Unit 7
What we will cover:
Balance of Trade and Payments
Why import? Why export? Barriers to trade, government assistance to international trade, IT and international trade
EU institutes - who they are and what they do
EU policies - what they are and what they do.
Interest groups, Directives and regulations and SEM
Transnational companies, reasons for them, advantages and disadvantages. Global Marketing
Balance of Trade and Payments
Exports: Money comes into the country
Imports : Money goes out of the country
Visible : Goods
Invisible : Services
Exam Papers
2011 SQ5 a
2006 SQ10 a
Balance of Trade and Payments
Balance of Trade : The difference in the value of goods Ireland exports and imports
VISIBLE exports - VISIBLE imports = balance of trade surplus (+) or Deficit (-)
Balance of Payment : The difference in the value of goods and services Ireland exports and imports
TOTAL (Visible + Invisible) exports - TOTAL (Visible + Invisible) imports = balance of payment surplus (+) or Deficit (-)
Example
See book p430
Exam Papers
2011 SQ5 b
2006 SQ10 b note: total - invisible = visible
2013 Q3 a
International Trade
Why Import
- More choice for consumers - Brandy Melville , Hot topic
- Lack of natural resources - oil
- Unsuitable climate - bananas
- Lack of skill - making cars
Why Export / opportunitiesp432
- Increase sales - much bigger market
- lower costs - economies of scale
- Diversification - spread the risk
- Survival - Ireland has a limited market (small country)
Challengesp438
·
Import
and export duty – Tariffs
·
Distribution
·
Establishing
a new market – new marketing mix
·
Communication
–Language
·
Time
difference
Exam papers
2013 Q3 b
Barriers to Trade
- Tariff
- Quota
- Embargo
- Subsidy
Read book p 434
Exam Papers
2010 SQ8
2012 Q3 b
Government assistance with International trade
Provide
- grants to help export
- training courses to assist in exporting
- assistance with market research, documentation, labelling and so on
to businesses in Ireland that wish to export their products.
- Department of Enterprise, Trade and Employment
They give advice on legalities and regulations for exporting. They also provide export credit insurance, where the Irish Government will pay the exporter if the foreign customer doesn't
Irish diplomatic services help promote Ireland abroad. They lobby foreign governments to trade with Irish companies. They help to organise trade fairs abroad.
Role / Benefits of ICT in International trade
E-commerce
WWW
E-mail
WWW
Video Conferencing
Read book p440
Exam papers 2012 Q3 a
Changes in International Trade
Read book p435-436
Exam papers
2002 SQ9
2008 SQ4
2012 SQ9
2007 SQ6
European Union
EU Institutes
European Commission
Made up of commissioners who are given different responsibilities. Each commissioner represents interests of the EU
Think up new ideas for laws to benefit the 27 countries in the EU.Once such law drafted by the commission was the law for minimum wage
They supervise the EU to make sure everyone obeys EU laws. They are responsible for making sure EU policies are carried out properly.
They make the initial decision as to how much money each country should get from the EU. Each of the 27 countries are very reliant on this financial support.
European Parliament
Elected by the citizens of the EU to represents their interests in decision making. There are over 700 members in Parliament, known as MEPs. Each member represents interests of the EU
The Parliament must consider all laws proposed by the commission. They discuss the advantages and disadvantages of each law. If the Parliament do not agree with the proposal it will not become law. (Co-decision)
It supervises the Council of the EU. It calls the president of the Council to come before Parliament to answer their questions.
The Parliament has the power together with the council of the EU to approve of or reject the entire EU budget.
Council of the European Union / ministers
The most important decision making body in the EU. Made up of relevant ministers from each EU country (changes according to topic). Each minister represents interests of their own country
The council pass EU laws. Once the Parliament agree (co-decision) then the council will discuss the law and vote to pass or reject. This is the final decision on the law. They also have the power to reject the EU budget
The council officially signs agreements on behalf of the EU. These agreements often cover areas such as fisheries, science, technology and transport.
They allow member states work together in the areas of foreign policy, security and defence
European Court of Auditors
Responsible for EU finance. Each auditor represents interests of the EU
it is the job of the Auditors to check that EU funds, which come from taxpayers money are properly collected and spent legally, economically and for the intended purpose
It can audit any country or organisation that receive EU funding to make sure the money was not wasted. They may carry out on the spot checks.
Based on their findings each year they draw up a report for the commission
Court of Justice
They apply laws to all EU countries. Each judge represents interests of the EU
They make sure each country understands the laws and how they apply to their country. They make sure different countries do not have different rulings
If a country breaks an EU law they go before the court. They also try to settle disputes between EU countries, institutions, citizens and businesses
If a member state or institution believe that a particular EU law is illegal they may go to the court to annul it.
Exam Questions
2010 SQ4
2009 SQ10
2004 SQ8
2005 Q3 b
EU Decision Making
The
European Commission is responsible for drawing up proposals for new European Legislation or
changes to existing legislation. These
proposals must be in the best interest of the union
Proposals are sent to the European Parliament for
discussion. If the Members of the
European Parliament (MEP) agree and approve the proposal will be passed
on. However, they can ask commission to
amend proposals before passing them on. They can also decide if proposal should be rejected (Co-decision).
The Council of Ministers are the most powerful
institution in the EU. The council
representing their country of origin have the power to vote and adopt
decisions. They must always consider the
views of Parliament .
In some decisions (co-decisions)
Parliament does not merely give its opinions but it shares legislative power
equally with Council.
The
commission
together with the Court of Justice is responsible for making sure EU law is
properly applied in all member states.
If it finds that an EU country is not applying an EU law they take steps
to put the situation right.
Eu Policies
Programmes designed to help categories of people in the EU.
Common Agriculture Policy
To give all farmers in the EU a decent standard of living
Farmers are allowed sell products anywhere in EU without any barriers or restrictions. This gives Irish farmers a much bigger market
CAP established the single payment scheme which tops up the incomes of farmers to help them survive. Farmers have to reach EU standards to receive this. This ensures farmers in Ireland remains viable. They also provide provisions for farmers in emergency situations, such as natural disasters or outbreaks of animal disease.
Spends money on research programmes to come up with new ways to improve farming and improve the environment.
CAP adds tariff on non-EU food imported to make it dearer and encourage consumers to buy EU.
See book page 454 for more details
Common Fishery Policy
To give all those in the EU fishing industry a decent standard of living and to conserve fish stocks
The CFP provides grants to buy better boats and to modernise fishing technology.
The CFP pays for marketing campaigns to encourage consumers to buy more fish
Every country has a quota of fish it can catch each year. The CFP sets limits on the size of the holes in nets to stop immature fish being caught. They also help patrol the waters to prevent illegal fishing
See book p455
EU Social Charter
To improve working and living conditions for EU citizens
EU citizens have the right to work in any EU country they want and be treated the same as nationals of that country.
All EU countries must set a minimum wage that will give workers and their families a decent standard of living.
EU workers can work only a maximum of 48 hours a week. They also have the right to public holidays with pay and four weeks paid annual holiday.
EU workers have the right to be consulted by the employer and to take part in decision making in their company. They must be kept informed regularly by their boss of the financial situation the business is in.
See book p456
Competition Policy
Ensures EU consumers get quality products at reasonable prices
This is an illegal secret agreement between competitors to restrict competition. Businesses are not allowed to work together to rip off consumers by agreeing that they will all charge the same high price.
Businesses in a dominant position in the market cannot abuse their power by increasing prices or trying to stop new competitors from entering the market
They also ensure that enterprises cannot enjoy a monopoly position. This means they cannot be the only business selling a particular product. They must be open to competition.
They must seek and obtain permission from the European Commission to go ahead. Permission is denied if the commission believes that such a merger or takeover would be bad for competition.
See book 456
Exam Papers
2005 Q3 b (i)
2006 Qb b
Interest Groups
A group of people that come together to fight for a common goal
There are thousands of special interests in the EU including:
IBEC
ICTU
- IFA
Amnesty International
Special interest groups will phone, write to and meet with MEP's to try to persuade them to vote a certain way. They will send a petition to the European Parliament about an issue they feel strongly about in order to pressurise the MEP's into doing something about it.
They meet with commissioners and make them aware of the particular problems and issues that concern them. They want to influence Commission into changing laws in accordance with their needs. Therefore special interest groups sometimes initiate the ideas that eventually become law.
Many EU decisions are made in Brussels and in order to access decision makers special interest groups set up offices there. It facilitates regular quick access to the most influential people in the EU decision making process.
When a directive is passed by the council of ministers then all EU countries must accept it and obey the principles of the directive
All countries are given a date that they must implement and change their countries law to include the new Directive by.
Example
The WEEE (Waste Electrical and Electronic Equipment) Directive states that Irish retailers must allow customers to leave back their old WEEE for free when they buy new equipment from the shop.
EU Regulation
When a regulation is passed by the council of ministers it becomes directly applicable
It comes into force immediately and must be obeyed by all as soon as it is passed
Example
Regulation 261 /2004
Sets out the rules on compensation and assistance to airline passengers in the event of long delays to their flight cancellations or being denied boarding.
Exam Papers
2013 SQ 9
2007 SQ3
2008 Q3c
Single European Market
Read book p458 - 459
Exam papers
2009 Q3 a
Transnational
/ Multinational Companies / Global Companies
·
A company
with headquarters in one country and further branches around the world.
·
Known as
business giants.
·
They
bring new technology, job opportunities and competition to the Irish market.
Reasons for their Development
·
Increase
profits
·
Diversification
·
Eliminate
trading barriers
·
Advances
in technology
Advantages of TNC
- Create
jobs
- Bring
new technology
- Competition
- Pay
Tax
- Encourage
enterprise
Disadvantages of TNC
- They
may leave
- Too
much power
- Repatriate
profit
- Decisions
made abroad
Global
Marketing
·
Global
Customer Satisfaction
Meeting the needs of consumers around the world
·
One
single market
Focus on the similarities between people around the
world and try to satisfy the common needs and wants of people everywhere.
·
Global
Marketing Mix
Some companies use a STANDARISED MARKETING MIX(same mix in each country), for example
Coca Cola. Other companies change their mix in accordance with
culture, tastes etc. This is called an ADAPTED MARKETING MIX.
Global
Marketing Mix
Global
Product
·
Brand
Name
·
Mass
Production
·
Standardisation
Global
Price
How is price set:
·
The
income of consumers
·
Currency
used
·
Tax and Tariffs
·
Competition
·
Cost of
production and distribution
Global Place
·
Channel of
distribution
o Manufacture in the country
o Agents
o Local distributors
Global
Promotion
Global Advertising – may change
language
Global PR – Famous Celebrity
(Endorsement) Sponsor World Cup or Olympic games
Global Sales Promotions – Holiday
Competition
Global Personal Selling – global sales
representatives
The
importance of a global Marketing Mix
The business will want global customer
satisfaction.
·
To have
the right Global product
·
Uses Global pricing
·
Use an
effective Global promotion
·
In the Global place
