Chapter 8- Global marketing

What is a boycott? How does it differ from an embargo?

Boycott- prohibition to buy Embargo- prohibition to sell

What method of entering a foreign market gives the marketer the most control over his/her marketing strategy? The least control?

Different ways to enter a foreign market: • Export- least risk and lowest control (simplest way to enter foreign market). Take present product with present packaging and then ship it over seas. The minute the package is delivered, you will be paid. However, once that item is delivered to the foreign intermediaries, they can do whatever they want with it (very little control) • Franchising- A little more control with a little more risk. A franchise is a form of licensing (permission that you give to someone else to use your name, recipe, brand, etc in exchange for money). Most franchises pay a fixed fee (royalty). This is a limited contract. When the contract expires, the franchisee becomes your competitor (a higher risk) • Strategic alliance- More control and more risk. This is an agreement to corporate. The partners in the alliance remain independent but share recourses (airline alliances). The risk is that the partners have different visions and can separate at any time. Or, if one of the partners is very big, the small partner will not be able to control the market much • Joint venture- Even more control and even more risk. This is classified as a partnership. Usually two or three companies join to create a third company, which is the third venture. The joint venture exists as a separate company that is owned by the two parent companies. The parents companies share the stock of the joint venture (normally not a 50/50 deal). Risk is that once the joint venture becomes dissolved, the two parent companies become competitors. • Direct investment- highest risk and most control- This is when you create a foreign company that you fully own (you can either buy an established company or build it from scratch, which is called a greenfield operation). However, you are now at absolute risk. You are now committed to doing business in that country and subject to any problems happening there

What constitutes "dumping" in international trade?

Dumping- World trade Org considers it to be unfair competition. Company sells a product in an overseas market below their cost (they are trying to get rid of the competition to try and get a monopoly). The WTO gives the foreign country permission to impose higher tariffs on company (anti-dumping duties)

What is the Gross Domestic Product (GDP) of a country and how does it differ from its Gross National Income (GNI)?

Gross Domestic Product (GDP) is the value of all goods and services that are created internally by one economy in one year. Gross National Income is the value of all sources at the official exchange rate; the total domestic and foreign output claimed by residents of a country

How did the GATT operate to achieve its purpose?

The General Agreement of Tariffs and Trade benefited everyone getting into multilateral negotiations to reduce tariffs. One negotiation between two countries benefited others, it reduced tariffs to everyone. GATT obligates each country to accord nondiscrimative, most favored nation treatment to all other contracting parties with respect to tariffs. GATT/WTO allows the formation of customs union, which causes a significant erosion to the MFN principle

What was the General Agreement on Tariffs and Trade (GATT) and what was its purpose?

The General Agreement on Tariffs and Trade (GATT) is a catalyst for free trade. The General Agreement on Tariffs and Trade (GATT) was implemented to further regulate world trade to aide in the economic recovery following the war. GATT's main objective was to reduce the barriers of international trade through the reduction of tariffs, quotas and subsidies. The US initiated negotiations with 22 other countries that led to commitments to regulate 45,000 tariff rates. The purpose of the General Agreement on Tariffs and Trade (GATT) was to lower trade barriers such as high tariffs on imported goods and restrictions on the number and types of imported products that inhibited the free flow of goods across borders.

What is the key difference between the International Monetary Fund (IMF) and the World Bank?

The International Monetary Fund has the role of rescuing countries that get into balance of payment problems, they became lenders of last resort. In contrast, the World Bank is in charge of lending money for development and infrastructure. World Bank is for development projects in the developing world. Its main aim is to eliminate poverty from the world. IMF is about balancing the international financial system in both rich and poor countries

What is a tariff?

Tax on an import

What is the successor organization to the GATT?

The World Trade Organization

What method of entering a foreign market is the least risky? The most risky?

Export- This entry strategy requires the least financial risk but also allows for only a limited return to the exporting firm. Global expansion often begins when a firm receives an order for its product or service from another country, in which case it faces little risk because it has no investment in people, capital equipment, buildings, on infrastructure. Direct investment requires a firm to maintain 100 percent ownership of its plants, operation facilities, and offices in a foreign country, often through the formation of wholly owned subsidiaries. This entry strategy requires the highest level of investment and exposes the firm to significant risks, including the loss of its operating and/or initial investments

What are Geert Hofstede's 5 cultural dimensions and what does each one measure?

Geert Hofstede cultural dimensions- Interviewed 100,000 people from all over the world. Came up with a numerical way to compare countries o Individualism/collectivism index- How much does a culture emphasize individual action (U.S. received the highest score)/ How much does a culture emphasize collective action (Japan scored high) o Power distance index- How large is the distance between levels of the hierarchy (Mexico scored very high) o Uncertainty avoidance index- how tolerate of risk is a country/ focused on rules and regulations (ex: France) o Masculinity/femininity - How strong are each gender roles on the country • Focuses on male achievement orientation o Time orientation index- How long do companies plan ahead (U.S. scored very low- they have shorter time periods for planning)

What is the "infrastructure" of a country and what are the key elements that marketers are especially concern

Infrastructure is the basic facilities, services, and installations needed for a community or society to function. A firm's ability to conduct business in a particular country is in large measure determined by that country's infrastructure Without infrastructure, a country cannot develop • Transportation • Communication • Distribution channel • Commerce

What is Purchasing Power Parity (PPP)?

Is an economic theory that states that whenever the exchange rate of two countries are in equilibrium; a product purchased in one will cost the same in the other.

What is a quota?

Limitation on the amount of a product that can be brought in (benefits the producer, not the customer)