World Trade

World trade refers to the flow of goods and services among different countries - the value of all the exports and imports of the worlds nations Trade Balance Almost 25% world trade is non-cash based

Competitive Advantage of Nations

Michael Porter* describes four keys to a nations competitive advantage relative to other countries
Demand conditions Related and supporting industries Factor conditions Company strategy, structure, rivalry

* Often referred to as Porters Diamond

Competitive Advantage for Companies

Organizations that are successful in highly competitive home markets should succeed in international markets
Success requires an international plan, resources, marketing mix adaptation

Conflict between standardization and customization

Borders and Roadblocks

Protectionism is a government policy which seeks to provide home companies an advantage over foreign companies by implementing trade barriers
Import quotas Embargos Tariffs Red tape

Economic Communities
Countries band together to form an alliance
Bi or multilateral trade agreements

Such economic communities coordinate trade policies and ease restrictions on trade across the member borders
EU (European Union) NAFTA (North American Free Trade Agreement) ASEAN (Association of Southeast Asian Nations

WTO
Objective: to help trade flow smoothly, freely, fairly, and predictably Acts as forum for negotiations among countries, settles trade disputes, and assists developing countries with training programs General Agreement on Tariffs and Trade (GATT) developed by UN after WW II to moderate trade conflicts, replaced (1995) by WTO

Top 15 Wired Countries

1 2 3 4 5 6 7 8 USA* Japan Germany Canada UK South Korea China Italy 9 France 10 Australia 11 Taiwan 12 Netherlands 13 Sweden 14 Spain 15 Russia

* Singapore exceeds US

The Global Marketing Environment

Economic Environment Political and Legal Environment Cultural Environment

Economic Development
Less Developed Countries (LDC)
lowest stage of economic development

Developing Countries
economies shift from agriculture to industry; standards of living, education, and use of technology rise

Developed Countries
economically advanced countries; the G7 countries (U.S., U.K., Canada, France, Italy, Germany, Japan)

Political and Legal Environment

Political Issues
economic sanctions nationalization expropriation

Regulatory Issues
product requirements local content rules taxation

Human Rights Issues

Cultural Environment
Values Norms and Customs - handed down from the past & controls basic behaviors Symbols and Superstitions - colors, numbers, words, food, gestures Language Ethnocentricity - preference for local products Cultural Change - culture shock, globalization

Economic Environment
Indicators of Economic Health Demographic Characteristics Economic Infrastructure Internet Coverage Levels of Economic Development

Indicators of Economic Health

Gross Domestic Product (GDP) - the dollar value of goods and services a country produces within its borders within one year Gross National Product (GNP) - the value of all goods and services produced by a countrys individuals or organizations whether in or out of country borders

Country Comparisons
Total GDP
$9.963 trillion $3.15 trillion $4.5 trillion $113.9 billion $720.8 billion

Country
USA Japan China Hungary Spain

Economic Indicators
Countrys Demographic Characteristics
birth rates size of different age groups

Economic Infrastructure
quality of a countrys distribution, financial, and communications systems

Internet Coverage
percent of population online

Ethnocentrism
Buy American

The tendency to prefer products or people of ones own culture over those from other countries Ethnocentric consumers are likely to feel ethically wrong in buying products from other countries because they want to support their domestic economy

Market Entry Strategies

Domestic Strategy Exporting Contractual Strategic Strategy Agreements Alliances Direct Investment

Direct export Export merchants

Licensing Franchising Subcontracting

Without equity With equity Joint ventures

Building Buying

Casual

Level of Commitment

Significant

Standardization versus Localization

Standardization suggests that greater efficiencies and economies of scale are generated when all marketing is the same in each country Localization recognizes that customer satisfaction will be highest when the marketing mix is tailored to local needs and wants

Product Decisions
Sell the same product in the new market (straight extension strategy) Modify the product for the new market (product adaptation strategy) Develop a brand new product for that new market (product invention strategy)

Promotional Decisions
Will the same promotional message work in the different markets? Standardized strategies are more likely to work when cultural factors are similar, and when target customers are in cosmopolitan urban areas

Price Decisions
Costs associated with transportation, tariffs, insurance, differences in currency exchange rates, and bribes may make a product more expensive in one country than another Gray marketing - unauthorized (but legal) imports of products and selling for less than authorized distributors Dumping - a company prices its products lower than at home in order to establish a market or to dispose of merchandise