and consequently are not only useless but misleading. Then again, the investigators are not always particularly well qualified and trained. But perhaps the most important objection of all to their employment is the fact that since their work is limited to investigation, they have no such special interest in the subject as would be the case if they had any hope of advancement, of larger earnings, or of permanent employment. Notwithstanding all this, their reports are of great value in promoting American commerce abroad. Trade Representatives' Investigations Perhaps of still greater value would be the reports of an investigation in a foreign country based on the requirements of a particular trade and furnished by a representative of a trade association in a particular line. The result would be more gratifying to the individual manufacturer for the reason that such an investigation could be conducted primarily along the lines which would be of special interest to the majority of the members or to an export combination which might be forming. In any event, neither the government's investigation nor that of a trade association representative can be considered by a conservatively managed concern as anything but a preliminary to its own final and thorough survey of the field. Of course, when a number of concerns enter into an export agreement for the creation of a joint sales organization, their study of the market by their own representative ought be deemed sufficient and his reports final. Miscellaneous Printed Matter Of value are the works on political economy, and the essays of private investigators upon different aspects of the world's commerce. The trouble with such data is that they too quickly get out of tune with the times. Commercial progress marches rapidly and such information cannot be of much value if it is more than a year old. Some of these works are useful as giving a general idea of foreign trade, but for practical purposes, to the man who wishes to learn the game of international trade quickly and without waste of time, this source is of moderate value only. Sources of information of this sort which have been found to be of real value are the almanacs and year-books of the different countries, and commercial and geographic atlases. Original Information Original information is the data one secures for oneself on the ground. This first-hand knowledge is the most valuable of all. It should, of course, be strictly up to date the very latest news which is obtainable in the world of trade relating to the line being handled. To accumulate a large volume of knowledge from personal observation and investigation, the investigator must not only have the opportunity but ability and special qualifications as well. This kind of information must be secured directly from the people who are in possession of the facts, and if it is to be of greatest value the investigator must be expert in the subject he is investigating. The available sources of foreign trade information are: 3. Manufacturing, financial, and mercantile organiza- 4. Special trade channels. If one is in the steel business his special channels of information would be all the avenues of the steel trade. These channels would include the manufacturers and traders in steel and their trade and commercial associations. The first two of the above sources are in some cases of but little informative value, and especially when extensive preliminary information has been secured at home. Even if they are not available as sources of information they are frequently capable of giving most valuable assistance in the way of advice and introductions. In the last analysis no investigation, no matter how thorough, should be considered as all-sufficing because commercial life is not stationary but is continually changing. The wisest thing for an up-to-date, progressive house to do is to keep someone permanently on the ground who can be in constant touch with the ever-fluctuating trend of events in the world of commerce. Above all, there should be a concrete and definite plan of procedure and a clear idea of the knowledge desired before any investigation is begun. CHAPTER V DEMAND AND SUPPLY IN THE FOREIGN MARKET The Principles of Demand The investigator in the foreign field need not delve very deeply into the philosophy of demand. The word has many implications and its meaning to the psychologist is vastly different from the political economist's conception. From whatever point of view it is considered, however, demand always implies two factors-the desire to possess and the means of purchase. Beyond this, generalization is dangerous. Every commodity has its own laws of demand and every market has its own peculiarities. The investigator who is interested in a particular product must study the reaction thereto of each individual market. Nevertheless, his determination of the extent and character of the demand will be greatly facilitated if he constantly bears in mind certain elementary principles which are universal in their application. These may be stated briefly as follows: 1. The demand for a given product rises or falls with every rise or fall in price. 2. When a market demands a certain commodity at any price, the price is determined by the competition of of the sellers. 3. With every reduction of price more will be demanded and less offered, so that too low a price ultimately creates an unsatisfied demand. 4. In the case of great international staples, price is controlled by the demand and supply in the world's markets. 5. Demand indicates the degree of the utility of the product, and a scale showing the demand for a given commodity indicates its present status. 6. Demand may be elastic or inelastic, immediate or deferred, and its status is governed by the social, economic, political, and business conditions prevailing in the given market. In selecting a market the safest rule to observe is to enter only those markets where the demand for a particular product is already established and clearly defined, so that both its extent and quality can be determined in advance. If no immediate demand is apparent the conditions of the country must be carefully studied to see whether a desire for the product can be fostered or created, and whether it is worth the time and the expense. The experience of the past shows that concerns have often sustained financial losses by venturing into a market where no adequate demand could be created. An illustration of this point is the experience of a large concern which went to Central America to sell an ordinary cooking stove used in northern countries. After a very large expenditure of money, the concern discovered that, owing to the climatic conditions, the people would not buy the new stove. The ill-judged effort to sell an utterly inappropriate article was entirely wasted. Tests of Demand Correct strategy requires that before venturing into a foreign market, the exporter should not only be certain that his preliminary information indicates a well-defined demand for his product, but that he knows with accuracy the nature, quality, and extent of that demand. There are two tests, one quantitative and the other qualitative, which if made on the basis of correct statistical information will give him these facts. |