MBA 776 LSUS- Darrat Exam 1

Barriers for protection against unwanted foreign investments and imports

- tariffs - quotas - Exchange barriers - Psychological barriers

Tariff barriers tend to increase:

--Ad valorem duties. --Specific duties. --Compound duties. - Inflationary pressures. •Special interests' privileges. •Government control and political considerations in economic affairs. •The number of tariffs resulting from countries impacted by your country's tariffs (reciprocity).

4 trends affecting global business

1. Growth of the WTO and open trade agreements 2. developing countries moving toward free trade 3. Internet, cellular and networked communication 4. Mandate to manage the global environment for the future

More reactive and less strategic

1. no direct foreign marketing 2. infrequent foreign marketing

How to avoid business errors in regard to SRC and Ethnocentrism

1.Define the business problem or goal in home-country cultural traits, habits, or norms. 2.Define the business problem or goal in foreign-country cultural traits, habits, or norms through consultation with natives of the target country. Make no value judgments. 3.Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem. 4.Redefine the problem without the SRC influence and solve for the optimum business goal solution.

Reasons to maintain government restrictions

1.Protection of an infant industry 2.Protection of the home market 3.Need to keep money at home 4.Encouragement of capital accumulation 5.Maintenance of the standard of living and real wages 6.Conservation of natural resources 7.Industrialization of a low-wage nation 8.Maintenance of employment and reduction of unemployment 9.National defense 10.Enhancement of business size 11.Retaliation and bargaining 12.Corrupt goals of despots and their ilk

More involved in strategic planning

3. regular foreign marketing 4. multidomestic or international marketing 5. global marketing

What are uncontrollable elements in domestic environments

Actively evaluate elements to make adjustments Determine the outcome of the marketing enterprise

Controlling population growth

Adequate incomes. Higher literacy levels. Education for women. Universal access to healthcare. Family planning. •Universally used by governments to control birthrates. Improved nutrition. Change in beliefs about importance of large family. •Procreation is culturally sensitive factor, uncontrollable.

School

Affects all aspects of culture. •Literacy rates. •Performance of education systems is a leading indicator of economic competitiveness. •Literacy profoundly affects marketing. •Schools seen as leading to positive cultural changes and progress.

Symbols

Anthropologist Edward T. Hall: culture is communication. •Includes ability to accurately interpret symbols. Language itself thought of as an important social institution. •Linguistic distance, bilingualism, biculturalism. Aesthetics as symbols. •Art, folklore, music, drama, dance, dress, cosmetics.

How is culture relevant to international marketing

Behaviors and values, the seen and unseen, that are learned, shared, and transmitted by a group of people. Relevant to the study of international marketing. The human-made part of human environment. •Knowledge, beliefs, art, morals, laws, customs, and any other capabilities and habits.

What do controllable elements in domestic environments do

Blend all elements to capitalize on anticipated demand Can alter elements if needed: (changing market conditions, consumer tastes, and corporate objectives)

Cultural values on consumer behavior

Can help predict consumer behavior patterns. •Consumption of luxury goods. •Consuming with immediate vs. long-term goals in mind. •Word-of-mouth communications. •Impulsive buying. •The propensity to complain. •Influence of perceptions of product creativity.

Why do societies change

Change can be thrust upon cultures. •War, natural disasters. Result of society seeking ways to solve problems. Adjusting to environmental and historical changes

Factors that can lead to economic stagnation

Climate and topography Civil wars Poor environmental policies Natural disasters (ex: poor irrigation and water management causes droughts, floods, soil erosion, and creeping deserts)

Resistance to change

Consumers in different cultures display differing resistance. Qualities of innovations that are most readily accepted: •Hold greatest interest within the society. •Are least disruptive to current values and behavior patterns. Important for international marketers to understand. •Can't wait a long time for acceptance of innovation. •Must gain acceptance within limits of financial resources and projected profitability periods.

How can Protectionism be harmful

Contributes to country's industrial inefficiency. Detracts from nation's adjustment to world situation. Higher prices for consumers. •Less likely to purchase, which in turn hurts the economy.

Uncontrollable uncertainty

Created by uncontrollable elements in business environments Each international market has it's own set of factors

Geert Hofstede

Culture is "software of the mind"

population Impacts demand

Current estimate: more than 8 billion people. Projected by 2050: about 9.8 billion. •Almost all growth will occur in underdeveloped regions. •85% of population will be concentrated in these regions. •1.2 billion jobs must be created to accommodate growth.

Trade and communication

Essential component of international commerce. •Know where goods and services exist and where they are needed. Technology has evolved. •Telegraph, telephone, television, satellite, mobile phone, computer, Internet. •Profoundly impacts international business. •Human condition, economic growth, functions of commerce.

Social Responsibility and environmental management

Essential part of the complex process of doing business. Global rather than a national issue. Greenhouse gas emissions. •Threaten humans and the environment. Sustainable development. •Economic development and environmental protection.

Social instituation

Family, religion, school, the media, government, corporations. Cultural interpretations are impacted by •The positions of men and women in society. •The role of family. •Social classes. •Group behavior. •Age groups. •Societal definitions of decency and civility.

Why is a marketing program designed

For optimal adjustment to uncertainty

Aging

Global life expectancy has increased greatly in last 50 years. U.N. projects drastic increase in older population by 2050. •65 to 84 years: 3x increase. •85 years and over: 6x increase. •100 years and over: 16x increase. Leads to economic strain. •High pension and healthcare costs. •Imbalance between funders and users of Social Security.

Monetary Barriers

Governments may use exchange-control restrictions to regulate international trade. •Blocked currency. •Government approval, exchange permits.

Balance of payments in US

High merchandise trade deficit yields an imbalance - value of US currency low= less purchasing power, less demand for imports - US products cheap for foreign buyers= higher imports

Climate and Topography

Impacts function of products and equipment; requires adjustments. •Extremes in altitude, humidity, and temperature. •Different seasons between northern and southern hemispheres. •Climate can be diverse even within single market. Geographical features impede economic growth and trade. •Mountains, oceans, seas, and jungles.

What is the importance of US brands having global reach

Important for US businesses to thrive Foreign Sales can exceed domestic sales Foreign investments generate a lot of revenue

Technology

Innovation impacts institutions and cultural values. The birth control pill perhaps most impactful. •Changed traditional gender roles; more women in careers. •Smaller families around world. •Government and schools must address abstinence, condoms. Technology does not always solve all problems. •U.S. has best healthcare technology but the highest cost and not the best outcomes.

Why is international trade important?

Lack of consistent and predictable trade policies can lead to tension (Company scandals and layoffs, wars and political unrest, natural disasters and pandemics, financial and economic disruptions)

Cultural Borrowing

Learn from other cultures to solve society's problems. •Once found, society judges whether it is acceptable solution. •If approved, it is passed on and taught as groups' cultural heritage. •Although many elements may be borrowed, culture is still unique. •Elements combined to become typical for society.

Beliefs

Mainly stem from religious training, varies by culture. Relationship between superstition and religion unclear. •Western aversion to the number 13. •Japanese concern about the Year of the Fire Horse. •The Chinese practice of feng shui. Important part of cultural fabric of a society. Influence all manners of behavior.

Unique form domestic marketing

Many unfamiliar problems require unique strategies to cope with problems Level of uncertainty and uncontrollable in foreign markets

Resources

Minerals and ability to generate energy are necessary. •Located all around the Earth. •Demand does not necessarily coincide with domestic supply. Human labor creates energy in underdeveloped world. Human energy is supplemented by •Animals, wood, fossil fuels, nuclear power. •To lesser extent: ocean's tides, geothermal power, the sun. •Petroleum dominant source; easy to store and transport. Many countries are initially self-sufficient. •Those same countries often become highly dependent on petroleum imports. World turning to renewable sources of energy. •Wood, peat, dung, wind, solar, geothermal. •Will develop along with technology. •Will impact world trade and marketing efforts.

What happens during the globalization of markets increase

More foreign customers, competitors, suppliers Competition comes from domestic and foreign firms

Stages of international marketing

More reactive and less strategic, more involved in strategic planning

population decline

Occurring in developed, industrialized nations. Birthrates in Europe, Japan decreasing since 1960s. •More women choosing career over children. •Couples are deciding to remain childless. Growth below necessary level to sustain current population.

Ethnocentrism

One's own country, culture, or country is best Most problematic when affluent countries work with less affluent

Rituals

Patterns of behavior and interaction that are learned and repeated. •Associated with major life events: marriage, funerals, graduation. •Also smaller rituals: dinner at restaurant, grooming, visit to store.

Global Commerce thrives during...

Peacetime (Economic boom in 1990s, end o gthe Cold War, Opening former communist countries to world trading system)

The performance of business activities

Plan, price, promotion, direct flow of goods and services for profit For consumers or users in more than one nation

Foreign Environment Uncontrollables Examples

Political/legal forces, economic forces, competitive forces, level of technology, structure of distribution, geography and infrastructure, cultural forces

Quotas and import licenses

Quotas restrict the quantity of a specific item that can be imported. •They tend to increase prices. Import licenses are sometimes required by countries to regulate an imported commodity.

balance of payments statement

Record of all financial transactions with other countries. •Credits and debits must offset each other. •Double-entry bookkeeping system. Three main accounts. •Current account. •Of primary interest to international business. •Capital account. •Reserves account.

Consequences of Consumption

Some think consumption of romantic products would lead to higher birthrates. •Germans consume great amount of flowers, candy, and wine. •But, have one of the lowest birthrates among the six European countries. Cardiac issues in countries that consume higher levels of red meat.

Cultural sensitivity and tolerance

Starting point for successful foreign marketing. •Being attuned to nuances of a culture. •Viewing it objectively, evaluating and appreciating it. •Reduces conflict, improves communication, makes collaborative relationships successful. Must be carefully cultivated. •Understand how own culture impacts view of other cultures. •Just because a culture is different doesn't mean it's wrong.

Geography

Study of Earth's surface, climate, continents, countries, peoples, industries, and resources. Geography imposes limitations. •Impacts society's culture and economy. •Affects nations' ability to supply citizens' needs. Important to understand when evaluating market potential.

culture and consumption (examples)

The Dutch are champion consumers of cut flowers. •Flowers of cultural and economic value through history. The Germans, British, and Japanese love chocolates. •Cooler temperatures allow for easier storage. The Japanese and Spaniards love seafood. •Being surrounded by water explains preference for seafood. French and Italians consume the most wine. •Grapes grow best there; alcohol laws more relaxed.

family

The impact of birth control. Putting off marriage. Single parenthood. What constitutes a family is changing. •Same-sex marriage. •Divorce. Changing ratios of males to females.

What is cultural adjustment?

The most challenging and important task

The Omnibus Trade and Competitiveness Act

U.S. policy established in 1988. •Help U.S. businesses be more successful in world markets. •Correct perceived injustices in trade policies. •Many countries allowed to trade freely with U.S. •Same countries do not reciprocate access. •Covers three areas for improving U.S. trade. •Market access, export expansion, import relief.

Self-Reference Criterion (SRC)

Unconscious reference to own cultural values, experiences, knowledge. Problematic when used for decisions

thought-processes

Ways of thinking vary across cultures. •Impact snap judgments more than long deliberations. •Deeply impact sensory perceptions, particularly aromas. •The Geography of Thought, Richard Nisbett. •Compares Eastern and Western ways of thinking. •Confucius's worthy picture indicative of perception differences.

James Day Hodgson

describes culture as a "thicket"- tough to get through

Both SRC and Ethnocentrism can

impede ability to accurately assess foreign markets

Change is spurred by what

marketers impacts on host cultures

Trade routes link

people and economies Bind the world together; overcome differences. Represent effort to overcome economic and social imbalances created by geography. 1500 - trade routes established between Europe, Asia, Americas. •Same trade routes remain important today. •The Panama Canal. Trade among developing nations quickly growing.

Domestic Environment Uncontrollables Examples

political/legal forces, economic climate, competition, level of technology, Structure of distribution, geography and infrastructure, cultural forces

boycotts and embargoes

•A boycott restricts the purchase and importation of goods and services from other countries. •An embargo is a refusal to sell to another country.

Tariff barriers tend to weaken

•Balance-of-payments positions. •Supply-and-demand patterns. •International relations (trade wars).

Voluntary Export Restraints

•Called voluntary because the exporting country sets the limits. Generally imposed under the threat of stiffer quotas and tariffs being set by the importing country if a VER is not established

4 approaches to governance competed for world dominance for most of the 20th century

•Colonialism—casualty of WWII. •Fascism—fell in 1945. •Communism—crumbled in the 1990s. •Democracy/Free enterprise.

Important function of culture

•Coordinate everyday interactions and special occasions. •Let people know what to expect.

Edward Hall

•Cultural differences are often invisible •Marketers who ignore them hurt companies and career

The paradox of cultural change

•Culture is dynamic in nature. •Culture is conservative and resists change.

What are the reasons for trade barriers

•Develop new domestic industries. •Protect current domestic industries.

corporations

•Diffusion of innovation.

Religion

•First social institution infants are exposed to outside the home. •Affects value systems, habits, outlook on life, products bought.

History

•Helps define a nation's "mission," how it perceives its neighbors, self, and place in world. •Studying a nation's culture includes studying its history.

Main characteristics of companies that internationalize quickly:

•High-technology and/or marketing-based resources. •Smaller home markets and larger production capacities. •Managers who are well-networked internationally.

Domestic Subsidies and Economic Stimuli

•Include domestic bailout packages. •Complaints that these work against companies in developing countries (unfair advantage).

Hofstede's four dimensions

•Individualism/Collectivism Index (IDV); focus on self-orientation. •Power Distance Index (PDI); focus on authority orientation. •Uncertainty Avoidance Index (UAI); focus on risk orientation. •Masculinity/Femininity Index (MAS); focus on assertiveness and achievement.

Duties of international marketers

•Interpret influence of each uncontrollable element on market •Adjust marketing efforts to cultures in which they are not attuned •Be aware of own frame of reference when evaluating markets

Government

•Less influential. •Governments try to influence the thinking and behavior of adults. •Use of propaganda, laws to influence.

Tariff barriers tend to restrict

•Manufacturers' supply sources. •Choices available to consumers. •Competition.

Media

•Media time has replaced family time. •Difficult to gauge the long-term effects of increased media consumption by children. •Socio-income levels and race may affect perceptions of children's media use.

How is free-trade typically beneficial

•More people willing to purchase. •Higher purchasing power for the average consumer. •Agreements like NAFTA (now USMCA) result in higher income levels. •More job opportunities. •Economic effects of COVID-19 pandemic reduced consumers' spending power.

Standards

•Protect health, safety, and product quality. •Sometimes are used in an unduly stringent or discriminating way to restrict trade.

Global trade benefits all

•Provides more business opportunities for marketers •Provides wider selection of goods and services for consumers

Non-tariff barriers

•Quotas and import licenses. •Voluntary export restraints (VERs). •Boycotts and embargoes. •Monetary barriers. •Standards. •Anti-dumping penalties. •Domestic subsidies and economic stimuli.

Culture

•Society's accepted basis for responding to external and internal events. •Influenced by historical events and geographical uniqueness. •History and geography impact business.

Main components of global awareness

•Tolerance of and willingness to learn about cultural differences •Knowledge of cultures, history, world market potential, and global economic, social, and political trends

tariff and non-tariff barriers

•Until recently, use has been reduced in recent years •Election of nationalistic leaders threatens this effort •Some countries attempt to control trade for their own advantage •As competition increases, so does tendency toward protectionism

Five elements of culture

•Values. •Rituals. •Symbols. •Beliefs. •Thought processes.

General Agreement on Tariffs and Trade (GATT)

•Worldwide agreement after World War II. •Main provisions: 1.Trade shall be conducted on a nondiscriminatory basis 2.Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas 3.Consultation shall be the primary method used to solve global trade problems

Antidumping penalties

•antidumping laws have emerged as a way of keeping foreign goods out of a market (de facto trade barriers). •Designed to prevent foreign producers from "predatory pricing".