Quiz 1 (Int. MKTG)
Types of Political Risk
1) General instability 2) Seizure of assets
Seizure of assets
1. Confiscation-government takes property 2. Expropriation-government takes but gives some compensation 3. Nationalization-government runs & owns (may not have taken it) 4. Domestication-private locals run & own 5. Why would a country seize assets? 6. Risk of seizure today
Has EU created a Euro-consumer?
1. European TV 2. Young Generation- especially technology 3. Prestige Items 4. European Advertising 5. Micro-Marketing 6. Inter-market Segments
How to minimize political risk
1. Stimulation of local economy 2. Employ nationals 3. Share ownership 4. Being Civic Minded 5. Political neutrality 6. Observation of political mood 7. Avoid long-tern commitments 8. Make yourself indispensable
General Instability Impact on Marketing
1. Violence 2. Terrorism 3. Political reprisals in disputes between nations
Marxist-Leninist/Maoist Model
A development model attributed to Karl Marx and Vladimir Lenin that maps the development of society from an agrarian, traditional society to a society characterized by shared ownership of the means and out-comes of production and an equitable resource allocation; advancement from on stage to another is based on class struggle and transfer of ownership from one class to another and, ultimately, to the state - Primitive society: joint, tribal ownership of the means of production, which is minimal, primitive, and centered on very basic agricultural tasks, for the benefit of all the members of the tribe - Slavery-based society: emerges as a result of tribes taking over other tribes and enslaving their populations
Customs Union
A market composed of member countries imposing identical duties and sharing import regulations - South Africa Customs Union, Gulf Cooperation Council (GCC)-moving toward Common market
Common Market
A market composed of member countries, characterized by the unrestricted movement of goods, labor, and capital - Mercosur
Globalization starting in 1970s left Africa and Latin America out
A. "Los años perdidos" in Latin America B. Why? C. Import substitution policies D. Weak or poorly enforced commercial laws E. State run enterprises not successful F. Political instability / corruption / poor government planning impacts G. High level of transaction costs impacts H. High dependence on commodities impacts I. Inflation / economic instability impacts J. AIDS in Africa impacts on companies
European Union (EU) from the European Community (EC) 27 countries total
A. 15 Countries- Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and the UK + in 1995 Austria, Finland, and Sweden B. 10 Additional Countries to EU (May 1, 2004) -Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. C. 3 Additional Countries- Bulgaria and Romania (2007) Croatia (2013) EU 28. D. 2016 Brexit vote - UK leaving EU in Oct 2019. Impacts E. Political Aspects F. Common Currency, Euro (since 2002) (17 countries) Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain G. EU Impact on Marketing H. Has EU created a Euro-consumer?
USMCA changes impacts (Senate vote Jan. 2020, Mexico ratified, Canada has not yet)
A. 30% of vehicle production workers from countries that make over $16 an hour B. Auto parts from North America 75% instead of 62.5% C. Canada loosened Dairy restrictions D. What would happen if US does not ratify USMCA?
Management of Political Risk
A. Avoidance-screen out B. Insurance-shift the risk to others C. Minimize Political Risk
Foreign Trade Zones (FTZ) (Not Free Trade Areas)
A. Benefits 1. Delay duties 2. Reduce duties B. China Special Economic Zones C. Companies using FTZ
Successes
A. Chile B. Colombia C. Mauritius D. Rwanda E. Botswana
What are the Drivers of International Expansion?
A. Competition - Cars - Mobile phones B. Regional Economic and Political Integration - EU (trade agreements such as NAFTA) - USMCA C. Technology - Information Revolution (Disruptive Technology, 3D printing, IoT) D. Transportation/Communication Improvements - Cheap airfare - Skype - Shipping E. Economic Growth - Emerging middle class - Starbucks - Movies F. Transition to a Market Economy - Russia vodka G. Converging Consumer Needs
Benefits of Free Trade
A. Consumers have more choice B. Higher quality products for consumers C. More competition for producers D. Lower prices for Consumers- Increases wealth E. More trade-brings people together, encourages human rights F. Countries with more Free Trade
Evaluating Political Risk/ Country Risk Analysis/ Impact on Marketing
A. Economic performance signal B. Political repression signal C. Internal diversity and incongruent interests D. Political instability and the instability of government policiesqq
Levels of Integrations
A. Impacts of Bilateral Agreements- US and Australia, Bahrain, Chile, Colombia, Israel, Morocco, Oman, Panama, Peru, South Korea and Singapore B. Free Trade Agreements (FTA) (ASEAN, CAFTA-DR, AfCFTA-largest by # of countries) C. Customs Union (South Africa Customs Union, Gulf Cooperation Council (GCC)-moving toward Common market) D. Common Market (Mercosur) E. Monetary Union (West Africa Economic and Monetary Union (UEMOA) F. Political Union
Africa and Latin America: Some Positive Signs
A. Liberalization of trade B. Privatization of state-owned enterprises C. China Investment in Africa D. Political stability
How are countries classified?
A. Low-income countries - Low end of developing - Least developed countries (LDC) - Bottom of the pyramid B. Middle Income Countries - 3rd world - Industrializing/developing - Big emerging markets (BEM) - BRIC (Brazil, Russia, India, China) - BRIMC (+Mexico), - BRICS (+South Africa) - BRICET (+East Europe and Turkey) - Chindia (IC) C. High-Income Countries - Oil producing countries (non-OECD) - Developed, industrialized, postindustrial organization for economic cooperation and development (OECD) - EX: (Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, S. Korea, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, UK, US)
Natural / Technical Environment impacts on Marketing
A. Natural Resources / Topography / Climate B. Population C. Environmental concerns D. Technology/ Internet
Firm-Specific Drivers
A. Product Life-Cycle Considerations B. High New-Product Development Costs C. Standardization, economies of scale, and low-cost labor D. Experience transfers
Arguments for Protectionism
A. Protect Excess production or capacity B. Employment Protection C. Protecting local infant industry (only economic reason recognized by WTO) D. National Resources/environment E. Promote consumer safety F. Protect National Security G. Discourage immoral business practices H. Protect culture I. Earn revenue J. Political Pressure K. Impacts on Consumers
What is the World Trade Organization (WTO)?
A. Resolve trade disputes and continue Negotiations B. Partial Completion Bali Package 2014 1. Food Security / Subsidies of Agriculture 2. Trade facilitation 3. Development / Support of developing countries C. 2015 Tariff reduction on high tech goods
Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) 11 Countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam.
A. US pullout hurts US global trade leadership B. Without US- March 2018 CPTPP C. Problems with US exit D. Advantages of TPP exit
What was the General Agreement on Tariffs and Trade (GATT)?
A. Uruguay Round 1986 - 1994 B. Reduced tariffs and created WTO
Nontariff Barriers
All measures, other than traditional tariffs, that are used to distort international trade flows A. Quotas: specify a maximum quantity (unit limit) or a value (usually specified in the national currency) of a product that may be imported during a specified period B. Licenses: - Non-automatic import license (issues on a discretionary basis and are used to restrict imports of a given product) - Automatic import license (granted freely to importing companies) C. Price Controls: have a direct effect on a product mix aimed at a particular market - Antidumping/countervailing duty actions (designed to counter unfair competition, such as predatory pricing - Paratariff (charges that increase the costs of imports in a manner similar to tariffs D. Boycott: usually initiates as the result of an action group or government calling for a ban on consumption of all goods associated with a particular company or country E. Embargoes and sanctions: are imposed by a country (or a number of countries) against another county - Embargo (prohibits all business deals with the country that is the target, often affecting businesses from third countries that do business with both the country imposing it and the country undergoing it) - Sanctions (penalties against a targeted country that could take various forms, such as trade barriers and restrictions on commerce, among others)
Free Trade Agreements (FTA)
An agreement whose goal is the reduction in, or even elimination of, customer duties and other trade barriers on all goods and services traded between member countries - ASEAN, CAFTA-DR, AfCFTA-largest by # of countries
Rostow Modernization Model
An economic development model attributed to Rostow, according to which each stage of economic advance is a function of productivity, economic exchange, technological improvements and income: 1) Traditional society: characterized by an economic structure that is dominated by agriculture 2) Transitional society: characterized by increased productivity in agriculture, and the emergence of modern manufacturing 3) Take-off: becomes the norm and improvements in production lead to the emergence of leading sectors 4) The drive to maturity: modern technology is fully adopted in all economic activity, and new leading sectors emerge 5) High mass consumption: leading sectors shift toward durable goods
Ethnocentric Orientation
Company strategies consistent with the belief that domestic strategies, techniques, and personnel are superior to foreign ones and therefore provide the most effective framework for the company's overseas involvement; companies adopting this perspective view international operations and customers as secondary to domestic operations and customers - Domestic market extension approach - Mondavi
Polycentric Orientation
Company strategies predication on the assumption that each country's market is unique and should be addresses individually, with a country-specific marketing mix - Multidomestic approach/localized approach - Unilever - Citicorp
Geocentric Orientation
Company strategies that are consistent with the belief that the entire world, without national and regional distinctions, constitutes a potential market with identifiable, homogeneous segments that need to be addresses differentially - Global Approach - GM - Harley-Davidson
Regiocentric Orientation
Company strategies that view world regions as distinct markets that share economic, political, and cultural traits that will respond to a regionwide marketing approach - Global Marketing Concept
High-Income VS Low-Income Countries
High-income countries dominate the world economy, allocating resources worldwide based on market potential, rather than based o local population needs - Low-income countries control resources (raw materials, labor) that multinationals need, and access to local consumers; they sometimes pose barriers to international business operations
Home Country /Host Country
Home country: the domestic environment where the company is located (local) Host country: countries where the company operates (foreign subsidiary)
Did US, Canada and Mexico benefit from NAFTA?
Increase in trade Canada 1. New jobs 2. Increase in agricultural imports 3. Lower prices for Consumers (groceries) Mexico 1. Per capita income increase 2. Decrease in consumer prices by 50% 3. More global economic management 4. Corn farmers hurt US Benefits 1. Increased economic growth 2. Lower prices for consumers (groceries) 3. Better US access to growing export market in Mexico 4. Industries benefiting: Steel / Auto / Computers / Dental Equipment/ Toys / Construction Equipment / Textiles 5. US Financial & service sector expand in Mexico 6. Oil from Canada and Mexico (lower prices) 7. Trucking industry allowed to move across borders 8. Protection of US intellectual property rights US Costs 1. Jobs lost in certain industries 2. Painful restructuring-agriculture 3. Increased competition
Why do companies practice international marketing?
International marketing: the process involved in the creation, production, distribution, promotion, and pricing or product, services, ideas, and experiences for international market - Domestic marketing (focuses solely on domestic consumers and on the home-country environment) - Export marketing (a firm involved in indirect/direct exporting) - Global marketing (involves activities across different countries without focusing primarily on national or regional segmentation
United States Mexico Canada agreement (USMCA) replaces North American Free Trade Agreement (NAFTA) when ratified
Key Provisions of NAFTA 1. Tariff barriers reduced or eliminated 2. Protection of Intellectual Property 3. Process for settling trade disputes
Impacts of Bilateral Agreements
Regional trade cooperation between two countries aimed at reducing or eliminating trade barriers for all or for selected products - US and Australia, Bahrain, Chile, Colombia, Israel, Morocco, Oman, Panama, Peru, South Korea and Singapore
Political Union
Represents the highest level of integration; it assumes a viable economic integration involves the establishment of viable common governing bodies, legislative bodies, and enforcement powers
Tariffs and Duties
Tariffs: any type of tax imposed on goods entering a particular country A. Tires B. Solar Industry C. Steel Tariffs D. US-China Trade E. Tariffs in other countries
Monetary Union
The creation of a unified central bank and the use of a single currency - European Monetary Union - West Africa Economic and Monetary Union (UEMOA)
Protectionism
The practice of shielding one or more domestic industries within a country's economy from foreign competition through the use of tariffs or quotas
