Theories of International Trade and Business Plan

Questions and Answers

According to the Comparative Advantage Theory, what should a country specialize in to gain a trade advantage?

Both products and services

In the Product Life Cycle Theory, the decline phase is usually when a product is introduced in its home country.

False

In a business plan, one of the elements is the __________ Plan.

Organizational

What does SWOT stand for in business analysis?

<p>Strengths, Weaknesses, Opportunities, Threats</p> Signup and view all the answers

Match the following pricing strategies with their descriptions:

<p>Premium Pricing = High quality, high price strategy effective in product introduction phases Penetration Pricing = Low initial cost to encourage product trial Skimming = High initial cost followed by gradual price reduction Economic Pricing = Low quality, low price strategy typically used by generic brands</p> Signup and view all the answers

Study Notes

Theories of International Trade

Comparative Advantage Theory: a country should specialize in products or services that it can provide more efficiently than other countries, leading to efficient production at a lower cost and more profit
Example: Brazil specializes in coffee production due to its climate and soil conditions, while India specializes in tea production, leading to mutual trade benefits

Product Life Cycle Theory

The product life cycle consists of four stages: introduction, growth, maturity, and decline
The curve represents sales in value or units along with time
The life cycle of a product is bell-shaped, with four stages:
1. Introduction: slow sales growth, heavy expenses, and no profits
2. Growth: rapid market acceptance, substantial profit improvement
3. Maturity: slowdown in sales growth, stabilized profits due to market acceptance and increased competition
4. Decline: sales show a downward drift, and profits decrease
Examples: American fast-food restaurants and soft-drink companies introducing products in new markets during the decline phase

Preparing a Business Plan

A business plan is a written document that describes the nature of the business, its goals and objectives, and how they will be achieved
Elements of a business plan:
1. Nature of the Business: detailed description of products and/or services, industry analysis, target market attractiveness, and competitor analysis
2. Goals and Objectives: short-term and long-term goals, measurable results, sales volume, profits, sales growth, and market share
3. Marketing Plan: identifying customers' unsatisfied needs, designing a product/service that satisfies those needs, competitive advantage, pricing strategy, and distribution strategy
4. Financial Plan: investment needed, estimated revenues, expenses, profit, cash start-up, and cash flow needs
5. Organizational Plan: legal form of ownership, organization chart, job descriptions, employee skills needed, and physical facilities

Additional Notes

SWOT Analysis: identifying a company's strengths, weaknesses, opportunities, and threats
Marketing Mix: the 4Ps (product, price, place, and promotion)
Pricing Strategies: premium pricing, penetration pricing, skimming, and economic pricing
Distribution Strategy: using intermediaries (distributors and wholesalers), and retailers to move products from producers to consumers