International marketing of Agri-products


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This is a small presentation about the international trade & marketing of the Agri Products.

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International marketing of Agri-products

  1. 1. International Marketing of Agri-products
  2. 2. Syllabus <ul><li>International economics-issues and dimensions; concepts of interregional and international trade, </li></ul><ul><li>International marketing and international finance; </li></ul><ul><li>International trade-theories, economic growth and trade, gains from trade, barriers to trade; </li></ul><ul><li>International marketing-conceptual framework, global environment, policy framework marketing mix, market selection and segmentation; marketing research, market development and export promotion </li></ul><ul><li>International finance-global. environment, foreign exchange risk management, working capital management, regulations and strategies; </li></ul><ul><li>Emerging scenario of agricultural trade in WTO era. </li></ul>
  3. 3. International Economics-Issues &Challenges <ul><li>I.E. is that branch of economics which is concerned with the exchange of goods and services between one country and another ( foreign trade) as distinct from that trade which is carried on within the territory of a nation (domestic trade). </li></ul><ul><li>Issues : </li></ul><ul><ul><li>Why is I E. treated as a separate branch of economics? </li></ul></ul><ul><ul><li>Are not the laws of domestic trade applicable to foreign trade? </li></ul></ul><ul><ul><li>Can we just extend the general theory of production, value, money etc. to the problem of international trade & transactions? </li></ul></ul><ul><ul><li>Why there should be a need for a separate theory? </li></ul></ul>
  4. 4. Need for a separate theory of IT: Classical View <ul><li>Classical economists believed that international immobility of factors is the fundamental criteria for a separate theory of IT. </li></ul><ul><li>Other factors responsible are: </li></ul><ul><ul><li>Political & legal differences, </li></ul></ul><ul><ul><li>Cultural & language differences, </li></ul></ul><ul><ul><li>Economic differences </li></ul></ul><ul><ul><li>Differences in the currency units </li></ul></ul><ul><ul><li>Differences in the marketing infrastructures, trade restrictions, high transportation costs and </li></ul></ul><ul><ul><li>Differences in trade practices </li></ul></ul>
  5. 5. No Need for a separate theory of IT: Ohlin’sView <ul><li>Bertil Ohlin viewed that IT is a special case of inter local or inter regional trade. </li></ul><ul><li>Factors of production are interregionally immobile but intra regionally (within the region) freely mobile, hence IT is an integral part of general price theory & there is no need for separate theory of IT. </li></ul><ul><li>But it was not agreed and it was advocated that specialzed branch of economics must be there to study IT & it should be called Int Economics. </li></ul>
  6. 6. Inter-Regional & International Trade <ul><li>Inter-regional trade refers to trade between regions within a country (Domestic or internal trade). </li></ul><ul><li>International trade is concerned with the exchange of goods and services between one country and another. </li></ul><ul><li>Degrees of interdependence among nations has increased over last 2 decades </li></ul>
  7. 7. Forces behind Internationalisation <ul><li>Technical Progress in Transport & Communication </li></ul><ul><li>Increased Return to scale in production </li></ul><ul><li>High Income elasticities for differentiated products </li></ul>
  8. 8. Inter-Regional & International Trade- Comparison <ul><li>Factor Immobility </li></ul><ul><li>Differences in Natural Resources </li></ul><ul><li>Geographical & Climatic Differences </li></ul><ul><li>Different markets </li></ul><ul><li>Mobility of goods </li></ul><ul><li>Different Currencies </li></ul><ul><li>Problem of Balance of Payments </li></ul><ul><li>Different Transport Costs </li></ul>
  9. 9. … ..Contd <ul><li>Different Economic Environment </li></ul><ul><li>Different Political Groups </li></ul><ul><li>Different National Policies </li></ul>
  10. 10. Smith’s Theory of Absolute Differences in Costs Country Commodity X Commodity X The division of labor at international level requires absolute differences in costs and every country should specialize in the production of that commodity which it can produce more cheaply than others. A 10 5 B 5 10
  11. 11. Ricardo’s Theory of Comparative Differences in Costs: Assumptions <ul><li>Each country will specialize in the production of those commodities in which it has greatest advantage or the least comparative disadvantage . </li></ul><ul><li>There are only two countries </li></ul><ul><li>There are only two commodities produced </li></ul><ul><li>Similar tastes in both countries </li></ul><ul><li>Labour is the only factor of production </li></ul><ul><li>Supply of labour is unchanged </li></ul><ul><li>All units of labour is homogenous </li></ul><ul><li>Prices of two commodities are determined by labour cost i.e. the no of labour unit employed to produce each </li></ul>
  12. 12. Assumptions contd… <ul><li>Commodities are produced under law of constant costs or returns </li></ul><ul><li>Technological knowledge is unchanged </li></ul><ul><li>Trade takes place on the basis of barter system </li></ul><ul><li>Factors of production are perfectly mobile within each country but perfectly immobile between countries </li></ul><ul><li>Free trade between both countries, there being no trade barriers in the movements of two commodities </li></ul><ul><li>No transportation costs are involved </li></ul><ul><li>All factors are fully employed </li></ul><ul><li>International market is perfect </li></ul>
  13. 13. Theory contd.. Country Wine Cloth England 120 100 Portugal 80 90
  14. 14. Domestic Exchange Ratio England Portugal Wine 120 : 100 Cloth 1:1.2 Wine 80 : 90 Cloth 1:0.89 Cloth 100 : 120 wine 1:0.83 Cloth 90: 80 Wine 1:1.13
  15. 15. Criticism <ul><li>Unrealistic assumption of Labour Cost </li></ul><ul><li>No similar tastes </li></ul><ul><li>Assumption of Fixed Proportions </li></ul><ul><li>Unrealistic assumption of constant costs </li></ul><ul><li>Ignores Transportation Costs </li></ul><ul><li>Factors not fully mobile internally </li></ul><ul><li>Two country two commodity model unrealistic </li></ul><ul><li>Unrealistic assumption of free trade </li></ul><ul><li>Unrealistic assumption of full employment </li></ul><ul><li>Neglects the role of technology </li></ul>
  16. 16. Haberler’s Theory of Opportunity Costs <ul><li>OC theory says that if a country can produce either commodity x or y the OC of commodity X is the amount of the other commodity Y that must be given up in order to get one additional unit of commodity X. Thus the exchange ratio is expressed in terms of their OC . </li></ul><ul><li>There are only two countries </li></ul><ul><li>Each country can produce two commodities </li></ul><ul><li>Each country possess 2 factors of production L,K </li></ul><ul><li>Perfect competition in both factor and commodity market </li></ul><ul><li>P of each commodity equals its marginal money costs </li></ul><ul><li>P of each factor equals its MVP in each employment </li></ul>
  17. 17. Opportunity Costs……. <ul><li>All factors are fully employed </li></ul><ul><li>Supply of each factor is fixed </li></ul><ul><li>Factors are immobile between countries </li></ul><ul><li>Factors are mobile within countries </li></ul><ul><li>Technological knowledge is unchanged </li></ul><ul><li>Trade between two countries is free and unrestricted </li></ul>
  18. 18. Opportunity Costs……. <ul><li>Trade under constant OC : If the amt of Y required to be given up to get additional qt of X remain constant PPC would be straight line and it would indicate constant OC </li></ul><ul><li>Trade under increasing OC : If more amt of Y required to be given up to get additional qt of X PPC would be concave to the origin and it would indicate increasing OC </li></ul><ul><li>Trade under decreasing OC : If in order to get additional qt of X the less amt of Y is required to be given up PPC would be convex to the origin and it would indicate decreasing OC </li></ul>