EXAM 1 (Ch. 1-6)
Six Types of Nontariff Barriers
(1) Specific Limitations on Trade: (2) Customs and Administrative Entry Procedures: (3) Standards: (4) Government Participation in Trade: (5) Charges on Imports: (6) Others:
International Marketing Involvement
(more reactive in nature, and do not involve careful strategic thinking about international marketing): No Direct Foreign Marketing Infrequent Foreign Marketing (involved in strategic planning and decisions about international marketing) Regular Foreign Marketing International Marketing Global Marketing
Resources
- A nation's demand for a particular mineral or energy source does not necessarily coincide with domestic supply. - In the underdeveloped world, human labor provides the preponderance of energy. - The principal supplements to human energy are: animals wood fossil fuel nuclear power to a lesser and more experimental extent the ocean's tides, geothermal power, and the sun
The Orientation of International Marketing
- Environmental/cultural approach - Relate the foreign environment to the marketing process - Illustrate how culture influences the marketing task
The Omnibus Trade and Competitiveness Act (OTCA of 1988)
- Many countries are allowed to trade freely with the United States but do not grant equal access to U.S. products in their countries. - To ease trade restrictions, the OTCA focused on correcting perceived injustices in trade practices. - It dealt with trade deficits, protectionism, and the overall fairness of our trading partners.
3 basic areas of GATT
- Trade shall be conducted on a nondiscriminatory basis - Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas - Consultation shall be the primary method used to solve global trade problems
Trade Barriers
- are one of the major issues confronting international marketers - They can be tariff or nontariff barriers - Countries continue to use nontariff barriers for a variety of reasons - Tariff barriers have reduced considerably in recent years
Port of Corinth
- crucial trading center and port serving Greece and its neighbors - In ancient times ships were unloaded in Corinth and literally dragged across the 6-kilometer isthmus and reloaded, all to save the weeks-long voyage by sail between the Aegean and Ionian Seas.
Climate and Topography
- need to be aware of these features that can affect the uses and functions of products and equipment Extremes in altitude, humidity, and temperature Products that perform well in temperate zones may deteriorate rapidly or require special cooling or lubrication to function adequately in tropical zones Within even a single national market, climate can be sufficiently diverse to require major adjustments Different seasons between the northern and southern hemispheres also affect global strategies Mountains, oceans, seas, jungles, and other geographical features can pose serious impediments to economic growth and trade
voluntary export restraints (VERs) or orderly market agreements (OMAs).
- similar to quotas - A VER is called voluntary because the exporting country sets the limits; however, it is generally imposed under the threat of stiffer quotas and tariffs being set by the importing country if a VER is not established.
General Agreement on Tariffs and Trade (GATT)
- the first multilateral, legally enforceable agreement covering trade and investment in the services sector. - It provides a legal basis for future negotiations aimed at eliminating barriers that discriminate against foreign services and deny them market access. - Specific market-opening concessions from a wide range of individual countries were achieved, and provision was made for continued negotiations to liberalize telecommunications and financial services further.
Factors Favoring Faster Internationalization
-Companies with either high technology and/or marketing-based resources are better equipped to internationalize than more traditional manufacturing companies -Smaller home markets and larger production capacities favor internationalization -Firms with key managers well networked internationally are able to accelerate the internationalization process
History is Subjective
1. Historical events are viewed from one's on biases and SRC 2. Must understand a nation's subjective perception of its own history 3. Latin American Vs North American perception of history
world bank group five institutions and services
1. lending money to the governments of developing countries to finance development projects in education, health, and infrastructure 2. providing assistance to governments of the poorest developing countries (per capita incomes of $925 or less) for developmental projects 3. lending directly to help strengthen the private sector in developing countries with long-term loans, equity investments, and other financial assistance 4. providing investors with investment guarantees against "noncommercial risk," such as expropriation and war, to create an environment in developing countries that will attract foreign investment 5. promoting increased flows of international investment by providing facilities for the conciliation and arbitration of disputes between governments and foreign investors; it also provides advice, carries out research, and produces publications in the area of foreign investment law
No Direct Foreign Marketing
A company that does not actively cultivate customers outside the country - Products may reach foreign market via domestic wholesalers/distributors who sell abroad without the knowledge of the producer - Sales done by trading companies/foreign customers who directly contact the firm - Products gain popularity to foreign buyers through websites
Infrequent Foreign Marketing
A company with temporary surpluses caused by variations in production levels or demand may send their products for marketing overseas -Sales to foreign markets are made as goods become available -As domestic demand increases and absorbs surpluses, foreign sales are withdrawn
International Marketing
A firm that is fully committed to international sales - Seeks markets all over the world and sells products that are a result of planned production for markets in various countries - Planning generally entails not only the marketing but also the production of goods outside the home market
Regular Foreign Marketing
A firm with permanent productive capacity devoted to the production of goods and services to be marketed in foreign markets
Successful Marketing Program
A program designed for optimal adjustment to the uncertainty of the business climate
Roosevelt Corollary
An extension of the Monroe Doctrine stating that not only would the United States prohibit non-American intervention in Latin American affairs, but it would also police the area and guarantee that Latin American nations met their international obligations. Using this in: - 1905, the Dominican Republic was forced to accept the appointment of an American economic adviser, who quickly became the financial director of the small state - 1903, the Panama Canal Zone was acquired from Colombia - 1906, Cuba was forced to accept the formation of a provisional government
import licenses
As a means of regulating the flow of exchange and the quantity of a particular imported commodity, countries often require_______
Foreign-Owned Companies in the US
Automobiles (Honda, BMW, Mercedes) Appliances (LG Electronics, Frigidaire) Convenience stores and restaurants (7-Eleven, Ben & Jerry's) News and entertainment (The Wall Street Journal, Pearle Vision, Universal Studios, RCA) Hotels (Holiday Inn, Waldorf Astoria)
Success in International Marketing
Awareness of the environment with which marketing programs will be implemented - Ability to assess and adjust properly to the impact of a strange environment
Tariff barriers weaken
Balance-of-payments positions Supply-and-demand patterns International relations (they can start trade wars)
Trade routes (link people and economies)
Bind the world together Minimize distance Break natural barriers Curtail lack of resources Bridge fundamental differences
Blocked currency
Blockage is accomplished by refusing to allow importers to exchange its national currency for the sellers' currency
Two Types of Monetary Barriers
Blocked currency Government approval
Second Opium War (1857-1860)
British and French forces destroyed the summer palace in Beijing Signaled more freedom for foreign traders Allowed Christian evangelism throughout the country
First Opium War and the Treaty of Nanjing (1839-1842)
British traders forced a gateway into xenophobic China
Global Marketing
Companies that treat the world, including their home market, as one market - Market segments are defined by income levels, usage patterns, or other factors that frequently span countries and regions - More than half of sales revenues come from abroad
Protectionism
Countries use legal barriers, exchange barriers, and psychological barriers to restrict the entry of unwanted goods The reality of trade is that this is a world of tariffs, quotas, and nontariff barriers designed to protect a country's markets from foreign investment Although the World Trade Organization has been effective to some extent in reducing tariffs, countries still resort to these measures
Culture's Pervasive Impact
Culture affects every part of our lives How we spend money How we consume How we sleep
Rural and Urban Migration
Desire for greater access to sources of education, healthcare, and improved job opportunities
Social Responsibility and Environmental Management
Environmental protection is NOT an optional extra; it is an essential part of the complex process of doing business. Global issue rather than national Poses common threats to humankind and thus cannot be addressed by nations in isolation Ways to stem the tide of pollution and to clean up decades of neglect are special concern to governments and businesses
China (Vigilant of Foreign Influence)
First Opium War and the Treaty of Nanjing (1839-1842) Second Opium War (1857-1860) Taiping Rebellion (1851-1864)
What thrives in times of peace?
Global commerce international trade flourishes as relationships between countries improve. This has a ripple effect and a positive impact on the economies of all countries involved.
(4) Government Participation in Trade
Government procurement policies Export subsidies Countervailing duties Domestic assistance programs
Cultural Values
Hofstede, who studied over 90,000 people in 66 countries, found that the cultures differed along four primary dimensions. 1) Individualism/Collective Index (IDV) 2) Power Distance Index (PDI) 3) Uncertainty Avoidance Index (UAI) 4) Masculinity/Femininity Index (MAS)
Government approval
In countries where there is a severe shortage of foreign exchange, an exchange permit to import foreign goods is required from the government. This encourages the importation of goods the government deems desirable and discourages importation of goods the government does not want by adjusting the exchange rate.
(Origins of Culture:) Social Institutions
Includes family, religion, school, the media, government, and corporations Aspects that are interpreted differently within each culture: -The positions of men and women in society -The family -Social classes -Group behavior -Age groups -How societies define decency and civility
Tariff barriers increase
Inflationary pressures Special interests' privileges Government control and political considerations in economic matters The number of tariffs they beget via reciprocity
Trade-Related Investment Measures (TRIMs)
It established the basic principle that investment restrictions can be major trade barriers and therefore are included, for the first time, under GATT procedures.
Taiping Rebellion (1851-1864)
Loss of confidence in the Chinese government
Tariff barriers restrict
Manufacturers' supply sources Choices available to consumers Competition
Birthrates in western Europe and Japan (have been decreasing since the early or mid-1960s, why?)
More women are choosing career over children Couples are deciding to remain childless
Cultural Adjustment
Most challenging and most important while confronting international markets International marketers must: adjust marketing efforts to cultures which they are not attuned to be aware of frames of reference they are using in making decisions or evaluating the potential of the market an important factor in determining or modifying a marketer's reaction to situations—social and even nonsocial
(Social Institutions:) Government
Most often governments try to influence the thinking and behaviors of adult citizens for the citizens' "own good." In some countries, the government owns the media and regularly uses propaganda to form "favorable" public opinions. Other countries prefer no separation of church and state. Governments also affect ways of thinking indirectly, through their support of religious organizations and schools. Governments influence thinking and behavior through the passage, promulgation, promotion, and enforcement of a variety of laws affecting consumption and marketing behaviors.
(Social Institutions:) Corporations
Multinational companies efficiently distribute new products and services based on new ideas from around the word. As a result: Cultures change. New ways of thinking are stimulated.
Events and trends affecting global business
Natural disasters Wars and national conflict Advancement in information technology
Standards
Nontariff barriers to protect health, safety, and product quality. sometimes used in an unduly stringent or discriminating way to restrict trade, but the sheer volume of regulations in this category is a problem in itself.
U.N. Projections for 2050
People Aged 65 to 84 - From 400 million to 1.3 billion (3x increase) 85 years and over - From 26 million to 175 million (6x increase) Over 100 years - From 135,000 to 2.2 million (16x increase)
(5) Charges on Imports
Prior import deposit subsidies Administrative fees Special supplementary duties Import credit discriminations Variable levies Border taxes
Arguments for Protectionism
Protection of an infant industry Protection of the home market Need to keep money at home Encouragement of capital accumulation Maintenance of the standard of living and real wages Conservation of natural resources Industrialization of a low-wage nation Maintenance of employment and reduction of unemployment National defense Enhancement of business size Retaliation and bargaining
(1) Specific Limitations on Trade
Quotas Import licensing requirements Proportion restrictions of foreign to domestic goods (local content requirements) Minimum import price limits Embargoes
Global Population
Recent estimates put world population at more than 7 billion people Expected to grow to about 9.5 billion by 2050 Almost all the projected growth will occur in less developed regions 1.2 billion jobs must be created to accommodate new entrants through 2025
(3) Standards
Standard disparities Intergovernmental acceptances of testing methods and standards Packaging, labeling, and marking
Communication Links
Telegraph Telephone Television Computer Mobile Phones Satellite internet
Manifest Destiny and The Monroe Doctrine
The basis of U.S. foreign policy in the 19th and 20th centuries
(Social Institutions:) Religion
The impact of religion on the value systems of a society and the effect of value systems on marketing must not be underestimated. - In most cultures, the first social institution infants are exposed to outside the home takes the form of a church, mosque, shrine, or synagogue The influence of religion is often quite strong, so marketers with little or no understanding of a religion may readily offend deeply.
The International Marketing Task
The inner circle depicts the controllable elements The second circle shows the uncontrollable domestic elements that have some effect on foreign-operation decision The third (outer) circle represents the uncontrollable elements of the foreign environment for each foreign market Each foreign market presents different problems involving some or all of the uncontrollable elements Greater possibility of variety of foreign environmental factors to deal with
(Social Institutions:) School
The literacy rate of a country is a potent force in economic development. Communicating with a literate market is much easier than communicating with one in which the marketer must depend on symbols and pictures.
Foreign Environment
The outer circle in in Exhibit 1.3 corresponds to a significant source of uncertainty, the uncontrollables in the foreign environment Political stability -Political/legal forces Class structure -Competitive forces -Level of technology -Geography -Cultural forces Economic climate -Structure of distribution I-nfrastructure
international marketing
The performance of business activities designed to plan, price, promote, and direct the flow of a company's goods and services to consumers or users in more than one nation for a profit
Controlling Population Growth
The prerequisites to population control are: Adequate incomes Higher literacy levels Education for women Universal access to healthcare Family planning Improved nutrition Basic change in cultural beliefs
(Social Institutions:) The Media
The relative performance of educational systems (Exhibit 4.6) is seen as a leading indicator of economic competitiveness. Media time (TV and increasingly the Internet and mobile phones) has replaced family time.
Domestic Environment
The second circle in Exhibit 1.3 corresponds to the uncontrollables in the domestic environment such as: - political and legal forces - economic climate and competition
(The Traditional Definition of)Culture
The sum of the values, rituals, symbols, beliefs, and thought processes that are learned and shared by a group of people, then transmitted from generation to generation Resides in the individual's mind Recognizes that large collectives of people can be like-minded
(Social Institutions:) Family
The technology of birth control has tremendously affected families and reduced family sizes around the world. Family forms and functions also vary substantially around the world, even around the country. The ratio of male to female children is affected by culture (as well as latitude). All these differences lead directly to differences in how children think and behave.
why governments establish tariffs (and a variety of nontariff barriers)
To encourage development of domestic industry To protect existing industry Include quotas, boycotts, monetary barriers, and market barriers Against imports and against foreign businesses
Global life expectancy (has grown more in the past 50 years than over the previous 5,000 years, why?)
Today, the over-age-65 group is 14%, and by 2030 this group will reach 25% in 30 different countries The number of "old old" will grow much faster than the "young old"
World Trade Organization (WTO)
Unlike GATT, _____ is an institution, not an agreement - It sets many rules governing trade between its 160 members - provides a panel of experts to hear and rule on trade disputes between members, and, unlike GATT, issues binding decisions
(2) Customs and Administrative Entry Procedures
Valuation systems Antidumping practices Tariff classifications Documentation requirements Fees
five elements of culture
Values Rituals Symbols Beliefs Thought processes
(6) Others
Voluntary export restraints Orderly marketing agreements
Religion
____ plays a major role in attitudes about family size and family planning. Many _______ discourage or ban family planning and thus serve as a deterrent to control.
quota
a specific unit or dollar limit applied to a particular type of good.
government boycott
an absolute restriction against the purchase and importation of certain goods and/or services from other countries.
Self-Reference Criterion (SRC)
an unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions.
International Monetary Fund (IMF) and the World Bank Group
are two global institutions created to assist nations in becoming and remaining economically viable. These organizations play important roles in international trade by: helping maintain stability in the financial markets assisting countries that are seeking economic development and restructuring
public boycott
can be either formal or informal and may be government sponsored or sponsored by an industry.
Internationalization of US business causes companies to have to
deal with foreign customers, competitors, and suppliers face competition from domestic and foreign firms Foreign direct investment in the United States is more than $3 trillion.
Confucian philosophy
emphasizes the basic virtue of loyalty "of friend to friend, of wife to husband, of child to parent, of brother to brother, but, above all, of subject to lord," that is, to country. A fundamental premise of Japanese ideology reflects the importance of cooperation for the collective good.
Trade-Related Aspects of Intellectual Property Rights (TRIPs)
establishes substantially higher standards of protection for a full range of intellectual property rights (patents, copyrights, trademarks, trade secrets, industrial designs, and semiconductor chip mask works) than are embodied in current international agreements, and it provides for the effective enforcement of those standards both internally and at the border.
origins of culture
geography, history, political economy, technology, social institutions, religion
History
helps define a nation's "mission." how it perceives it neighbors how it sees its place in the world how it sees itself
Economic climate and competition
if internal economic conditions deteriorate, restrictions against foreign investment and purchasing may be imposed to strengthen the domestic economy
Global awareness
involves knowledge of world market potentials and global economic, social, and political trends.
The Monroe Doctrine
is the cornerstone of U.S. foreign policy, proclaiming that - No further European colonization in the New World - Abstention of the United States from European political affairs - Nonintervention by European governments in the governments of the Western Hemisphere
Ethnocentrism
is the notion that people in one's own company, culture, or country know best how to do things.
International Monetary Fund
maintain order in the international monetary system
Manifest Destiny
means that Americans were a chosen people ordained by God to create a model society. - Referred to the territorial expansion of the United States from the Atlantic to the Pacific - Justified the U.S. annexation of Texas, Oregon, New Mexico, and California, and U.S. involvement in Cuba, Alaska, Hawaii, and the Philippines
Geography
one of the uncontrollable elements that international marketers have to deal with. has three major components: climate and topography, economic growth and development, and natural resources. Includes an understanding of how a society's culture and economy are affected as a nation struggles to supply its people's needs within the limits imposed by its physical makeup
Political and legal forces
political decision involving foreign policy can have a direct effect on a firm's international marketing success
embargo
refusal to sell to a specific country
Economic boom in north america (in the late 1990s is largely due to:)
the end of the Cold War opening of the former communist countries to world trading system
world bank group
to promote economic development
Masculinity/Femininity Index (MAS),
which focuses on assertiveness and achievement
Power Distance Index (PDI)
which focuses on authority orientation Measures the tolerance of social inequality, that is, power inequality between superiors and subordinates within a social system.
Uncertainty Avoidance Index (UAI),
which focuses on risk orientation Measures the tolerance of uncertainty and ambiguity among members of a society
Individualism/Collective Index (IDV),
which focuses on self-orientation Refers to the preference for behavior that promotes one's self-interest
