Incoterms 2010 and International Business - 101
International Business: Environments and Operations, 15e (Daniels et al.)
CHAPTER FIVE: INTERNATIONAL TRADE AND FACTOR-MOBILITY THEORY
CHAPTER FIVE: INTERNATIONAL TRADE AND FACTOR-MOBILITY THEORY
OPENING CASE: COSTA RICA’s TRADE EVOLUTION [See Map 5.1.]
Costa Rica, a Central American country of 4.7 million people, has successfully transformed its primarily agricultural economy to one that includes strong technology and tourism sectors as well. Bordering both the Pacific Ocean and the Caribbean arm of the Atlantic, Costa Rica used international trade and factor-mobility policies to help achieve its economic objectives. Although exports of coffee and bananas are still important, high-tech manufactured products (electronics, software, and medical devices) are now the backbone of Costa Rica’s economy and export earnings. As in all countries, Costa Rica’s policies continually evolved, but generally fall into four periods and categories:
• 1800s–1960: a liberal trade regime that promoted the exports of coffee and bananas
• 1960–1982: a more protectionist regime that promoted import substitution, i.e., a policy of developing domestic industries to manufacture goods and provide services that would otherwise be imported (although results were mixed, the processing of coffee and cotton seeds increased the value of Costa Rican exports, and considerable substitution occurred in the pharmaceutical industry). To address this problem, Costa Rica joined four other countries to form the Central American Common Market (CACM), which allowed goods produced in any member country to enter freely into the market of any other member.
• 1983–Early 1990s: a less protectionist regime that promoted the liberalization of imports, encouraged export promotion, and provided incentives to attract foreign capital and expertise. The country also established a private organization (CINDE) to aid economic development and attract foreign direct investment.
• Early 1990s-Present: a liberal trade regime that seeks the production of electronics, software, and medical devices via strategic trade policy, i.e., identifying and targeting industries for international competition.
QUESTIONS
5-1 Using the framework in Table 5.1, explain which of the theories relate to Costa Rican trade policy during each of the four eras described in the case.
1800’s-1960 – Absolute Advantage
1960-1982 – Neo mercantilism
1983-Early 1990 – Country Similarity Theory
Early 1990-Present – The Diamond of National Advantage
(LO: 1, Learning Outcome: Understand the theories of international trade, AACSB: Analytical Skills)
5-2 Map 5.1 shows that a bit over 50 percent of Costa Rica’s exports go to only three countries. Which trade theories may help you explain this concentration, and why?
In 2011, a bit more than 50% of Costa Rica’s exports went to only three countries: United States (30.4%), Netherlands (10.9%), and China (11.3%)
Costa Rica has been known principally as a producer of bananas and coffee, which are still important exports. However, in recent times electronics, pharmaceuticals, financial outsourcing, software development, and ecotourism have become prime industries in their economy.
Costa Rica has used international trade and factor mobility policies to help achieve its economic objectives, as a country’s competitive position depends on the quantity and quality of its production factors. Trade pattern theories will also serve as a guide in determining which partner will primarily trade. Many of the top trading nations are high-income countries (U.S. and the Netherlands), while despite its low per capital income, China also has a large economy because of its large population. (LO: 1, Learning Outcome: Understand the theories of international trade, AACSB: Analytical Skills)
CLOSING CASE: Ecuador: A Rosy Export Future?
Ecuador has been successful in developing markets for the export of roses. In fact, the product is one of the most important exports, behind only petroleum and bananas. This success is partially the result of a competitive labor force, as well as unique geographical advantages, including less climatic risks when compared to neighboring competitors. Producers have also cooperated with competitors and purchasers to meet consumer needs. As the global market for these products expand, Ecuador will have to deal with many additional challenges and opportunities in the future.
Questions
5-3 Discuss each of the trade theories that help to explain Ecuador’s competitive position in exporting roses.
Both the theories of absolute and competitive advantage help to explain Ecuador’s position as an exporter of roses. Market prices are impacted by the laws of supply and demand. Ecuador has a natural advantage due to geographical and climatic conditions. Additionally, the country has an acquired advantage due to the creation of trade networks and production capabilities. Specialization in the market may also provide a comparative advantage to Ecuador. (LO: 1, Learning Outcome: To understand the theories of international trade, AACSB: Analytical Skills)
5-4 What trade theories do not help explain Ecuador’s competitive position in exporting roses? Why is this so?
Clearly, mercantilism is not a theory being utilized by Ecuador. The nature of cooperation, network development, and extent of the globalization of trade do not comport with the notions of mercantilism. (LO: 1, Learning Outcome: To understand the theories of international trade, AACSB: Analytical Skills)
5-5 Look back in Chapter 1 to the factors in increased globalization and explain which factors have influenced the growth of world trade in cut roses, and why.
Several factors have created the environment for the increased globalization of the market for roses. Liberalization of cross-border trade, as well as the development of services that support international business are both important factors. Additionally, increased global competition, cross-national cooperation, and changing political systems have also played a role. These factors are important because they continue to increase the level of global connectedness between producers and new markets, as well as decrease barriers to trade and investment. (LO: 2, Learning Outcome: To explain how free trade improves global efficiency, AACSB: Dynamics of the Global Economy)
5-6 Think back to the external environmental conditions (cultural, legal-political, and economic) discussed in Chapters 2-4 and discuss how these have affected and might affect future demands for Ecuadorian cut roses.
These forces have reduced and eliminated barriers to trade, while expanding potential markets and granted improved access to markets. These forces have also created additional opportunities and incentives for producers, while fostering international economic cooperation and development. (LO: 4, Learning Outcome: To explain why a country’s export capabilities are dynamic, AACSB: Dynamics of the Global Economy)
5-7 There are a number of ways that Ecuadorian growers might increase demand for their cut roses. Among these are (a) try to get more consumers to move up-market by buying premium roses, (b) to promote more rose demand for a different special day, and (c) to promote sales in relatively untapped markets, such as the Middle East. Compare these and any other alternatives that you can think of.
Each of the alternatives presents specific risks and opportunities. There are also a myriad of additional marketing strategies and promotions that may be used. A greater emphasis on technology and more efficiency within the distribution system, as well as the elimination of regulatory barriers to trade, could also help.
5-8 Some counties have found success by promoting the nationality of their products, such as the Juan Valdez campaign for Colombian coffee and the “if it’s Danish, it’s good” campaign for Danish agricultural products. Discuss the viability of a national campaign to promote Ecuadorian roses abroad.
According to the Trace Commissioner of Ecuador, the country’s year-round perfect climate and high elevation produces large-stemmed, big bulb, and colorful roses, such as purple, green, terracotta, orange, peach, and fuchsia that you cannot get from anywhere else in the world. They are the most impressive and outlast any other type of rose. FlorEcuador is also the social environmental certification which ensures that the flower farms in Ecuador treat the environment properly and their workers fairly. (LO: 5, Learning Outcome: Recognize how a country’s export capabilities are dynamic, AACSB: Dynamics of the Global Economy)
------
VIDEOS
See full video List here - link
EBOOKS
Incoterms 2010 - Ebook - link
Incoterms 2010 - Guides - link
Incoterms 2010 - Guides - Light Version - link
Incoterms 2010 - Q & A - link
Incoterms 2010 - English Vietnamese - link
Incoterms 2010 - Reviews - link
Incoterms 2010 - Incoterms new 2016 - Made easy e-Guides - link
Incoterms 2010 - Case Study Guides - link
INTERNATIONAL BUSINESS - FREE DOWNLOADS
International Business: The New Realities, 4th Edition, Cavusgil, Knight & Riesenberger
International Business: The Challenges of Globalization, 8th Edition, Wild & Wild
International Business, 15th Edition, Daniels, Radebaugh & Sullivan
International Business: A Managerial Perspective, 8th Edition, Griffin & Pustay
DOWNLOAD Ebooks - here
DOWNLOAD Slides - here
DOWNLOAD Video List - here
DOWNLOAD Test Bank - here
DOWNLOAD Case Study Guides - here
Any Question, email to: ecomftu2012@gmail.com
No comments:
Post a Comment