Market Trade History and Rationale
Trade history is based on Ricardian theory of international trading which assumes that goods usually form the basis of international trade. But this theory has since then been expanded by many researchers to necessitate the inclusion of intermediate goods such as fuel and machinery (Bowen, 1998, p.12).By the inclusion of other goods, markets have become more competitive than before, hence leading to reduced prices of goods.
The current country partners in the Australian and the U.S markets are; China, Japan and New Zealand. These countries have played a significant role in developing the two markets.
In the past many countries did not consider international marketing but preferred internal trading, since it was less involved and cheap. Nowadays many countries have partnered hence going further to form trading blocs, which are being considered as the basic way of trading. These trading blocs have enabled many economies to develop from shackles to the new heights of today. These trading blocs have of late had a positive implication in international politics, which is a good trend. The emergence of trade blocs started way back in 1834 where the German Custom Union was formed (Nigel, 2007, p.36). The other trading blocs that have since then emerged are;
- European Free Trade Association
- European Union
- North American Free Trade Association
- East Africa Economic Community
- Economic Community of West African States
- Asia Pacific Economic Cooperation
In these trading regions and other trade markets there are barriers and restrictions to countries which want to venture in such markets. Trade barriers or restrictions may come inform of tariffs, subsidies, embargos, import licenses, export licenses and voluntary export restraints (Nigel, 2007, p.36). These types of restrictions have an overall increase in the cost of doing business and product prices go up.
Competition and Cost of Market Entry
The introduction of international markets has led to massive competition of markets, thus forcing many countries to introduce different types of products which can easily penetrate these markets (Lymbersky, 2008, p.45). It is important to note that this trading system has also caused imperfect competition, which is normally called monopolistic competition. Since the cropping up of this type of competition different types of models have been introduced in order to counter the same, an example of these models is the use of this equation: Q = S x [1/n – b x (P – P)].This model helps to determine the number of competitors in the market and the prices of the products being offered.
Countries which engage in market entry usually have a cost issue to focus on, since such entries have their cost implications (Lymbersky, 2008, p.45). These costs normally occur due to the expanded markets and the logistical issues. There are also risks involved in market entry, for example a partner country can change its import policy or tariffs without informing the other partner in the market, and this will lead to losses being incurred. Countries which want to engage in market entry are normally required to use a risk matrix so as to assess risks involved in such trade. Risk assessment should include the calculation of single loss expectancy; this is the loss which occurs due to a single security occurrence.
Product support needs
In international trade markets, it is always prudent for countries to consider the products they are offering in these types of markets; that means providing a high quality and improved product to the market. Product life cycle should also be determined; this enables the entrepreneur to determine the amount of money to use while marketing (Bowen, 1998, p.45). It is also important to take into consideration the product packaging and branding, if the two are done properly marketing becomes easier.
References
- Bowen, H.P (1998). Applied International Trade Analysis. London: Macmillan Press.
- Lymbersky, C. (2008). Market Entry Strategies: Hamburg, Management Laboratory Press.
- Nigel, B. (2007).Marketing Research: Tools and Techniques. Oxford, Oxford University Press.