Business Environment Assignment 2 BTEC Nguyen Huu Phong 2017

Contents
I/ Introduction

2

II/ Content

3

Task 3.1 Explain how market structures determine

3

the pricing and output decision of businesses
Task 3.2 Illustrate the way in which market forces

11

shape organizational responses using a range of examples
Task 3.3 Judge how the business and cultural

15

environments shape the behavior of a selected organization
Internal environment
External environment
Task 4.1 Discuss the significance of international trade

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to a business organization

Task 4.2 Analyze the impact of global factors

37

on a Vietnamese business organization
Task 4.3 Evaluate the impacts of one of the policies

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of the Asia on Vietnamese business organization
III/ Conclusion

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References

52

1


I/ Introduction
Intimex Group
According to Intimex (2016) Intimex Joint Stock Company or as known as Intimex
Group was officially established in 2006 after being equitized from a state-owned
company founded in 1995 - Ho Chi Minh Branch of Intimex Import - Export Company.
Since 2011, the company’s name changed to Intimex Group Joint Stock Company.

After 10 years, Intimex Group has developed significantly and become one of the most
prestigious brands in Vietnam specializing in: agricultural products processing and

exportation (green coffee beans, pepper, rice, cashew nuts, etc.); frozen food and steel
importation and distribution; supermarket and trade center services; construction
materials manufacturing.

Intimex Group also expanded our trading worldwide to most of the world’s big markets,
including Europe, America, USA, Africa, Australia, Middle East, China, Japan, Korea,
India, and ASEAN.

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By analyzing and discussing about Intimex Group, this report is going to figure out how
the business environment affects a company’s decisions of producing goods and pricing
strategies.
II/ Content
3.1 Explain how market structures determine the pricing and output decision of
businesses
The market structures are the terms describe the producer behavior and supplier
behavior. The economists based on the level of competitive or the level of monopoly to
separate the market into 4 structures: Perfect competition, monopolistic competition,
oligopoly and monopoly. Each different structure will assesses the status of the target
markets base on the different criteria, it could be about the number of supplier and
consumer in the market, the hindering of entry or exit in the market, the direction of
price decision to optimize profits, output decision, the power market, shot-run and longrun equilibrium.

Table 3.1 Characteristics of four types of market structures

Number of

Perfect

Monopolistic

Oligopoly

Monopoly

competition

competition

Many

Many

Few

One

Freely

Easy

Difficult

Very difficult

firms
Barriers to
entry or exit

Price decision

or impossible
Not important

Very important

Lower normal

Not important

Same

Sam and

Same and

No substitutes

different

different

Yes

High

to maximize
profit
Product

Market power

None

3

Absolute


Price taker
Short-run

MR = MC

MR = MC

MR = MC

MR = MC

P = ATC min

P = ATC

Nash

Positive

Profit = zero

equilibrium

equilibrium
Long-run
equilibrium

(Sources: Author)


Perfect competition
Perfect competition is the term describe the market has many competitors, freely
in entry or exit the market and do not have the market power. Because of many
consumers and many suppliers and the indifferences between the goods offered,
so consumers and suppliers are price taker – takes the prices as given. The
products in perfect competition also are the agriculture goods. In the perfect
competition has MR (Marginal revenue) = P (Price) = D (Demand). We can also
base on the change of MR and MC (Marginal cost) to decide increase or reduce
Q (Quantity). If MR > MC, we should increase Q to raise profit because each
item can get more profit than the cost. If MR < MC, we should reduce Q to raise
profit because if we produce more goods it would be loss in MC of each one. If
MC = MR, the business shouldn’t change Q because the profit get maximize at
this point. If we change Q when MC = MR, it would be lower profit.

4


(Sources: Lecture)

Another example:

(Sources: Lecture)

You can see at the chart above, when P1 move the P2 then the MR will change to
MR2, and MC is also the same, Q1 will move to Q2 to get the MC = MR.

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In business, some different stages company has to decide to shutdown or exit the
market. Shutdown is the short-run decision not to produce anything because of
market conditions, but still pay for FC (Fixed cost). Exit is long-run decision to
leave the market when business see that’s hard or impossible to get profit from
this market in the period of time, and don’t have to pay any cost. So when we
should shutdown or exit the market? We have the cost of shutting down is
revenue loss = TR, and benefit of shutting down is savings cost = VC (but still
pay FC). So we should shutdown if TR < VC, then se divide both of them by Q:
TR/Q < VC/Q. The last result is P < AVC (Average variable cost) when we
should shutdown. When we should exit the market? We have the cost of exiting
the market is revenue loss = TR, and benefit of exiting the market is cost savings
= TC (includes the FC in long run). So If TR < VC, then we divide both sides by
Q, we have P < ATC (Average total cost) is the time we should exit the market,
and enter the market when P > ATC. The short-run equilibrium of business in
perfect competition is get the MR = MC to maximize the profits. When the
process of entry or exit is complete-remaining firms earn zero economic profit is
the time we get the long-run equilibrium. When P = ATC, business get zero
economic profit. The MC will intersects ATC at the minimum ATC. So the longrun equilibrium in perfect competition is P = ATC min.


Monopoly

A monopoly is a company that is the sole seller of a target product without any
substitutes. A monopoly firm, has market power, is the price maker which can
directly influence the price of product in the market. In monopoly market,
business very difficult or impossible to entry or exit because it’s have no
substitutes. There’s also the government business in monopoly like electricity.
And monopoly gets the maximize profits as the same of perfect competition: MR
= MC. Because of the price maker, monopolist can change the prices effectly to
get the maximize profits. When monopolist want to increasing Q has 2 effects on
revenue: Output effect (higher output raises on revenue) and price effect (lower
price reduces revenue). For the practical examples in life, when you produce
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more goods to the market it become more easy to get one, so you have to reduce
the prices of product to stimulate the demands of consumption. MR could be
negative if the price effect overwhelms the output effect. Because of the pricing
advantages, monopolist also set the highest price that consumers are willing to
pay for the quantity they want to provide. With the way the bridge slopes down,
each level of the production associated with a single price, normally the
monopolist always want to sell at high prices and large output. However, because
of the way the bridge slopes down, necessary home exclusively determine the
price the higher the lower output and sales just want to sell more products, the
price is low. Monopolist cannot increases the price and does not reduce output.
Therefore, the shape of the road slopes down requirements limiting the power of
the monopolies. The monolist’s profit equal has been calculate by: ( P – ATC ) *
Q. Short-run equilibrium is to charges the same price (Pm) to all buyers.

(Sources: Lecture)


Monopolistic competition

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Monopolistic competition is the market in which each business supply to the
market a type of product, or a brand has the different in quality, packaging or
reputation and each business exclusive with its brand. In monopolistic
competition, there are many sellers and buyers, and have many substitutes.
Power market has been limited, and no barriers to entry or exit the market. The
principal items in this market are daily products such as shampoo, toothpaste,
student products, drug, films...Every business has a little market powers, can
control the price of their products, showing that the supply line down towards to
the right. The demand line in monopolistic competition has the different with the
monopoly is the elasticity at the different point in demand line. There are many
small businesses in competitive markets monopolies and business products are
products have the ability to replace highly, but not completely replace so the
product demand line of the monopolistic competition more elastic to the
monopoly, but is not completely elastic like perfect competition. Because of the
product differences, so there can’t be only one price for all the products. It’s a
group of price in monopolistic competition, but the distance of each price not
really high. The long-run equilibrium in monopolistic competition is get the
point that P = ATC and profit = zero then business get the markup.

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(Sources: Lecture)


Oligopoly
In Oligopoly, there are only a few seller offer similar or identical products, and
difficult to entry or exit the oligopoly market because there’s not many
substitutes. The most important in oligopoly is the pricing strategy in which the
business catches the pricing trend of another and set the strategy to get the best
profit with any pricing decisions of competitors. Nash equilibrium defines as a
situation economic participants interacting with one another each choose their
best strategy given the strategies that all the others have chosen. For example to
support the Nash equilibrium called the “fare wars” game. We have 2 players
American Airlines and United Airlines, there is a choice to cut fares by 50% or
leave fares alone. There are 3 case can happend. If both airlines cut fares, each
airline’s profit = $400 million. If neither airline cuts fares, each airline’s profit =
$600 million. If only one airline cuts its fares, its profit = $800 million the other
airline’s profits = $200 million. Let’s see the Nash equilibrium in this situation.

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(Sources: Lecture)

In the case of American Airlines, we can see that it will get the best profit no matter
what’s the competitor choosen is cut fares. And it’s the same with United Airlines when
they decides to cut fares. So in this case, Nash equilibrium is both firm will cut fares.

Intimex is the ex-import raw agriculture goods corporation, so the market structure of
Intimex is perfect competition. Because of the freely to entry and exit market, so the
market competitors changed rapidly, it can affect to the pricing and production of
business. Intimex should regularly updated the information about the entry and exit of
the target product market and the demands of consumption to set the price and
production decision effectively. Otherwise, Intimex should consider the profitable of the

target product then decides to keep producing or shutdown or exit the target product
market. Based on the MR and MC of the target market to set the right strategy, If MR >
MC, then decides to increase the quantity production of target market to get more profit.
If MR < MC, then decides to reduces the quantity to minimize the loss of MC. And set
the reasonable strategy to get MR = MC to maximize the profit.

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The advantage of Intimex is the diversity of import and export commodities, so Intimex
has multiple sources of revenue from different markets, from which can change the
different strategies for different items to avoid instability of a certain market. For
example, if the market of 1 items were fluctuating sharply, without compromising too
much with the business activities of the company. For example, if the rice export market
has negative conversion, one of the opponents successfully transplant new rice varieties
for high yield and good quality will affect the quantity of exported rice stitch of Intimex
to other countries because Vietnam is the top 3 country has largest rice exporter and
Intimex is one of the influential group for agricultural commodities such as rice and
coffee. But the coffee market in Vietnam tend to grow quite rapidly, Intimex growing
again expressed the position as well as get more profit in coffee market.

The disadvantage of the domestic market is also from the diversification of products.
Because there are too many markets, so it’s will be hard to maximize the profits from the
target products because the changes of market come very slowly without the
breakthrough, so it’s hard to detect. And the distribution of resources as well as reviews
of the market is also one of the obstacles of Intimex. The advice for Intimex is
expanding the department of management as well as research and development of
products to more easily capture the general situation of many different markets. Clearly
define the target goals for each market to set the reasonable strategies to maximize the
profits from each target commodities.

3.2 Illustrate the way in which market forces shape organizational responses using
a range of examples

Porter's fives forces is good model to analyse a particular industry. It includes the five
main factors that affect a particular industry:


Power of suppliers



Power of buyers



Competitive rivalry

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

Threats of substitutes



Threat of new entrants

(Source: BPP, 2009)

Power of suppliers
A manufacturing industry requires raw materials-including labor, the constituent parts
and the other inputs. This demands lead to the relationship the buyer-side provided
between the manufacturing industry and the supplier of the raw materials to manufacture
products. The weak world may have to accept the terms that business launched, thanks
to which the enterprises reduce costs and increase profits in the production, by contrast,
the large providers can cause pressure on the manufacturing industry in many ways,
such as the most recent selling price of raw materials to the san sharing part profit sector.
Intimex must maintain profitable relationships with suppliers. This make we know how
suppliers influence to Intimex businesses. The weak bargaining power of suppliers is
based on the following external factors:
There are many suppliers for Intimex

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The size of suppliers is small and medium
Intimex has many vendors and suppliers near as durable so it reduces the bargaining
power of suppliers. Because of the low forward integration it leads to reduce the power
of the suppliers, limit the supplier's control of Intimex's supply chain. The factors of
influence on the company even though they are large and medium sized
organizations. This component of the Five Forces analysis indicated that the ability to
negotiate with the provider is a low priority for Intimex. Furthermore, Intimex is great
and almost company the suppliers are small and medium companies, thereby increasing
their profits from Intimex is higher so they are both a source of passive.
Power of buyers
Customer power is influenced by customers for a particular industry. In general, when
the power of large customers, the customer relationship with the production will close to
what economists call exclusive buy-that is, the market has many suppliers but only one
buyer. In such market conditions, customers have the ability to impose the price. If the

client is strong, they can force the price must drop, causing the rate of profit of the
industry decline. There are very few exclusive phenomenon buy actually, but still often
exist in non-equilibrium relationship between a manufacturer and the buyer.
The customer is the most important factor for the success or survival of
Intimex. Because it is related to the survival of this factors should lead to strong
negotiating abilities of Intimex's consumer/buyer as follows:
Low switching costs
High access to product information
High availability of alternative
We know that customers have the ability to choose other institutions if they feel
uncomfortable. This is the strength of the likely impact of Intimex customers. Moreover,
consumers have sufficient information to buy or choose between Intimex's products and
competing products. In addition, customers will have the comparison about the price or

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the quality of Intimex and Intimex do competitors priced depends too much on customer
demand. Based on the elements of the Five Forces analysis, Intimex must ensure
customer satisfaction in order to maximize revenue.
Competitive rivalry
The intensity of competition is often described as devastating, strong, moderate, or
weak, depending on whether the airline's efforts to gain a competitive advantage.
Diversity of the opponent with the culture, the history and different philosophy makes
the business becomes unstable. There are growth companies do not follow the rules to
make the companies do not evaluate correctly, so the market situation, the
competitiveness is also unstable and tends to increase.
Trung Nguyen is one of the biggest competitor of Intimex. However, this element of the
analysis of Five Forces show that other factors to determine the influence of competitive
rivalry. The powerful forces of competition with Intimex:

High aggressiveness of organizations
Low switching costs
High number of organization
Most companies in oligopolistic markets is positive because they have to face many
competitors to ensure their profitability. Competitors are also powerful because
consumers can easily change from organizations to organizations which lead to lower
conversion costs. This component of the Five Forces analysis shows Intimex faces
strong competition. Competition is one of the most pressing concerns of it.
Threats of substitutes
In Porter's model, the term "alternative products" is referring to products in other
manufacturing industries. According to the Economist, alternative risk appears when the
demand for a product is affected by the change in the price of a commodity
instead. Elasticity of demand as the price of a product subject to the impact of price
changes in goods instead. The more the goods replaced then needs more products of

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high elasticity (that is only a small change in product prices also lead to large changes in
demand products) because at the moment the buyer has many choices. So, the existence
of alternative goods do limit the ability to increase the price of the business in a certain
industry.
Intimex's products can be replaced, depending on the customer's decision. There are
elements of the powerful threat of substitute products for Intimex:
High performance of substitutes
Low switching costs
High availability of substitutes
All the products of Intimex a replacement. Moreover, Intimex customers can easily
switch to an alternative, it is appropriate and reasonable. In addition, most of the
alternative products are available in stock and other distributions. On elements of the

Five Forces analysis, external factors make strong threats replace a priority issue facing
Intimex.
Threat of new entrants
Not only the new current creates the risk of threatening the businesses in an industry,
that the ability of new firms can join the industry also affect competition. In terms of
theory, any company can join or withdraw from the market, if exist "entrance" and
"gateway". Meanwhile, the profits of the industry will be negligible. But in fact, each of
the private sector to protect the high profit level of the unit were present in the market, at
the same time discouraging potential rivals to join in that market. These measures are
called barriers to accession.
Intimex should care for new companies to join its market. Elements of the force analysis
of the year shows the impact of those new or new organization of coffee export
sector. The external factors provide the threat of new ones for Intimex:
Low switching costs

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Moderate customer loyalty
High cost of brand development
Likewise with the threat of substitutes, the new company in this market make for more
alternative products to customers. Therefore, it increases the opportunity for clients to
give to Intimex's products, used products instead. On the other hand, Intimex has a
corresponding level of protection from new people and clients may attempt to use the
new product of the new organization to have the comparison. Intimex is one of the
strongest brands on the market to compete with Intimex's new organization will face the
high number of capital to grow the brand to it is the competitive advantage of Intimex.
3.3 Judge how the business and cultural environments shape the behavior of a
selected organization
Internal environment

Internal environmental factors are events that occur within an organization. Generally
speaking, internal environmental factors are easier to control than external
environmental factors. The internal environment consists: human resources, company
image and brand equity, and other factors (physical assets and facilities, R&D and
technological capabilities, marketing resources, financial resources).
To begin with, effectively using and controlling human resources, or else the labor force
of a company, may change a whole picture of business. Choosing the right groups of
employees to finish suitable tasks would boost up the productivity.
Besides, building a strong company image and brand equity creates a better environment
for company to expand its business. With a trustable background and long-term mission,
any company would have a chance to reach more customers and eventually develop.
About other factors, controlling the financial stage of company is important to maintain
the whole organization’s operation, not to mention the importance of technology, or how
a company do R&D would affect the final results. All of the internal factors takes a
important role on the way to a successful business and should be carefully considered.
Since the internal environment factors are much easier to deal with than the external
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environment’s, every company should apply the right strategies to solve problems if
needed.
External environment
External environment includes all factors outside the organization which provide
opportunities or pose threats to the organization. It is considered as uncontrollable
factors, and it mainly consists of micro and macro environment.
Micro environment

In a study of Kotler and Armstrong (2016) the microenvironment is explained that:

“The actors close to the company that affect its ability to serve its customers – the

company, suppliers, marketing intermediaries, customer markets, competitors, and
publics.”

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To be clearer, microenvironment is a combination of the actors which are closed to the
company, and they do have an ability to impact the marketing decisions.

The company

The company itself is considered as an internal environment that affects the marketing
management first. Beside marketing management, other company groups are divided
into different groups namely top management, finance, research and development
(R&D), purchasing, operations, human resources (HR), and accounting (Kotler and
Armstrong, 2016). Each of these groups hold different positions in designing marketing
plans. While top management is who sets the whole company’s mission or objectives
and policies, marketing managers are who decide the suitable strategies without making
any illegal actions.

Suppliers

Kotler and Armstrong (2016) emphasize suppliers in microenvironment that:

“Suppliers form an important link in the company’s overall customer value delivery
network. They provide the resources needed by the company to produce its goods and
services.”

Since most of companies have strong bonds with the suppliers in order to both side gain
benefits, the marketing managers should take a careful step before making any big

decisions regarding to suppliers. Each of supplies problems or matters could affect the

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marketing strategies. For instance, if the suppliers warn that they would rise the supply
costs, it leads to the result that the company would receive less profits from sales
volume.

Marketing intermediaries

Marketing intermediaries are supposed to help the company to sell, promote and
distribute products to customer. There are resellers, physical distribution firms,
marketing services agencies, and financial intermediaries in marketing intermediaries
(Kotler and Armstrong, 2016). First, resellers are channel firms that find customers or
make sales such as wholesalers and retailers. Second, physical distribution firms stock
and move goods and products to many different destinations. Next, marketing services
agencies are those who help the company to target and promote its products to the right
markets. The next one is financial intermediaries which include banks, insurance
companies, and other businesses that prevent the risks concerning the buying and selling
of products.

Let’s take Pepsi, a popular soft drink brand, as an example. In KFC, people can only
enjoy Pepsi as coke, not Coca Cola. There is an exclusive contract between KFC and
Pepsi in order to promote Pepsi to customers who come to KFC. Those customers who
regularly come to KFC would eventually have a good thinking about Pepsi through time,
and it may create their habit of choosing Pepsi as a beverage later. In this case, KFC is a
marketing intermediaries which Pepsi chooses to target based on the same range of
customers of the 2 companies.
Competitors

Competitors are considered as the actor that helps a company to improve and enhance its
goods and services. To be successful, a company have to bring greater value and

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benefits to customers than other competitors do (Kotler and Armstrong, 2016). By
researching and understanding the competitors of company, marketing managers can
make a right marketing strategies to boost company’s business.
Publics
According to Kotler and Armstrong (2016) “A public is considered as any group that has
actual potential interest in or impact on an organization’s ability to achieve its
objectives.” There are 7 publics groups in total, which are: financial publics (banks,
investment analysts, stockholders), media publics (carry news, features, and other
content such as: television, newspapers, magazines,…), government publics (the
company should follow the rules and policies: product safety, truth in advertising,…),
citizen-action

publics

(environmental

groups,

minority

groups,

consumer

organizations,…), local publics (neighborhood residents and community organizations),
general public (public’s image of the company), and the last one is internal publics
(workers, managers, volunteers, board of directors,…).

Every groups may cause issues to a company’s marketing strategies, that is why
marketing managers should carefully analyze the impact of each group. To prevent any
bad impacts and boost up the good effects, Intimex should make sure to cooperate with
media publics to carry any new interesting deals to potential customers under legal
government policies, try to stop any crisis happened in order to eliminate any bad
conflicts about the company, control the company’s image by improving skills and
attitudes of employees, and do not forget to solve any arguments.
Customers
All the revenue and profits come from customers, so there is no wonder why customers
are the most important actors in the microenvironment. There are 5 types of customer
markets that a company might target any or all of them, which are: consumer markets,
business markets, reseller markets, government markets, and international markets
(Kotler and Armstrong, 2016).

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Macro environment
A macro environment is the condition that exists in the economy as a whole, rather than
in a particular sector or region. In general, the macro environment includes trends
in gross domestic product (GDP), inflation, employment, spending, and monetary and
fiscal policy. The macro environment is closely linked to the general business cycle as
opposed to the performance of an individual business sector. In business, macro
environment is divided into 2 broad groups: economic and non-economic.
Economic environment
There are 3 important factors about economic environment that would affect business of

company which are: economic conditions, economic policies, and economic systems.
Economic conditions of a company is the stage of development of a whole country’s
economy, economic resources, the level of income, the distribution of income and
assets,… These important determinants are vital to business strategies of a company.
While the level of income may decide how affordable customers are to products on the
marketplace, the stage of development of a country’s economy holds a big role since all
companies would make strategies depending on it. If the stage of development is stable,
companies would invest more to the economy, or else they would withdraw out of the
market.
Economic policies also affect a company’s decisions in business. All of business should
be run under government policy, and it brings both advantages and disadvantages to
company. For example, a restrictive import policy may greatly help the import
competing industries, but somehow it would slow down Intimex’s business if Intimex
could not afford the requirements.
Economic system is one of the most important factors that would affect a company. The
greatest economic system is the free market economy. In the free and open market
economy, companies have more chances to expand their businesses to the world, which
create more profits and to build the country’s economy.
The economic environment can offer both opportunities and threats. It consists of

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economic factors that affect consumer purchasing power and spending patterns. (Kotler
and Armstrong, 2016)
The Vietnam economy is developing through time. According to Focus Economics
(2016), the GDP per capita of Vietnam eventually raised from 1,373 to 2,036 in the
period of 5 years from 2011 to 2015. It proves that the living standard of Vietnam has
been much enhanced and improved in recent years.
Non-economic environment

Non-economic environment consists of regulatory, socio-cultural, demographic,
technological, and political environment.
Cultural environment
In a study of Kotler and Armstrong (2016) cultural environment is noted that:
“Institutions and other forces that affect society’s basic values, perceptions, preferences,
and behaviors.”
The importance of cultures in businesses is nothing to be argued. People who grows up
in different places would have different beliefs, basics, and points of view. The societies
affect the way how people think and make decisions. When deciding to enter the new
marketplaces or another countries, the company must do R&D about the cultural in
order to make clear the right marketing strategies for the right target customers.

Demographic environment
Demography is a study of human populations in terms of size, density, location, age,
gender, race, occupation, and other statistics. (Kotler and Armstrong, 2016)
Vietnam population pyramid

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Indexmundi, 2016

In the report of Indexmundi (2016) the age structure of Vietnam can be divided in details
like below:

0-14 years: 23.84%
15-24 years: 16.69%
25-54 years: 45.22%
55-64 years: 8.24%
65 years and over: 6.01% (2016 est.)

Since people in the range of 15-24 and 25-54 years old are the most potential customers

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to every companies, it brings out the fact that Vietnam is now considered as a great and
open marketplace to invest.
Technological environment
Nowadays, technology has been widely applied in business to access the maximum
profits of companies. Without high technology, the supply chain of Intimex would be
slow down or even could not meet the strict requirements of exporting.
Political environment
In a book of Kotler and Armstrong (2016) political environment is defined that:

“The political environment consists of laws, government agencies, and pressure groups
that influence and limit various organizations and individuals in a given society.”

The companies always seek for free-market to effectively invest in business and
compete with the competitors in order to maximize the profits. However, it can not be
denied that any businesses or systems only work best under some laws and regulation.
That is the reason why companies should do business following laws published by the
government to help the competition market to be equal and fair.

4.1 Discuss the significance of international trade to a business organization
International trade
International trade is the exchange of goods and services between countries. This form
of commerce to promote the entire world economy, including the price, supply and
demand, the impact and are impacted by global events. For example, political change in
Asia could lead to an increase in labor costs, thus increasing the cost of production for

an American shoe company based in Malaysia, leading to a price increase shoes tennis at

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the shopping center where you are. In contrast, the reduction in labor costs will make
your prices cheaper shoes. Global trade provides opportunities for consumers and the
country is exposed to goods and services that their country does not have. Almost all
kinds of products you want are found on the international market: food, clothing, spare
parts, oil, jewelry, wine, stocks, currencies and water. The service is also traded as
tourism, banking, consulting and transportation. When a product is marketed world
called exports, and when a product is purchased from the world market is called import.
Imports and exports are recorded into current account balance of payments of a country.
Advantages
International trade allows rich countries to use their resources more efficient, whether
labor, technology and capital. The country has the advantage of the assets and various
natural resources (land, labor, capital and technology), for this reason, some countries
have the ability to produce a certain number of goods with the same quality products of
other countries, but at a lower cost, so price is also cheaper. If a country can not
efficiently produce a commodity, it can be purchased from a different country. This is
called specialization in international trade.
International trade will not only increase global production efficiency but also allows
countries to participate in the global economy, encouraging opportunities for foreign
direct investment (FDI), which is the amount that the personal investment in companies
and other assets abroad. In theory, so that the economy can grow more efficiently and
easily become a competitive economy.
For recipient countries, they receive foreign currency as well as the know-how and
technology through FDI, thereby enhancing labor skills, and in theory, lead to growth in
the total value of gross domestic product. For investors, FDI to help them grow wide and
firm, synonymous with increased sales.

International trade is seen as two conflicting views about the level of control in the trade:
free trade and protection policies. The theory of free trade is a simpler theory of two
theories: economic liberalism (laissez-faire) said that there should be no restriction on
trade. The self-adjusting supply and demand on a global scale will ensure production
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