4. International trade

Free trade is trade between countries with the minimum of barriers. A fundamental belief of free trade is that it allows countries to fulfill their economic potential and to grow by increasing potential markets. The economist Adam Smith (1723-90) explored these ideas in his work The Wealth of Nations. A free trade philosophy replaced Mercantilism, which favoured overseas trade while imposing barriers on imports. The principles of free trade are essential for the development of globalization. Protectionism is an opposing philosophy which uses tariffs and quotas to protect domestic industry.

There are numerous arguments put forward in favour of free trade. Countries with small domestic markets can find other customers. Niche manufacturers can find larger markets and thus achieve economies of scale.

Free trade also encourages competition and provides consumers with choice.

Tariffs (taxes on imports), and quotas (limits on numbers) are two common protectionist tools. Bureaucracy and the placing of unfair or unreasonable obstacles in the way of foreign exporters is another common ploy.

Protectionism can seem like an attractive option when jobs and industries are under threat. Protectionism, it is argued, protects jobs, communities, and the traditional way of life. Unfortunately, it can also provoke retaliatory action from countries whose exports are blocked.

It is probably true that no country is 100% for free trade and that there are domestic industries which benefit from protection in one guise of the other. The EU and US regularly accuse each other of practising unfair competition by providing subsidies to farmers and the aeronautical industry. The favoured nation relationship which exists between European countries and some of their old colonies also frequently leads to friction and disputes with the US, such as the so-called 'banana war'.

Some believe that protectionism is legitimate in the following circumstances:

•to protect infant industries in developing countries from overseas competition.

• to protect domestic industries against aggressive policies, such as dumping. Dumping is selling goods in a foreign market at a price lower than their production cost. This can be a means of undercutting the local competition and forcing them out of the market.

• to give a breathing space to industries so that they can make necessary reforms and changes which will make them competitive internationally.

• when a country has a huge trade deficit because too many foreign goods are being purchased. Protectionism slows down the flight of capital overseas.

5. Marketing

The terms selling and marketing are sometimes used carelessly as interchangeable synonyms, but there are important differences. A sales-based approach starts with a product and involves finding customers who will buy it. By contrast, a marketing approach has the needs, wants and aspirations of customers as its starting point - all else flows from this. Marketing involves successfully identifying or anticipating the needs of customers. Satisfying customers may entail providing them with the right kind of products and services, at the right price, distributing them in the right way, with the right kind of customer care and after-sales service. So, while selling is an integral part of the marketing process, marketing encompasses much more.

What marketing involves is often called the Marketing Mix, and is expressed as the four Ps, or four Cs. The Marketing Mix is the blend of the following elements:

Product, Price, Place, Promotion.

Or we can define marketing from a customer's perspective with the four Cs, as follows: Customer value (this replaces Product in the four Ps), Cost to the customer (replaces Price), Convenience (replaces Place), Communication (replaces the one-way process suggested by Promotion).

A crucial part of the marketing process is to correctly identify the type of customer that you want to target. A product which aims at everyone is likely to satisfy nobody.

Socio-economic groupings which classify people from A-E according to their occupation are sometimes used in Britain. This would rank an Al as someone in the top management bracket, and an ordinary worker as a Cl. The ACORN system, based on where people live, provides a better profile of consumers.

ACORN (A classification of residential neighborhoods) has 39 neighborhood types, and is a more accurate way of profiling consumers. It is used in marketing research and for mail shots.

VALS (Values and life styles segmentation) classifies people by their values and how they live. For example, belongers are patriotic, stable, sentimental traditionalists who are content with their lives; societally conscious are mature, successful, mission-oriented people who like causes.

A further classification is the Family life cycle, which described people by the stage they are at in their family lives.

1 young singles

2 young couples no children

3 couples with a child under 6

4 couples with dependent children

5 older couples no children at home (empty nesters)

6 older single people

One more classification is that of Marketing generations: this groups people according :o when they were born: baby boomers, generation X, generation Y. The theory is that people born around the same period have similar attitudes and aspirations. Baby boomers, the generation born in the fifteen years or so after WWII, have been responsible for the success of many everyday brands.