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73 Cards in this Set

  • Front
  • Back
Dynamics of World Trade
and World Trade Flows
All nations do not participate equally in world trade. Flows reflect interdependency among industries, countries, and regions.
-exports and imports:
US, Europe, Canada, Japan and China account for 2/3 of world trade.
the practice of using barter rather than money in making global sales. (15-20% of world trade)
-popular in E. European countries, Russia, and Asian countries
Global Perspective on Exports and Imports
views exports and imports as complementary economic flows: A country's imports effect its exports and exports effect its imports.
trade feedback effect
-greater demand for imports stimulates exports from other counties

-increased exports lead to more income, which leads to more demand for imports.
US Perspective: role in world markets
-world's perennial leader in GDP
-world leader in exports, but shifting down
-percentage share of imports has increased
-role in the world marketplace has increased
Gross Domestic Product
the monetary value of all goods and services produced within a country during one year
Balance of Trade
Difference between the monetary value of a nation's exports and imports
Exports> Imports= Surplus
Imports> Exports= Deficit
US Balance of Trade
Since 1975:
1) imports have significantly exceeded exports= Trade deficit
2) volume of both imports and exports is about 10-15x what it was - significant effect on every American

*3 largest importers of US goods: Canada, Mexico, Japan
Exporters: Canada, China, Mexico, and Japan
-Trade imbalanace b/w US and Asia
Competitive Advantage of nations

Why do some companies succeed globally? (Four Key Elements)
1) Factor conditions: Natural resources, Education and skill levels, Wage rates
2) Demand Conditions: Size of domestic market, Sophistication of consumers, Media exposure of products
3) Related and Supporting Industries: existence of supplier clusters that accelerate innovation EX. Germans
4) Company strategy, structure, and rivalry: number of companies in an industry, intensity of competition, Public or private ownership
National Competitive advantage Cont.

*economic espionage
Theme: firm that succeeds in global markets has first succeeded in in intense domestic competition (#4)

* Down side of competitive advantage: clandestine collection of trade secrets or proprietary info. of competitors
Economic Espionage Act (1996)
law to counteract the threat of economic espionage that
makes the theft of trade secrets by foreign entities a federal crime in the United states.
Marketing in A Borderless World:

Four Trends:
1) Gradual decline of economic protectionism by individual countries

2) Formal economic integration and free trade among nations

3) Global competition among global companies for global customers

4) Development of networked global marketspace
1) Decline of Economic Protectionism
-quotas and tariffs

-every country has some form of protectionism, but it has declined
the practice of shielding one or more industries within a country's economy from foreign competition through the use of tariffs and quotas

Arg.-limits the outsourcing of jobs, protects political security, discourages dependency on other nations, and encourages development of domestic industries
a government tax on goods or services entering a country that primarily serves to raise prices on imports.
a restriction placed on the amount of a product allowed to enter or leave a country.
-Seek to guarantee domestic industries access to a certain percentage of their domestic market.
-Limits supply and increase prices
EX. Italian quota on Jap. motorcycles
General Agreement on Tariffs and Trade(GATT)
International treaty that was intended to limit trade barriers and promote world trade through the reduction in tariffs,BUT did not address quotas
World Trade Organization
formed in 1995 by the major industrialized nations of the world to address a broad array of world trade issues.

- A permanent institution that sets rules governing trade b/w its members through panels of trade experts who decide on trade disputes and issue binding decisions
EX. Kodak decision regarding Japan
2)Rise of Economic Integration
-forming of international trade groups that promote free trade among member nations and enhancing individual economies
EU, NAFTA, and Asian Free Trade Areas
European Union
-25 member countries that have eliminated most barriers to the free flow of goods, services, capital, and labor across borders
-most adopted common currency: euro
-less need to market on a nation by nation basis
- reduced production and marketing cost savings
NAFTA - North American Free Trade Agreement
- lifted many trade barriers b/w Canada, Mexico and the United States.
-Plans to expand to Latin American and Caribbean Countries
- cross-border retailing, manufacturing, and investment
Asian Free Trade Agreements
growing efforts to liberalize free trade from Japan to the four little dragons(Hong Kong, Singapore, South Korea, and Tiawan) through Thailand, Malaysia, and Indonesia.
-reduce tariffs
Global Competition
exists when firms originate, produce, and market their products and services worldwide.

- broadens the competitive landscape for marketers
EX. Pepsi vs. Coke, Pampers vs. Huggies
- many collaborative relationships have formed as a result
Strategic Alliances (Global)
agreements among two or more independent firms to cooperate for the purpose of achieving common goals, such as competitive advantage or customer value creation.
EX. General Mills and Nestle goined to fine tune European cereal marketing(Nestle), and distribute GM worldwide
Part 2: Global Companies
1) international 2)multinational
3) transnational
-employ people in different countries
-have divisions/subsidiaries worldwide
a. international firm
engages in trade and marketing in different countries as an extension of the marketing strategy in its home country
-same way as in home country (AVON)
b. multinational firm
views the world as consisting of unique parts, and markets to each part differently
-use multidomestic strategy
Multidomestic Marketing Strategy
strategy used by multinationals that means that they have as many different product variations, brand names, and advertising programs as countries in which they do business
ie. using different brand names in different countries
c. transnational firm
views the world as one market and emphasizes cultural similarities across countries or universal consumer needs and wants more than differences.
Global Marketing Strategy
strategy used by transnational firms
- the practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ

-benefit: allows marketers to realize economies of scale from their production and marketing activities.
-popular among business to business marketers (Texas instruments) and some consumer goods (Coke, McDonalds, Mattel)
Global Brand
a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs
EX. McDonalds, Gillette

- have same product formulation and service concept, deliver the same benefits, and use consistent marketing/advertising
-some aspects are tailored
Def: Global Consumers
consumer groups living in many countries or regions of the world who have similar needs or seek familiar features and benefits from products or services
-global middle-income class (IKEA), youth market(Nike), and elite segment (Gucci)
4) Emergence of a Networked Global Marketspace
-internet technology is a tool for exchanging goods, services, and information on a global scale
- enables exchange of goods services and info. from companies ANYWHERE to customers ANYWHERE AT ANY TIME and at lower cost.
-business to business e-commerce worldwide
-multiple country and language websites
Global Environmental Scan
- five environmental factors discussed earlier (Social, Economic, Regulatory, Technological, and Competitive)
- focus on uncontrollable:
Cultural, Economic, and Political-Regulatory
1)Cultural Diversity

*DEF: Cross-Cultural Analysis
study is necessary before exchange

*the study of similarities and differences among consumers in two or more nations or societies
represent personally or socially acceptable preferable modes of conduct or states of of existence that tend to persist over time.
EX. Cow sacred in India

-affect attitudes and beliefs and importance assigned to specific behaviors and attributes of goods and services
what is considered normal and expected about the way people do things in a specific country.
EX. men wear cosmetics in France
EX. Giving Business Gifts
-bribes, kickbacks, and payoffs to commit an illegal act for economic gain is corrupt in most nations
-ALSO: nonverbal behavior- Japanese listen more
Foreign Corrupt Practices Act (1977)

amended: International anti-dumping and Fair Competition Act (1998)
make it a crime for US corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign country.
- does not include bribes to foreign companies
c.Cultural Symbols-
things that represent ideas and concepts

-play an important role in cross-cultural analysis
-improper use can= disaster
EX. Thumbs up, unlucky numbers

-country of origin has different symbol for quality
field of study that examines the correspondence between symbols and their role in the assignment of meaning for people
d. Language
not only the native tongue of a particular country, but also the nuances and idioms of language
EX. Brand name meaning in different countries
Back Translation
a translated word or phrase is retranslated into the original language by a different interpreter to catch errors.
cultural ethnocentricity
The tendency to people to view their own culture (customs, values, symbols and language) as superior to others.

-impediment to successful global marketing
Consumer Ethnocentrism
the tendency to believe that it is inappropriate, indeed immoral, to purchase foreign made products.

-purchases are unpatriotic, harm domestic industry, and cause domestic unemployment
EX. US, France, Germany
2) Economic Considerations
1)Comparative analysis of economic development in different countries

2)An assessment of the economic infrastructure

3)Measurement of consumer income

4)Currency exchange rate recognition
a.Stages of Development:

1) Developed

2) Developing
a. have somewhat mixed economies. Private enterprise dominates, although there are substantial public sectors. (US, Canada, Japan, Western Europe)

b. in the process of moving from an agricultural to an industrial economy. Subgroups:
1)made the move (Brazil, China, Australia)
2)remain locked in preindustrial (Afghanistan, Chad)
b.economic infrastructure
country's communications, transportation, financial, and distribution systems
-we can take our infrastructure systems for granted
-communications infrastructure: telecommunications like telephones, cable TV, computers, satellite etc.
-financial and legal systems
c. consumer income and purchasing power
income distribution is a more reliable measure of a company's purchasing power than per capita income
-more middle income = greater purchasing power
-government subsidies must be taken into account
d. Definition: Currency Exchange Rates
the price of one country's currency expressed in terms of another country's currency
EX. dollar expressed in Brazillian Reals, Yen, Euros, etc.
-must consider when pricing in foreign countries
Effect of Fluctuations in Exchange Rates
fluctuations impact sales and profits made by global countries

-buy more US dollars= US products are less expensive for foreign consumers.
3) Political-Regulatory Environment
favorable or unfavorable? how long will conditions last?

Political Stability
Trade Regulations
a. Political Stability
effected by: government's orientation toward foreign companies and trade with other countries
b. Trade Regulations
rules that govern business practices within a country's borders
-trade barriers

-free trade agreements and rules that specify how goods are to be made and marketed
Global Market-Entry Strategies (4)
1)Exporting (Direct and Indirect)
2)Licensing (Contract Manufacturing, Contract Assembly, Franchising)
3)Joint Venture
4)Direct Investment

Profit Potential, Risk, Financial Investment, and marketing control increses as you move form 1->4
A. Exporting (30%)
producing goods in one country and selling them in another country
- entry option that requires the least amount of changes in terms of product, organization, and corporate goals. Less local employment.

-prominent strategy global market entry strategy for small and med. sized firms
indirect export
when a firm sells its domestically produced goods in a foreign country through an intermediary. least amount of commitment and risk, but also potential profit
direct export
when a firm sells its domestically produced goods in a foreign country without intermediaries.

-usually b/c large sales volume is easy to obtain
- a little more risk and profit possibility than indirect
B. Licensing
company offers the right to a trademark, patent, trade secret, or other intellectual property in return for a royalty or fee.

ADV- low risk, capital-free entry, home country gains employment

DIS- licensor forgoes control and potential profits. may be creating it's own competition
contract manufacturing
a US company may contract with a foreign country to manufacture products according to stated specifications. Product then sold in the foreign country or sent back to the US

- low wage rate for licensor, employment for licensee
contract assembly
US company may contract with a foreign firm to assemble (not manufacture)parts and components that have been shipped to that company.
- low wage rate for licensor, employment for licensee

*franchising is third method of licensing used
C. Joint Venture
when a foreign company and a local firm invest together to create a local business.

-Two companies share ownership, control, and profits
Advantages and disadvantages of a Joint Venture
ADV- one company may not have the financial, physical or managerial resources to enter a foreign market alone
- The govt may require or strongly encourage a joint venture before it will allow a company to enter its market (China)

DIS- two companies may disagree about policies or courses of action b/c of govt. bureaucracy
D. Direct Investment
a domestic firm actually invests in and owns a foreign subsidiary or division
-biggest investment a company can make when entering a global market
EX. Nissan plant in Tennessee
- usually follows one of the other market-entry strategies

ADV- cost savings, better understanding of local market, fewer local restrictions
DIS- high risk and investment
Crafting a Worldwide Marketing Program
-after choosing strategy to enter the market you must design, implement, and control the marketing program
Product and Promotion Strategies
can 1)use the same promotion or 2) adapt the promotion

can 1) use the same product as in the home market 2)adapt the product or 3) create a totally new product

RULE: standardize whenever possible and customize whenever necessary
1) product extension
selling virtually the same product in other countries
EX. Coke, Wrigley's, Sony

- works best when consumer market target for the product is the same across all countries and cultures
2) product adaptation
changing the product in some way to make it more appropriate for a country's climate or consumer preferences
EX. Gerber baby food, Mascara for different climates
3) Product invention
inventing totally new products designed to satisfy common needs across countries
EX. Flexable Flashlight
4)communication adaptation strategy

5) dual adaptation strategy
4)Adapt Promotion/ Same product
EX. golden beauty products

5)Adapt promotion/Adapt Product
EX. Nescafe coffee
Distribution Strategy
channels in global marketing:
seller-> Seller's international marketing headquarters-> channels between nations-> Channels w/in foreign nations-> Final consumer
Pricing Strategy
countries may impose competitive, political, and legal constraints, on the pricing of global companies
EX. Wal-Mart in Germany

- costs of production, tariffs, transportation and storage costs
when a company sells a product in a foreign country below its domestic price or below its actual cost.
- build company's share of market
- products are in surplus
Grey Market (or parallel importing)
situation where products are sold through unauthorized channels of distribution.
When people buy in a lower price country from an authorized retailer, ship to higher priced countries and then sell below the manufacturer's suggested retail price. Legal in the US.

occurs when companies price their products very high in one country, but competitively in others