-intensive goods and import labor-intensive
capable of producing. goods.
➢Equilibrium- intersection of the demand and supply - However, Leontief was surprised to discover that the
curve. US was actually exporting labor-intensive goods and
➢Slope of an isovalue line- A line of slope equal to importing capital-intensive goods. His analysis
the relative prices. The best point to produce is where became known as Leontief paradox.
PPF is tangent to the isovalue line
➢ Paradox- seemingly absurd or self-contradictory
- Isovalue lines are lines along which market value of
statement or proposition that when investigated or
output is constant.
explained may prove to be well-founded or true.
➢World relative supply curve (RS) ➢ Capital Intensive- business processes or industries
- Upward sloping that require large amounts of investment to produce a
- Increase in price leads to increase in supply or good or service.
production. ➢ Labot Intensive- applied to a process or industry
➢World relative demand curve (RD) that requires a large amount of labor to produce its
- Downward sloping goods or services.
- Increase in price leads to decrease in demand or
consumption. ➢ Wassily Leontief received a Nobel price in 1973 for
* Both determines the market equilibrium under his contribution to the input-output analysis. Three of
international trade. his students, Paul Samuelson (specific factor model),
➢ The best point to produce is where PPF is tangent Robert Solow, and Vernon Smith also received Nobel
to the isovalue line equal to the relative prices. prizes.
➢ Tatemoto and Ichimura
- Studied Japan’s trade pattern and discovered another
paradox. Japan was a labor-abundant country but
exported capital-intensive goods and imported-
intensive goods.
- Japan’s overall trade pattern was inconsistent with
the H-O theory. It agreed with the Leontief Paradox.
- 25% of Japan’s exports went to advanced industrial
countries. 75% of exports went to LDCs.

➢ Stolper and Roskamp

- Applied Leontief’s method to the trade pattern of
East Germany. EG’s exports were capital—intensive. -
About ¾ of EG’s trade was with the communist bloc
and EG was capital abundant relative to its trading
partners. Therefore, EG case was consistent with the
H-O theory.

➢ Wahl
- Studies Canada’s trade pattern. Canadian exports
were capital intensive. Most of Canadian trade was
with the US. The result was inconsistent with H-O
and therefore consistent with the Leontief Paradox.

➢ Bharawaj
- Studies India’s pattern. India’s exports were labor-
extensive, consistent with the H-O theory.
- However, Indian trade with the US was not in
accordance with the H-O theory but was consistent
with Leontief Paradox. Indian exports to the US were
capital-intensive.
Hong
- Analyzed Korea’s trade pattern, which was consistent
with H-O theory.

➢ Looking at the foregoing results for different

countries, it seems that we cannot summarily say when
the H-O theory applies and when the Leontief Paradox
applies. What we can, perhaps, safely say is that there
will continue to arise economic theories affecting
international business and trade in the foreseeable
future
CHAPTER 5.1: INTERNATIONAL BUSINESS AND TRADE includes for profit border-crossing transactions as well
as transactions motivated by nonfinancial gains.
● International ● Triple bottom line- means profit (economy), people
- involves more than one country or relates to or (society), and the planet (environment).
affecting two or more nations.
● Corporate social responsibility- means that
- synonyms of international include foreign, global,
businesses has an obligation to society and the
universal, intercontinental, and world
environment beyond that prescribed by law and
● Business
above and beyond making a profit.
- engaged in by people, organizations, or countries
covering any activity to earn income and gain a profit. ● International business and trade links countries
- endeavor to make a profit (governments), organizations/institutions, and
● Trade- basic economic concept involving buying, individuals and makes them participants in the
selling, the or exchange of goods and services. international market.
● Occupation- a person’s usual or principal work as a ● Foreign direct investment- means that a firm is
means of earning a living. investing assets directly into a foreign country’s
● Profession- involves specialized educational training building, equipment, or organizations.
and a formal qualification. DIFFERENT MEANS OF JOINING
DIFFERENT TYPES OF BUSINESS ACCORDING INTERNATIONAL BUSINESS AND TRADE:
TO NATURE/SCOPE: 1. Exporting/ importing
1. SERVICE- those rendering services like barber - Exporting means selling products to foreign markets;
shops, spas, restaurants, hotels, schools, and other Importing refers to buying goods and services from
recreational services. foreign sources and bringing them back into the home
2. TRADING/MERCHANDISING- buying or selling; country.
they sell what they buy. - Total trade equals exports plus imports.
3. MANUFACTURING- converting raw materials into - Trade agreements/treaties are contractual
finished products. agreements between countries concerning their trade
4. HYBRID BUSINESS- e-commerce or a business relationships.
geared toward socially beneficial goals. 2. Licensing
- a contractual arrangement where the licensor sells
DIFFERENT TYPES OF BUSINESS ACCORDING the right to use intellectual property or manufacture a
TO OWNERSHIP: product to the licensee for royalty.
1. Sole Proprietorship- owned by only one person - Royalty means a certain percent of sales of the
2. Partnership- owned by two or more person. product or intellectual property.
3. Corporation- generally owned by five or more 3. Franchising
persons, although the Revised Corporation Code, - a contractual arrangement in which the franchisor
Republic Act No. 11232 now allows the establishment permits the franchisee to use the business model or
of One Person Corporations (OPC) brand name for a fee, to conduct business as an
4. Cooperative- composed of members established to independent branch of the franchisor.
serve their common good. 4. Forming Joint Ventures
- is a business arrangement in which two or more
INTERNATIONAL TRADE AS BUSINESS AND AN
parties agree to pool their resources for the purpose of
ECONOMIC INDICATOR AND A POLITICAL
accomplishing a specific task or project.
TOOL
5. Establishing a Branch
● International business and trade
- means maintaining an office in the foreign country.
- any activity/endeavor among nations around the
6. Establishing a Wholly Owned Subsidiary
globe involving the buying, selling, exchanging of
- Wholly owned subsidiary is a company whose
goods, services, capital, labor, resources, technology,
common stock is 100% owned by the parent
and the like.
company.
-factor and a product of the economic development of
7. Investment in Other Country’s Companies or Stock
nations and also known as an “engine of growth”.
Market
- broader definition of international business also
- refers to buying global financial instruments or
foreign direct investment by putting up a business in a largely shaped by the emerging power of huge,
certain country. multinational corporations.
- International investing refers to selecting global ● Globalization 3.0, "which Friedman says is today's
financial instruments as part of a geographically globalization, began around 2000, with advances in
diversified portfolio to spread investment risk global electronic interconnectivity that allowed
8. Labor Migration individuals to communicate as never before.
- means residents of one country goes to another
country to work. ● The Philippines-Japan Economic Partnership
Agreement (PJEPA) is the first bilateral free trade
Technology transfer agreement of the Philippines. The PJEPA covers trade
- process of conveying results stemming from in goods, trade in services, investments, movement of
scientific and technological research to the natural persons (MNP). intellectual property (IP),
marketplace and to wider society, along with government procurement (GP), competition, and
associated skills and procedures. improvement of business environment (IBE) among
others.
CHAPTER 5.2: GLOBALIZATION
- increasing connectedness, integration, and ● The Philippines and the European Free Trade
interdependence of the world cultures, economies, Association (EFTA) members-Iceland, Liechtenstein,
politics, and environment. Norway, and Switzerland-signed a free trade
- brings about increased interconnectedness with the agreement in 2016 which became effective in 2018.
advent of interconnection technology - The Philippines-EFTA covers trade in goods, trade in
services, investment, competition, intellectual
➢ A common denominator which appears to link
property, government procurement, and trade and
nearly all high-growth countries together is their
sustainable development.
participation in and integration with the global
economy. ● Under ASEAN, the Philippines has a preferential
trade agreement with China, Hong Kong, India, Japan,
According to WHO, globalization is generally
South Korea, Australia, and New Zealand.
understood to include two interrelated elements:
1. Opening of international borders to increasingly fast ● The current process of globalization is basically
flows of goods, services, finance, people, and ideas characterized by:
2. Changes in institutions and policies at national and a. increasing worldwide active communication
international levels that facilitate or promote such systems;
flows. b. increasing fluent economic conditions, especially
those circumstances and factors regarding mobility of
The basic principles of international trade that seem to
financial resources and trade.
underpin greater prosperity among nations are the
following: CHAPTER 5.3: GLOCALIZATION
a. investment (particularly foreign direct investment); - an amalgamation or a two-level system linguistic
b. the spread of technology c. strong institution hybrid of globalization and localization.
d. sound macroeconomic policies - It was popularized by the sociologist Roland
e. an educated workforce Robertson and coined, according to him, by the
f. existence of a market economy. Japanese to explain Japanese global marketing
strategies. It means the simultaneous occurrence of
According to Thomas Friedman (2005) in his book
both universalization (global) and particularization
“The World is flat.” There are 3 Stages/Eras of
(local) tendencies in contemporary social, political,
Globalization, and we are now on the 3rd stage.
and economic systems.
● The first stage of global development, what
Friedman calls "Globalization 1.0," started with ● Glocalization in a three-level system involves the
Columbus' discovery of the New World, ran from 1492 subnational (or local). national, and supranational (or
to about 1800, and characterized by how much global) levels. In this context, glocalization points to
industrial power countries could produce and apply. increasing transnational (international) interactions
● "Globalization 2.0 from about 1800 to 2000, was among local entities from different countries and to
contacts among local and global entities generally CHAPTER 6.1: NATURE AND SCOPE OF
circumventing the national level and undermining the INTERNATIONAL MARKETING
gatekeeper position of national executives.
International marketing- application of marketing
● There are two typical reactions and results of this principles to satisfy the varied needs and wants of
interplay of global and local forces (both encourage different peoples residing across the national borders.
diversity): - The concept of international marketing represents the
a. opportunistic reaction- creation of hybrids. performance of business activities designed to
Especially in world cities where immigrants and elites address the 7Ps and direct the flow of goods or
must adjust to each other and maintain ties abroad, services to consumers or users around the globe for
mixed cultures and identities arise. profit. The company's marketing department handles
b. rebellious reaction- foster a resistance identity its own international marketing strategies and plans.
defending local history, traditions, and authentic
● Market segmentation- practice of dividing the entire
cultures.
market into groups creating subsets of a market based
● Glocalization- used to refer to the marketing on demography, needs, priorities, common interests,
strategies and business methodologies of companies in and other psychographic or behavioral criteria.
a foreign market. It is the creation of products or - Companies can leverage their market targeting in
services for the global market by adapting them to product, sales, and marketing strategies.
local cultures and environment - The segment(s) the company wants to serve is called
the target market and the process of selecting the
Glocalization in Cebu is manifested in the key areas target market is referred as market targeting.
of business, export trade, governance, and trans-border a. Market targeting- process of selecting the target
diplomacy. Nevertheless, Cebu's experience of
market after market segmentation has been done.
glocalization shows that there are enabling factors that
b. Target market - segment(s) the company wants to
can maximize global opportunities:
serve and the process of selecting the target market is
a. Leadership, not only of the local chief executives
referred as market targeting.
but also of the private sector and civil society
organizations. ● Market positioning- strategic tool used to establish
b. The ability to use, process, and analyze data on the image of a brand or product in the minds of the
resource inputs to the locality, specifically, consumer.
information and communications technology (ICT)
as a potential tool currently introduced from the ● The components of the extended marketing mix
grassroots to the local government; consists of the 7Ps-product price, place, promotion,
c. Education that meets global labor demands; and d. people, process, and physical evidence (environment).
A mindset that is global in orientation but grounded on ● Product- commodity or good produced or
local realities.
manufactured to satisfy the wants and needs of
➢ The opening of national boundaries to trade and customers. The product can be tangible (goods) or
investment increased the economic importance of Intangible (services); the service rendered by a service
location. The resulting economic environment is company is its product.
instead characterized by the clustering of companies in - Product differentiation strategy helps companies
specific city regions and by geographic concentration. build brand image and value.

● Companies cluster in specific city-regions resulting ● Price of the product- amount that customers pay.
in geographic concentration, like the financial districts Economies of scale help to reduce costs and,
of London and New York and the Silicon Valley in consequently, the price of the product.
California for the computer industry. - It is the most critical element of a marketing plan,
because it dictates a company's survival in terms of
● The enabling factors that can maximize global profit.
opportunities are leadership. information and - Selecting the most cost-efficient components of the
communications technology (ICT), education, and a product cost — raw materials, labor, and overhead —
global mindset. is critical in this aspect.
● Moving products from the producer to the intended ➢ Branding- when people hear the name of your
user is called place. The how refers to the the company or of the products and services that you offer,
distribution channel, a reliable combination of a logo or image of your brand would easily come to
middlemen and the where is the location where the mind.
products should be distributed. - In addition, physical evidence makes customers
aware of the company through signage, logos,
● Promotion- marketing communication process that
tarpaulins, web pages/websites, employee uniforms,
helps the company to acquaint the customers with the
packaging, letterheads, business cards, and the like.
product and publicize it and its features to the public.
It is the most expensive and essential component of Reasons to go global include the following:
the marketing mix. a. Increase sales and profitability
b. Enter new markets
● The company's employees are important in
c. Create jobs
marketing because they are the ones who deliver the d. Offset slow growth in your home market
service to clients. In human resource management, e. Outmaneuver competitors
people are the most important resource of a company f. Enlarge the customer base
as the company's success depend, to a large extent, on g. Create economies of scale in production
the quality of its people. It is important to select, hire, h. Explore untapped markets with the power of the
train, and compensate the right people to deliver internet
superior service to the clients. i. Make use of excess capacity off-season
● Process- flow of activities or mechanism that takes j. Travel to new countries
place when there is an interaction between the k. Sharing of costs and risks between market
customers and the businesses and, in case of l. Extending a product's life cycle
manufacturing companies, manufacturing process. m. Take advantage of a less competitive market
- In case of manufacturing companies, the n. Utilize excess capacity
manufacturing process is vitally important. These o. Taking advantage of geographical diversification p.
processes include the following: Taking advantage of the demand abroad
a. Electronic processes- use of barcodes, receipts, and CHAPTER 6.2: FACTORS AFFECTING
other forms or graphics or logos, and the information INTERNATIONAL MARKET
about a product or a company that comes with them.
b. Technological processes- creation of products that Factors that contribute to international marketing are
are tangible, that customers could really feel and own. the following:
Not only should the manufacturer create products that a. emerging regional economic and political
the customers need, but also what the customers want. integration
c. Direct activities- actual distribution and sales to b. enhancement in technology,
customers and the reactions of the customers as they c. improvements in transportation and
get to try the product and how the company feels about telecommunication,
what the customers have said. d. world economic growth
d. Indirect activities- support that happen before, e. transition to market economies
during, or after the service has been given, which may f. converging consumer needs.
even last for a lifetime.
● Economic integration, consistent with the free
➢ Companies can select from a number of trade economic theory revolves around the trade
manufacturing process — production line, continuous agreements/treaties between countries that usually
flow, custom manufacturing, and fixed position include elimination of trade barriers and aligning
manufacturing. What is most important, is that the monetary and fiscal policies leading to a more
company chooses a process that is cost-efficient. interconnected global economy.

● Physical evidence- physical environment ● Technological advances- driving force for

experienced by the customer. An office says a lot development making consumers worldwide aware of
about what a company is trying to offer. products, services, and entertainment creating demand
for such trade wares.
● Efficient transportation- due to containerization and and trade environment businesses operate within and
just-in-time (JIT) technology are creating more without.
international business opportunities. - Weather, climate change, temperature. Ethical
- Lower cost and higher quality communication behaviour, social responsibility.
7. Infrastructure- all the essential physical systems
➢ Transition to market economy leads to economic and facilities needed for the smooth flow of a country's
development and prosperity day-to-day activities, enhancing the people's standard
● International business and trade- stimulates long- of living, including basic facilities.
term world economic growth through multiple THREE TYPES OF INFRASTRATURES:
channels, the most conducted trades being in the ● Soft infrastructure- all the institutions that help
monetary and financial system. maintain a healthy economy, including human capital
● Converging consumer- needs dictate international (workforce), health Infrastructure. educational
business and trade participants on what to produce and infrastructure, financial infrastructure, law and order,
sell in the international markets. and governmental systems.
● Hard Infrastructure- covers all the physical systems
● The PESTLE analysis, a useful scanning tool, crucial to running a modern, industrialized economy
identifies the relevant political, economic, including the transport systems, and
sociocultural, technological, legal, environmental telecommunication services.
factors from the external environment. ● Critical infrastructure- makes up all the assets used
for shelter and heating. public health,
These factors can represent threats or opportunities as
telecommunication, agricultural facilities, natural gas,
well as challenges:
drinking water, and medicine.
1. Political- Changes in tax rates, policies and actions
of government, political stability of a country, and 8. Competition: Michael Porter's Five Competitive
foreign trade regulations. Forces identified five factors present in the
2. Economic- relate to the economic system of the competitive market:
country where a company operates. a. competition industry- highly dynamic in nature, any
- Customers behavior and attitude and their purchase change can happen anytime, international marketing
demands are often linked to their economic/financial participants who do not react maybe let far behind.
status. - If international marketing participants do not react,
➢Inflation- an economic factor. It’s the rate at which they may be left far behind.
the price level of products are service are rising. b. new entrants- enter the market to capture market
➢ A country’s national income represents the total share. The more barriers there are for entry, the more
amount of income accruing to a country from the industry becomes attractive.
economic activities in a year’s time. c. substitute product- products which are essentially
3. Sociocultural- social factors concern people. the same or similar enough to another product.
Organizations are made up of people. People and - Many consumers prefer the use of substitutes over
organizations have their own culture. the original because of the low price and almost
- Customs, lifestyles, and value, differ from country to equivalent value added.
country, which further directly impact international d. bargaining power of customers- ability of the
marketing. customers to persuade the seller to do what they want.
4. Technological- advancement in technology. It’s e. bargaining power of suppliers- more concentrated
technologies that have created new businesses. or are more organized. When the supply is limited, the
5. Legal- Adjunct to the political factor. Governments supplier has the bargaining power.
have long intervened in international trade through
9. Distribution channels- links between sellers and
variety of mechanisms, one of which is through legal
buyers, the marketing intermediaries or middlemen.
system.
- The distribution process includes the physical
- Laws and ordinances of all countries. Trade
handling and movement of goods/services from the
restrictions, consumer protection, trade regulations
producer to the customer and the passage of ownership
6. Environmental- physical environment and business
(title).
10. Geography- study of the physical features and help the domestic company exporter find buyers in the
environment of the earth and its atmosphere, including foreign markets.
the impact of human activity on these factors and vice
● Semi-direct exporting- an exporter usually initiates
versa.
the contact through agents, merchant middlemen, or
CHAPTER 6.3: LEVELS OF INTERNATIONAL other manufacturers (domestic) in the home country,
MARKETING where the exporter resides.
- The degrees of marketing involvement, which are 1. Domestic agent intermediary- act as an exporting
international/export marketing, multinational department for several noncompeting firms engaged in
marketing, transnational marketing, and global trading
marketing, and which are, sometimes, overlapping. 2. Manufacturer's export agent (MEA)- operates very
much like the domestic agent intermediary but caters
1. International/export marketing- based in a single
to manufacturing firms only.
home country with no foreign direct investment in
3. Export Association- act similar to 1 and 2, that
other countries.
handles exporting of the products of the association’s
2. Multinational companies (MNCs)- operate in more members.
than one country, having foreign direct investment in 4. Piggyback exporting- one manufacturer (carrier)
all of them with management headquarters in the that has export facilities and overseas channels of
country of origin, known as the home country distribution handles the exporting of another firm's
operating in several other countries, known as host (rider) noncompeting but complementary products.
countries. They are centralized (directly managed by
the home office). ● Direct exporting - company generally establishes an
export department to sell directly to a foreign market.
3. Transnational corporations (TNCs)- type of
multinational corporation operating in multiple IN THE PHILIPPINES, FOREIGN INVESTMENTS
countries larger than most multinationals but are MAY BE MADE UNDER ANY OF THE
decentralized. They are able to glocalize. FOLLOWING MODES:
a. by establishing a domestic branch office or
4. Global marketing- highest level of international operation;
business activity. A global business has operations b. by establishing a Philippine representative office: c.
worldwide but does not identify with any home by operating through a business association in the
country focusing on the selection and exploration of Philippines;
global marketing opportunities to achieve a global d. by operating through a local subsidiary, which may
competitive advantage. be owned entirely or partially by the foreign business
entity:
THE FOLLOWING ARE THE REASONS TO e. by establishing joint venture arrangement with a
EXPORT PRODUCTS: local corporation or business organization
a. Products in the maturity stage of their domestic life f. by establishing an affiliate in the Philippines.
cycle may find new growth opportunities overseas.
b. Some firms find it less risky and more profitable to CHAPTER 6.4: PARTICIPANT IN
expand by exporting current products instead of INTERNATIONAL MARKETING
developing new products.
International marketing or international trade
c. Firms who face seasonal domestic demand may
- trade in the international arena, involves several
choose to sell their products to foreign markets, when
participants, in general Individuals, for-profit and
those products are "in season" those foreign markets.
nonprofit organizations, and governments all have a
d. Some firms may elect to export products because
vested interest in understanding and shaping
there is less competition overseas.
international business practices and trends.
3 WAYS OF EXPORTING:
● The World Wide Web and the internet - empowered
● Indirect exporting- common practice by going
individuals and small firms to start business and to
through International Marketing Intermediaries,
expand their business horizon by becoming
companies (could be domestic or foreign) who will
participants in international marketing
➢ Businesses could be micro, small, medium, or slavery movement, the movement for women's
large, and include even the international, suffrage, and movement against child labor.
multinational, transnational, or global companies - NGOs were formed to emphasize humanitarian
and they are participants in international marketing. issues, developmental aid, and sustainable
development
● Intra-company transfers- trade between affiliates or
divisions of companies located in different countries.
● Trading companies- simply buy items that other
companies manufacture; they sell what they buy.
● Merchant exporters- who export products
manufactured by other firms.
● Governments- participants in international
marketing when they buy products, machineries and
equipment, services, and when they borrow money
directly or sell bonds and other securities in the foreign
capital market.

● The North American Free Trade Agreement

(NAFTA) is an agreement signed by the governments
of the United States, Canada, and Mexico to create a LESSON 7.1: GLOBAL ENTREPRENEURSHIP
trade bloc in North America to reduce or eliminate AND INTRAPRENEURSHIP
tariffs among the member countries and, thus, Creativity- seen in one’s ability to solve challenges or
facilitate trade. problems with novel ideas
● Atlanta Agreement- agreement between Innovation- means “new” and measurable because an
participating governments and companies to eliminate innovation is the most spontaneous creation of
child labor in the production of soccer balls in something new
Pakistan.
Entrepreneur
● European Community (EC)- agreements span trade, - the linchpin of the economy, is an important part of
the environment. labor, and many other subjects our economic system. Linchpin is a person or thing
related to business, social, and environmental issues. that holds something together: the most important part
of a complex situation or system.
● Kyoto Protocol- agreement aimed at combating
- "the organizer of an economic venture, especially one
global warming among participating countries.
who organizes, owns, manages, and assumes the risks
● World organizations like the United Nations (UN) of a business."
or the World Trade Organization (WTO) are - concerned with starting new businesses.
practically separate governments themselves with Entrepreneurs start on their own, while intrapreneurs
certain powers over all member countries. are working for companies.
- French word that means "to undertake."
● State trading enterprises- governmental and
nongovernmental enterprises, including marketing Entrepreneurship- recognition of opportunities and the
boards, which deal with goods for export and/or use or creation of resources to implement innovative
import. The rule in the communist countries and was ideas for new, thoughtfully planned ventures.
prominent in socialist countries. - concerned with new ideas connected with new
markets.
● Canalized item can be exported/imported only by a
public sector undertaking. “Entrepreneurs are distinct from small business
owners. Entrepreneurs rely on creativity and
● Nongovernmental organizations (NGOs) include innovation-new products, new methods, or new
any nonprofit, voluntary citizens' groups that are markets”
organized on a local, national, or international level.
- International NGOs were important in the anti-
Intrapreneurship- grade/type of entrepreneurship Easton was referring to when he defined politics as the
within a given system or entity. Balanced dimensions "authoritative allocation of values."
of the right level assure graded sustainable - a science. It’s a systematic body of knowledge that
intrapreneuring (GSI) for optimal output. deals with the government and the regulation. It also
deals with the protection of the rights of its citizens.
“Entrepreneurship is not always for profit. There are
entrepreneurial ventures that are nonprofit. Societal SOME OF THE BIGGEST WAYS THAT POLITICAL
entrepreneurs look for and implement innovative ACTIVITY CAN SHAPE ENTREPRENEURIAL
solutions to societal problems; their focus is to solve a DECISIONS AND OUTLOOK INCLUDE THE
social problem or create a benefit to humanity.” FOLLOWING:
a. Demographic Insights- any political change in
There are a lot of myths about entrepreneurship:
government or in Congress represents the rise or fall of
a. Entrepreneurs are born, not made.
a particular demography.
b. Entrepreneurs are aggressive risk takers.
b. Periods of activity or Inactivity in legislation- the
c. Entrepreneurs must invent something new.
creation, change, or removal of legislation could have
d. Entrepreneurs make more money.
a huge impact on businesses.
e. Being first is essential.
c. Fears on new developments- political tumult often
f. A good product means a successful business.
leads to fear and fear leads to the rise of new needs.
g. It takes a lot of money to start a business.
d. Excitement over new developments - Similarly, new
h. Age is a limit.
developments stir people's excitement and their needs
Graded sustainable intrapreneuring (GSI) - balanced may change in different ways.
dimensions of the right level assuring optimal output. e. Cultural attitudes and buying decisions- politician's
leadership has the potential to shape an entire
Social entrepreneurs look for and implement generation of cultural attitudes and beliefs.
innovative solutions to societal problems
2. Socioeconomic- interaction of social and economic
LESSON 7.2: ENVIRONMENTS OF factors. Economic relates to trade, industry, and the
ENTREPRENEURSHIP AND creation of wealth.
INTRAPRENEURSHIP
Economic system- organized way in which a country
● As entrepreneurs are an important part of the allocates resources and distributes goods and services
economic system, entrepreneurship plays a key role in across the whole nation, a type of social system.
economic development.
Socioeconomic factors- social and economic
● Environment- surroundings in which a person, experiences and realities that help mold one's
animal, or plant lives or the conditions under which a personality, attitudes, and lifestyle.
business operates.
● Entrepreneurship/ Intrapreneurship environment Culture and/or ethnicity- also socioeconomic factors
- various facets within which entrepreneurship and that can contribute to our thoughts and attitudes
intrapreneurship operate and survive. impacting on how people are raised, their core values,
- The environment covers the political, socioeconomic, and their sense of family and tradition.
technological, legal and infrastructural spheres that Socioeconomic factor of religion
influence entrepreneurship. - plays an important social role in the lives of many.
1. Politics Whole social networks are built around churches,
- comes from the Greek word "polis" which means temples, and mosques.
"city- state." What transpires in the "polis" is politics. - Often closely tied to culture.
- encompassing the totality of human activities SOCIOECONOMIC FACTORS THAT WILL AFFECT
transpiring within the city-state (Intrastate), as well as ENTREPRENEURSHIP:
among states (interstate). a. Level of education
- art and science of government. It is an art because it - Educational levels influence economic social status
involves the process through which the government as higher paying jobs tend to require advanced or
skillfully addresses the needs of society, which David specialized education.
- One's level of education can shape how he or she recognition of entrepreneurial opportunities and the
views the world and how he or she can contribute to ability of entrepreneurs to actualize those
social growth. opportunities.
b. Income and occupation
- “As level of education affect incomes and
occupations, incomes and occupations affect one's
socioeconomic status. Net income is a direct
contributor to people's purchasing power. Where the
entrepreneur will establish his or her business will
determine the purchasing power of his or her market.”
c. Health and lifestyle
Health status- definite measurement of socioeconomic
LESSON 7.3: INTRAPRENEURIAL
status. A person may be rendered stagnant because of
ENVIRONMENT REQUISITES
poor health.
d. Quality of neighborhood’s Intrapreneurship is concentrated in a single and inside
- Neighborhood are often grouped socially among a particular company. It is a system that allows an
people with similar incomes and, often similar employee to act like an entrepreneur within a
backgrounds. company. Intrapreneurs are the company's
employees.
3. Technology advancement had significantly allowed
efficient use of resources, Including the need to use ● “For an intrapreneur to succeed, he/she should be
renewable resources and utilize nonrenewable working in an environment that will encourage,
resources. promote, and instill him or her to drive to pursue his or
- helps public and private enterprises and her innovative ideas to reality.”
entrepreneurs to gain a competitive edge
- If an economy is made up of a large number of REQUISITES FOR AN INTRAPRENEURSHIP
entrepreneurial units, risks can be diversified. Even ENVIRONMENT:
though some enterprises may fail, others will be a. innovation
successful and the economy as a whole can grow - Innovative workplaces are also happier workplaces,
rapidly. with consistently higher levels of employee
satisfaction, retention, and morale.
4. Legal - “An innovative working approach appeals to
- For a legal environment to be efficient to support employees with higher levels of creativity and lateral
entrepreneurship, it should provide entrepreneurs with thinking, helping companies to hold on to their best
rights and protections. talents.”
- “Intellectual property (IP) and the IP protection - Leaders need to find ways to encourage their people
measures need to strengthen and enhance entrepreneur to be creative and innovative.
trust. Dispute resolution and execution is another - Employees should be empowered to think about
issue that affects the legal environment for tough problems and be rewarded for working toward
entrepreneurs. solutions.
- A proper dispute resolution system that fits the new - Organizational culture set of philosophies, beliefs,
nature of entrepreneurship need to be implemented. attitudes, and behaviors that members of the
Adequate Insolvency laws are needed. A proper organization exhibit, promote, and adopt.
entrepreneurial ecosystem needs to be established by ➢ Innovation strategy
minimizing obstacles that restrain and prevent - sets out guiding principles for how the company will
entrepreneurial engagement.” grow its market share through product and service
5. Infrastructure innovation.
- Infra means "below" so infrastructure is the - helps to clarify what is expected of employees at
underlying structure" of a country and its economy, the every level of the company when it comes to
fixed installations that it needs in order to function. innovation and problem-solving.
- can enhance connectivity and linkages allowing the - The physical working environment is as simple as
reorganizing the seating arrangement to encourage
staff to share ideas and knowledge that can make a
huge difference when it comes to innovation.
b. originality and experimentation
- The spirit of intrapreneurship cannot be forced on
individuals, but should originate. Ideas are “spur of
the moment” thing and belongs to no one else but to
the person who got the idea.
- “In experimentation, trial and error must be
encouraged and failures should not be frown upon.
Mistakes and errors are innate in new ideas; that is
why people should experiment.”
c. top management support- The support and
encouragement from top management is critical for
intrapreneurial activities to prosper and succeed.
d. availability of resources
- For any endeavor to progress and succeed, it should
have the needed resources available.
- The different M’s of management-men, money,
methods, materials, markets media, and moment
(time)- should be made available to intrapreneurs.
e. teamwork- The teamwork approach needs to be
encouraged for success of intrapreneurial activities in
the organization.
f. evaluation and reward- The company should set a
longtime horizon for evaluating success of
intrapreneurial ideas and activities and should institute
a reward program for rewarding intrapreneurs.
g. Innovative company culture
- Intrapreneurs are creative people who, mostly, work
not on the path companies are treading, but outside the
company’s comfort zone.
- “Intrapreneurs' personal drive helps to foster
productive and highly engaged teams, develop other
employees, and as a result, drive impressive growth
for the company.”
- The intrapreneurial spirit is contagious and
intrapreneurship can be ingrained in the organizational
culture.
“Intrapreneurship ensures the company will never run
out of ideas, ideas that push for new product
development, new services, or new technology.
Supporting intrapreneurial behaviors within the
company culture will increase the number of
innovations developed leading to new products and
services launched into both established and new
markets.”
LESSON 8.1: ETHICS 4. Bioprospecting- collection, research and
commercialization of biodiversity for new medicines
● The field of Ethics, also called moral philosophy, is and other useful natural products.
a discipline, a branch of philosophy, that seeks virtue. 5. Biopiracy- usage of bio-resources by foreign
● Ethics also called moral philosophy, are moral corporations and other organizations without
principles that rule a person’s or an organizations appropriate authorization form the countries and
behavior. individuals concerned without compensation.

● Ethics deal with morality about what is considered Five-Point Excerpt from the Markkula Center for
“right” and “wrong” behavior for people, Applied Ethics at Santa Clara University about what
organizations, governments, and countries. ETHICS IS NOT:
1. Ethics is not the same as feelings
● Virtue is conformity of one’s life and conduct to - feelings provide important information for our ethical
moral and ethical principles. choices.
2. Ethics is not following the law
● Business ethics- set of moral rules, principles, and - Ethics are subjective, whereas laws are relatively
standards that govern how businesses operate, how objective.
business decisions are made, and how people are - Being ethical does not always mean being legal.
treated. While a good system does incorporate many ethical
- Rules, principles, and standards for deciding what is standards, law can deviate from what is ethical.
morally right or wrong when doing business.
➢ Totalitarianism - a system of government in which
● International business ethics is important to aid in the state holding absolute control and under which the
regulating international business and trade and create people are allowed virtually no authority.
winning situations for international marketing 3. Ethics is not religion
participants. - Many people are not religious, but ethics applies to
everyone.
● Ethical decision-making is tricky; therefore, it is 4. Ethics is not following culturally accepted norms
imperative that there be a specific decision-making - Some cultures are quite ethical, but others are blind
framework that will help decision makers make ethical to certain ethical concerns.
decisions. 5. Ethics is not science
● Organizations have their code of conduct or code of - Social and natural science can provide important data
to help us make better ethical choices. But science
ethics that embodies the principles defined by the
alone does not tell us what we ought to do.
organization, reflecting the organizational culture of
the company, to help employees conduct business LESSON 8.2: ETHICAL APPROACHES TO
properly and any violation may mean disciplinary DECISION MAKING
remedies.
There are different ethical approaches that may help
● Professionals have their code of ethics and violation someone make the most ethical decisions. These
will mean banning the violator from practicing the approaches are the following :
profession. 1. Utilitarian Approach
- Utilitarianism is an ethical theory that determines
Issues handled falling under business ethics in the
right from wrong by focusing on outcomes, which
international marketing environment includes:
action results in the most good and least harm.
1. Child labor- involves using children to do jobs for
- It’s a form of consequentialism.
companies or small business owners. Some cottage
industries employ children as part of their labor force. - It was conceived by Jeremy Bentham and John
2. Transfer Pricing- involves how entities price Stuart Mill to help legislators determine which laws
products/service that they market to affiliates and were morally best.
subsidiaries. ➢ GOOD: More happiness less pain
3. Fair Trade Movement- agreement between and BAD: More suffering than pain
among countries to encourage free trade and remove
barriers to entry.
2. Rights-based Approach ● Most underdeveloped and developing countries are
- has its root in the philosophy of the 18th century rich in natural resources- agriculture, metals, and
thinker Immanuel Kant, which action respects the minerals. They excel in the production of primary
rights of everyone involved. products, but due to the highly competitive and
- According to Kant, what makes human beings volatile nature of market conditions for primary
different from mere things is that people have dignity products, these underdeveloped and developing
based on their free will and they have the right to countries claim they are exploited by buyers in the
make choices and they have a fundamental moral highly developed world.
right to have these choices respected.
● World Bank, International Monetary Fund, World
3. Fairness or Justice Approach- action treats people Trade Organizations, and United Nations Conference
fairly on Trade and Development are some of the world
- to ethics has its roots in the teachings of Aristotle, organizations concerned with the process of economic
Plato, and Cicero. The theory hypothesizes that development.
everybody should be treated fairly or in the same
way and not showing favoritism and discrimination. ● The WTO fosters international trade negotiations so
- Favoritism gives benefits to some people without that developing countries can extract favorable trade
justifiable reason for singling them out. conditions from more developed countries.
- Discrimination imposes burdens on people who are ● UNCTAD is the United Nations' (UN) body
no different from those on whom the burdens are not
responsible for dealing with development issues,
imposed.
particularly international trade-the main driver of
4. Common Good Approach- action contributes most economic development.
to the quality of life of the people affected
● Developing countries are claiming a right to a more
- actions that are taken or policies that are put into
stable share of the gross national product (GNP) of
place in order to benefit not only certain group of
developed countries in the form of aid, preferably
individuals but the society as a whole.
administered multilaterally and with no strings
- Contemporary ethicist John Rawls defined the
attached.
common good as “certain general conditions that
are equally to everyone’s advantage.” ● Subscription- is what a country pays when it joins
the International Monetary Fund (IMF). The amount
5. Virtue Approach- action embodies the character that
strengthens value. of money it pays into the IMF as a member.
- emphasizes an Individual's character as the key ● Quota- How much money a country can borrow
element of ethical thinking, rather than rules about from the IMF, based on its subscription.
the acts themselves (deontology) or their
consequences (consequentialism). ● Gold Tranche- is the proportion of a member's line
- Virtue Ethics is a philosophy developed by Aristotle. of credit at the IMF that can be automatically
It’s the quest to understand and live a life of moral borrowed. It equals 25 percent of the country's
character. subscription to the IMF.
- The virtuous person is the ethical person.
LESSON 8.3: RICH AND POOR COUNTRIES
● Credit Tranches- the remaining portions of a
● “Trade relations between developed and country's line of credit which are more difficult to
underdeveloped countries have always been the bone obtain.
of contention and controversy. The business
orientations of the multinational companies (MNCs) ● New International Economic Order (NIEO)
which establish manufacturing and selling in countries - A transnational governance reform initiative
where labor and resources are cheaper is seen as a promulgated as a United Nations declaration in 1974,
form of exploitation.” which fundamental objective was to transform the
governance of the global economy to redirect more of
the benefits of transnational integration toward "the standards not only of the country, but more
developing nations." importantly that of each and every country in which
they conduct business.
● General Agreements to Borrow (GAB)
● When companies plan their long-term expansion
- A standing agreement that was established by the
into a foreign environment, they must tackle serious
IMF in 1962 that allowed them to borrow money from
moral and ethical challenges and decision making in
the G-10.
order to make their expansion a success.

● Businesses trading internationally are expected to

fully comply with federal and state safety regulations,
environmental laws, fiscal and monetary reporting
statutes, and civil rights laws.

● Acting in accordance with ethical and cultural

values is crucial for a multinational company to win
clients' support and business and to achieve a
competitive advantage in a particular market.

● As there is greater emphasis on collaboration, both

within and between different disciplines, it has
● The difficulties faced by commodity exporters in become important for professionals and, in fact, for
general, and by developing countries, in particular, are participants in international business and trade to not
heavily dependent on commodity export earnings. only be thoroughly aware of ethical guidelines in their
own fields of operation, but also have some
● In the capital markets, the developing countries
knowledge of ethical guidelines in other fields and in
have paid extremely high real interest rates because
other countries.
of their economic weakness and because of
perceptions of the risks of lending to them. They were ● Business ethics laws and regulations dictate a
viewed as default risks. standard of conduct that represents going beyond
doing what is legally right and going to acting what is
● MARKETS FOR SERVICES
morally right.
- The weakness of developing countries is also evident
- Moral norms are imperative; legal norms are
in the markets for services, where they would
mandatory.
probably earned a lot, if they did not lack the
necessary access to capital and finance to be able to ● Legal norm- a mandatory rule of social behavior
compete on an equal footing. established by the state. The main function of any
legal rule is to suggest a certain behavior; to try to
● LABOR MARKET
guide and regulate human activity
- Immigration controls were instituted.
● Morality- only to the conscience of each individual.
- Tariff and non-tariff barriers restricted the flow of
Anyone who violates them is not exposed to any
goods and services. Technology markets are also
punishment or material pressure, but is subjected
closely guarded.
only to scorn or rejection on the part of society.
World Trade Organization (WTO) ● Moral norms- guide to good behavior, based on the
- fosters international trade negotiations so that customs, habits, and beliefs that guide the behavior of
developing countries can extract favorable trade people, about what should be done.
conditions from more developed countries.
➢ Legal Norm consists of three parts:
LESSON 8.4: ETHICAL VIRTURES 1. Hypothesis 2.Disposition 3.Sanction
● Participants to international business and trade ➢ In Criminal Law, a legal norm usually consists of
must understand the values, cultures, and ethical
two parts: - The word originates from the Old French word
1.Disposition 2.Sanction "prudence," which derives from the Latin word
"prudential" meaning "foresight" or "sagacity."
- Foresight means the ability to anticipate what might
happen in the future.
- Sagacity means the quality of being discerning,
sound in judgment, and farsighted; wisdom.
● In accounting, prudence is associated with
conservatism. This means that readers of the financial
statements can trust that the financial statements
present fairly the company's results of operations and
financial condition.

5. FIDELITY- faithfulness to a person, cause, or belief,

DIFFERENT ETHICAL VIRTURES OR MORAL VIRTUES demonstrated by continuing loyalty and support.
NEEDED BY INTERNATION BUSINESS AND TRADE - meeting reasonable expectations regarding respect,
PARTICIPANTS: competence, subscribing to a professional code of
1. INTEGRITY- quality of being honest and having conduct, following policies and procedures, and
strong moral principles that you refuse you to change. honoring agreements.
● Incorruptibility- When a person has integrity, he or
she is not corrupt. 6. TRANSPARENCY- not hiding something from parties
engaged in a transaction.
2. TRUST- is the assured reliance on the character, - However, transparency does not mean divulging
ability, strength, or truth of someone or something. confidential information. What should be kept secret
● Truth is in accordance with fact or reality. A fact is should be kept secret and confidential. Transparency
verifiable and cannot be denied. Truthfulness breeds is a direct contrast to fraud. Transparency leads to
trust. trust.
● Truth-telling relates to the disclosure of information ● The goal of transparency in accounting and finance
in a respectful and compassionate way. is to facilitate Informed decision-making. In the field
of information and communication technology, the
3. JUSTICE, EQUITY OR FAIRNESS- means treating
goal is primarily to breed confidence in the system.
everyone fairly, equally, and the same, regardless of
origin, race, creed, sex, age, culture, and the like. 7. SOCIAL RESPONSIBILITY
● There is equity if there is an equitable distribution - also known as corporate social responsibility (CSR)
of opportunities so that no one is left behind. means that businesses, in addition to maximizing
shareholder value, should act in a manner that
The South African Speech, Language, Hearing
benefits society.
Association (SASLHA) has this to say about justice:
Justice is a principle with the following four The American Society for Quality (ASQ) holds that
components: social responsibility is seen through transparent and
a. distributive justice- equitable allocation of ethical behavior that:
resources 1. contributes to sustainable development, including
b. respect for the law - whether an act is or is not health and the welfare of society;
against the law 2. takes into account the expectations of stakeholders;
c. rights - special advantages with correlative duties 3. is in compliance with applicable laws and consistent
d. retributive justice - making right when a wrong has with international norms of behavior; and
been perpetrated 4. is integrated throughout the organization and
practiced in its relationships.
4. PRUDENCE- act of being careful, wisdom in the way
of caution and provision; discretion; carefulness.
ISO 26000 also defines seven key principles of socially
responsible behavior:
1. Accountability
2. Transparency
3. Ethical behavior
4. Respect for stakeholder interests
5. Respect for the rule of law
6. Respect for international norms of behavior
7. Respect for human rights
LESSON 9.1: GLOBAL TRADING’S CHANGING FRONT ● Demographics, geographic, and psychographics’ are
all more important because of global marketing
● IBT has always been a letting pot of the world’s
diversity. A deep multicultural awareness is important
consumer demands and marketer’s supply. The supply
to compete successfully in the global market. It is
need to commensurate with the demand to reach
important to take into account the cultural values of
market equilibrium.
the target market to assess the best marketing
● The trend in every aspect of international business strategy global success.
and trade is toward greater cultural, ethnic, political,
LESSON 9.2: MARKETING TRANSLATION
social, and religious diversity.
● Marketing Translation- involves translating
● Distinct market segments need a separate class of
advertisements and communication regarding
goods and services and a separate marketing,
products and services to customers of cultures
advertising, and promotion strategy to be successful.
different from the home country.
● A consumer’s background influences how they
MARKETING COPY
consume products and services. Thus, marketers must
- The heart and soul of almost every marketing
consider their traditions, languages, custom, beliefs,
endeavor. It is the output of copywriters, who are
and experiences when crafting messages.
employed to write material, which encourages
● Marketers are targeting minority sectors as they are consumers to buy goods or services.
the ones usually spending billions of dollars annually. - Goal: to ensure that the message is creatively
adapted, effectively communicated, and stays on
● Marketing translation requires a deep brand.
understanding of how the character of the brand is
going to be conveyed in another language and culture ● TRANSLATING MARKETING COPY- requires a deep
and perceived by the target audience. understanding of how the character of the brand is
going to be conveyed in another language and culture
● And even if a country does not export, its domestic to be correctly perceived by the target audience.
market is increasingly made up of foreign-born
consumers. While these immigrants spend and buy a. Poor translation of marketing copy leaves a negative
domestic products, they are competitors to the brand impression in the same way that bad
existing country’s labor market. presentation and photocopied brochure does.
b. Well- researched marketing translation will
● On the positive side, however, they also create job strengthen a brand's identity on a global scale, while
opportunities because immigrant entrepreneurs preserving its uniqueness in each market
establish businesses that hire local talents.
● Valuable and well-written content is the key to
● Assimilation- a continuum and marketers must deal establishing a strong international reputation,
with varying degrees of assimilation within any ethic increased revenues, and maximum profitability.
market.
- absorption and integration of people, ideas, or ● Human interest marketing copy entices the
culture into a wider society or culture. emotions and senses of its prospective customers,
rather than intellect and judgement.
● Multicultural Awareness is important to compete
successful in the global market. It is important to take ● Marketing Copywriting- refers to all of the written
into account the cultural values of the target market to assets a business uses to develop customer awareness,
assess the best marketing strategy for global success. increase brand loyalty, encourage action, and keep
clients coming back for more.
● Building a company means the company has to
know its product and know its market. The tired ● Transcreation (similar to glocalization)- process of
adapting the message of the source text into that of the
techniques and theories of marketing and economics,
target text, all while maintaining the style.
technology and market research have changed.
The ABCs of Writing Great Marketing Copy by share in common that can be used to define as a
Wendy Keller (July 12, 2016) cites three simple “people”. The Values, beliefs, morals, communication
principles to writing good copy. and practices that people share in common provide
1. A is for ALWAYS- Always think about the them with a shared sense of purpose and a valuable
consumer in writing a copy. collective identity.
2. B is for BURNISH- To "burnish" means to rub
something to a shine or gloss. If needed, an expert in ● Culture is important for shaping social relationships,
grammar or advertising could be consulted. determining how we make sense of the world and our
3. C is for Call to Action- Call to action could be place in it, in shaping our everyday actions and
"Buy Now" or "Click Here" or anything similar that experiences in society.
calls the target market to action and make a decision.
SOCIAL ORDER- stability of society based on the
MARKETING TRANSLATORS collective agreement to rules and norms that allow
- It needs to be focused on meaning, brand values, and people to cooperate, function as a society and live
tone. Whatever industry a company is in, it needs together in peace and harmony.
creative translators, editors, and copywriters who
CULTURE COMPOSED OF TWO THINGS
specialize in the particular industry to adapt the
1. NONMATERIAL
company's marketing copy successfully.
- aspect of culture as the values and beliefs,
● Creative translation gives a short list of the trickiest knowledge, common sense, assumptions, expectations,
elements, which are always worth bearing in mind, language, communication, and practices that are
when it comes to launching global marketing shared in a common group of people.
campaigns: - rules, norms, laws and morals that govern society
1. Humor 3. Imagery and colors bringing about the social order.
2. Metaphors, puns, idioms 2. MATERIAL or CULTURAL PRODUCTS .
- refers to the things that human make and use-
buildings, technological the thing that human and use
building, technological gadgets, clothing.
EMILE DURKHEIM
- both material and nonmaterial aspects of culture are
valuable in that they hold society together.
- his claims is that society is a sui generis reality. A
reality unique to itself and irreducible to its composing
parts.
- according to him they have 3 degree of consensus
and intensity of cognitive orientations and regulative
cultural codes among the members of a population:
a. Rate of Interpersonal Interaction
“ Refrain from using obscene language in your copy.” b. Level of emotional arousal
● Clickbait- content whose main purpose is to attract c. Rate of ritual performance
- Culture in Emile’s sense is an emergent web of
attention and encourage visitors to click on a link.
representations, holistically encompassing the deep-set
● Pander- act of catering to or profiting from the
value, belief, and symbolic systems.
weaknesses, vices, or unreasonable desires of others.
● Culture can be force for oppression and domination
LESSON 9.3: IMPORTANCE OF CULTURE IN
but it can also be a force for creativity, resistance, and
MARKETING
liberation.
● Culture- refers to a large and diverse set of mostly
intangible aspects of social life. DR. EDWARD HALL
- An anthropologist who wrote about cultural issues in
ACCORDING TO SOCIOLOGISTS
business, divides culture into High-Context culture and
- Culture consists of the values, beliefs, systems of
Low-Context culture.
language, communication, and practices that people
a. High- Context Culture ● CUSTOMER ENGAGEMENT- ongoing cultivation
- depends heavily on the context of nonverbal aspects of a relationship between the company and consumer
of communication. Nonverbal means body language, that goes far beyond the transaction.
facial expressions, eye contact and the like. - It is an intentional, consistent approach by a
b. Low- Context Culture company that provides value at every customer
- Depends more on explicit verbally expressed interaction, thus increasing loyalty.
communication. Communication is mostly verbal and
written. ● Key benefit of MCM from a digital perspective:
- The ability to communicate in a more personal
● Multicultural marketing- faced with cultural barriers. manner, with the aim of providing targeted campaigns
Language is foremost, Packaging, Advertising, and and effective messaging, as part of marketing driven
Branding may need to be accurately translated to other sales model.
languages.
BENEFITS OR REASONS TO USE MCM:
Some Cultural Practices or beliefs that affect buying 1. Reach target market across several platforms
Patterns: 2. Increase a brand awareness and optimally reach
a. Rank c. Hierarchy e. Aesthetic Elements target audiences
b. Place d. Religion 3. Target wider range of customers and offer more
personalized communication
● ASSIMILATION- adopting mainstream values and
4. Better understand the motivating factors and
behaviors rather than keeping the culture of one’s
specific behaviors of customers
heritage.
5. Provide companies with a significant amount of
● ACCULTURATION- adding some elements of the metrics to help measure the marketing initiatives
mainstream culture without abandoning the native 6. Realize companies’ ROI goals
culture.

● Multicultural marketers, should realize that

consumer tastes and demands will never be uniform
anywhere else and that to prosper in the 21 st century,
they need to adapt their product lines to reach
profitable ethnic segments.

LESSON 9.4: MULTICHANNEL MARKETING

● MULTICHANNEL MARKETING (MCM)

- The practice of interacting with customers using a
combination of indirect and direct digital
communication.
- Companies which employ MCM are able to target a
wider range of customers and offer more personalized
communication.
- MCM is essential for companies as the international
business and trade landscape continues to evolve and
often presents many challenges. Traditional marketing
platforms are being relegated to the background.
Customers are becoming technology-adept and
digitally savvy.

● The primary benefit of MCM is the ability to reach

consumers across several platforms to increase brand
presence and customer loyalty.
LESSON 10.1: INTERNATIONAL MONETARY of exchange.
SYSTEM: AN OVERVIEW - This system advocated the adoption of an exchange
standard that included both gold and foreign
Hegemon- the leader, the country that has dominance
exchanges.
over other countries. It has the ability to issue
securities that are always in high demand. ➢ Triffin paradox- The reserve currency country
would aim to run a balance of payments (BOPs) deficit
DOMINANT INTERNATIONAL CURRENCY to supply reserves. If such deficits turned out to be
- a currency used outside the borders of its country of very large, then the reserve currency itself would
issuance like the US dollar, are multifaceted and witness crisis.
involve the three classical functions of money: - Special Drawing Rights were the central reserve
medium of exchange, store of value, unit of account currency modeled to be the weighted average of five
● Medium of Exchange- something commonly major currencies: US dollar, German mark, Japanese
accepted in exchange for goods and services and yen, British pound, and French franc that can be used
recognized as representing a standard of value. as a denomination currency.
● Store of Value - means the function of money that 4. Flexible Exchange Rate Regime
the medium of exchange retains its value and can be - a monetary system, wherein the exchange rate is set
used at a later time. according to the demand and supply forces, also
● Unit of account - the monetary unit or measure of known as floating exchange rate. The economic
value in terms of which accounts are kept and values position of the country determines the market demand
stated; the function of money that enables the user to and supply for its currency.
keep accounts and value transactions. - Jamaica Agreement - The agreement stipulated that
central banks of respective countries could intervene in
INTERNATIONAL MONETARY SYSTEM the exchange markets to guard against unwarranted
- operating system of the financial environment, which fluctuations.
consists of financial institutions, multinational
- Gold was also officially abandoned as the,
corporations, and investors around the globe.
international reserve asset.
- provides the institutional framework for determining
the rules and procedures for international payments, ❖ free-floating or independent-floating currency
determination of exchange rates, and the movement - The exchange rate is determined by the market, with
of capital. foreign exchange intervention occurring only to
MAJOR STAGES OF THE EVOLUTION prevent undue fluctuations.
1. The Era of Bimetallism ❖ managed-floating system
- Both gold and silver coins were used as the - the central monetary authority of countries influences
international modes of payment. The exchange rates the movement of the exchange rate through active
among currencies were determined by their gold or intervention in the foreign exchange market with no
silver contents. preannounced path for the exchange rate.
- Some countries were either on a gold standard or a ❖ fixed-peg arrangement
silver standard. - the country pegs its currency at a fixed rate to a
2. Gold Standard major currency or to a basket of currencies
- gold alone is assured of unrestricted coinage.
- National currencies were convertible into gold at a LESSON 10.2: A LOOK AT CHINA AND THE
stable ratio. The exchange rate between two currencies INTERNATIONAL MONETARY SYSTEM
was determined by their gold content. CHINA
- The gold standard ended in 1914 during World War I. - world’s largest trading nation in goods. Chinese and
The US returned to a gold standard in 1919. Taiwanese companies account for more than a fifth of
3. Gold Exchange Standard this year’s Global Fortune 500.
- also known as the Bretton Woods System. It is a - ranks in the world’s top two countries for receiving
monetary system under which a nation's currency may and giving foreign direct investment. It is the second
be converted into bills of exchange drawn on a country biggest spender on research and development at some
whose currency is convertible into gold at a stable rate $300bn last year.
- second-largest economy in the world if you measure and the euro, but above the yen and the pound
the current prices, and it is the largest economy in the sterling.
world if you measure it by purchasing power parity.
- become the biggest tourist economy in the whole
world in terms of the number of tourists going out,
education, culture, and advanced health care.
- China is a socialist economy.

● If you take IMF projections for 2020 and 2021,

China will account for an astonishing 60 percent of ➢ “Countries call for international order and
world economic growth. If you take the whole period cooperation within the international community, but
out to 2025, China will account for slightly over 30 the international community is itself divided. Several
percent of world economic growth. European countries have embraced nationalism, the
United Kingdom, a traditionally liberal country,
● China invests more than 40% of its economy, which surprisingly turned to Brexit (the withdrawal of the
is almost twice that of the US government. United Kingdom from the European Union), and the
● BOAO FORUM FOR ASIA (BFA) US withdrew from an array of international treaties
- nongovernment, nonprofit international organization and institutions.”
jointly initiated by 29 members states headquartered in ● Unilateralism- doctrine that nations should conduct
China. their foreign affairs individualistically without the
- Purpose: To promote economic integration in Asia, advice or involvement of other nations.
bringing Asian countries even closer to their
development goals and to pool positive energy. ● Multilateralism
- situation in which several different countries or
● The significance of BFA is that it features China’s organizations work together to achieve something or
long-term economic growth and the new huge role it deal with a problem
plays in the world. The population of existing high- - a form of membership in international institutions to
income economies is 16% of the world’s population, bind nations and discourage unilateralism to give small
but China by itself is 18% of the world’s population. powers a voice and influence that they could not
● Capitalist economy- factors of production are owned otherwise exercise.
by private parties. LESSON 10.3: ISSUES AND CHALLENGES OF
● Socialist economy- factors of production are all THE INTERNATIONAL FINANCIAL &
state-owned. Production occurs according to the needs MONETARY SYSTEM
of society and at the command of the state or the The Financial Sector Assessment Program (FSAP) of
planning authorities. Hence, this type of economy is the IMF helps to assess financial vulnerabilities and
also known as command economy. make financial systems stronger and able to withstand
● The governor of China's central bank, Zhou adverse events better.
Xiaochuan, criticized the international monetary Assessments for advanced economies are done by the
system for "the inherent deficiencies caused by using IMF alone, while those for other economies are
credit-based national currencies". typically carried out jointly with the World Bank.
● Special drawing rights (SDRs)- synthetic currency In 2021, the IMF plans to assess the stability of six
created by the International Monetary Fund (IMF). financial systems-two assessments cover economies
The SDRs "serve as the light in the tunnel for the with large financial systems:
reform of the international monetary system. 1. Special Administrative Region:
a. United Kingdom
● In November 2015, the IMF decided to accept the
- One of the world's most complex and open financial
renminbi (RMB) into the SDRs basket, assigning it
systems hosting several globally systemic entities and
10.92 percent of the total weight, below the US dollar
a large domestic financial sector.
- The United Kingdom's exit from the European Union
(Brexit) will lead to structural changes. locations, where supply chains can be managed in the
b. Hong Kong SAR most advantageous way.
- small, open economy, and a major international
financial center.
- one of China's special administrative regions
(SARS). A SAR is a relatively autonomous region
within the People's Republic of China that maintains
separate legal, administrative, and judicial system
from the rest of the country.
- It has cross-sectoral and cross-border linkages with ● Policy makers in OECD countries accommodated
extensive linkages to mainland China. these trends via financial deregulation, meaning
2. Four focus on the emerging markets: eliminating international capital controls, moving
c. Chile toward auction systems for selling sovereign debt, and
- features very large and deep local markets. Chile's developing monetary policy.
financial system exhibits a high level of ● Capital control represents any measure taken by a
interconnectedness between banks, mutual funds, government, central bank, or other regulatory body to
pension funds, and insurance companies. limit the flow of foreign capital in and out of the
d. Philippines domestic economy.
- Banks dominate the financial system and entered the
pandemic with solid capital and liquidity buffers. ● At the international finance level many emerging
However, they are closely interconnected with market economies (EMES), called "the dollar bloc"
nonfinancial corporations, where market analysts manage their currencies against the US dollar reserve
forecast significant earning shocks. currency. To prevent excess credit cycles and increased
e. South Africa dependence on dollar funding resulting from such
- with large cross-border banking groups and a well- exchange rate policies.
developed investment fund and insurance sector. It has
● The OECD Codes of Liberalization provide a
large fiscal deficits exacerbated by a weak financial
position of state-owned enterprises. flexible framework for dealing with a gradual global
f. Georgia liberalization process allowing for specific
- small, open economy with a moderately-sized "reservations" on becoming an adherent and
financial sector comprised almost entirely of banks. incorporating principles of "standstill".
The banking system is relatively concentrated and - The codes are particularly useful for dealing with
highly dollarized in both deposits and lending. some of the key global issues by calling for the
avoidance of discrimination between residents and
Organisation for Economic Co-operation and
nonresidents , freedom of residents to transact abroad,
Development (OECD)
-an international organization that works to build and freedom of nonresidents.
better policies for better lives. Its goal is to shape CONCERNS AND CHALLENGES FACING THE
policies that foster prosperity, equality, opportunity, INTERNATIONAL FINANCIAL AND MONETARY
and well-being for all. It is a group of 37-member SYSTEM:
countries.
a. Effectiveness of banking, insurance, and
● The opening up of OECD economies with respect to financial market supervision
international trade and investment in the post-War b. Macroprudential (MaP) framework is a key new
period changed the operation of the international element of the post-crisis financial reforms taking into
financial system helping to stimulate growth and to account national and regional arrangements. Its
encourage international investment. objective is to limit systemic risk. Its scope is on the
financial system as a whole.
● Multinational Corporations (MNCs) emerged and
c. Identification and monitoring of systemic
moved across international boundaries more freely
financial risk. Systemic risk is the risk of collapse of
creating new markets and the ability to locate
an entire financial system or entire market, as opposed
investment, production, and employment in multiple
to the risk associated with any one individual entity,
group, or component of a system.
d. Building Institutional and governance
arrangements in the domestic and regional context
e. Problems in relation to finance and technology
(fintech). Finance and technology (fintech) refer to
computer programs and other technology used to
support or enable banking and financial services.