International Marketing Chapter-2 International Marketing Environment

Chapter 2
International Marketing Environment
International Marketing
Chapter-2 International Marketing
Environment
Learning Objectives
What are the important

factors
Commodity agreements
State trading
Intra-regional trade
European Union
Role of GATT/WTO
Uruguay round and features
Environment
environment
Introduction
It is the differences in the marketing

environment which may make the
international business strategy different
from the domestic one
Business environment is very important
determinant of business strategy
Environment
Economic Environment
The nations of the world are broadly

classified as developing countries and
developed countries
The developing countries fall into two
categories viz. low income countries
and middle income countries
Economic environment of different
countries are International
not similar
Marketing
Environment
Social Environment
The social environment encompassing

the
religious
aspects;
language;
customs, traditions and beliefs, tastes
and preferences, social stratification,
social
institution
,
buying
and
consumption habits etc.
Social environment of different markets
differ vastly
Environment
Demographic Environment
Size of population, population growth

rates, age composition, family size,
nature of the family, income levels etc
have very significant implications for
business
The size of the population is an
important determinant of demand for
many products
Environment
Political and Government

Environment
The political environment includes the

characteristics and policies of the
political parties, the nature of the
constitution and government system
and policies
Regulation of the quality, prices,
packaging labeling etc. is also very
common
Environment
International Trading
Environment Trade Barriers
The main objective of imposing trade

barriers are to protect domestic
industries from foreign competition.
After the second world war, there was
a progressive liberalization of trade by
the developed countries.
Environment
Tariffs
Tariffs in international trade refer to the

duties
or
takes
imposed
on
internationally trade goods when they
cross the national borders
India has had one of the highest tariff
walls in the world
Environment
Non-Tariff Barriers
NTBs are new protection measures

There are tow categories
Licensing, quota etc. are used by

developing countries
Developed countries are using Voluntary
Export Restrains
Environment
Quotas
A quota on the export of a product from

a country may be imposed if the
government feels that exports in excess
of that will affect interests of the
domestic consumers
The aim of import quota, obliviously, is
to restrict the quantity of imports
Environment
Licensing
Quota
regulations
are
generally
administered by means of licensing
Under the import licensing system, the
prospective importers are obliged to
obtain a license from the licensing
authorities: the possession of an import
license is necessary to obtain the
foreign exchange to pay for the imports
Environment
Voluntary Export Restraints
VERs
are
bilateral
arrangements
instituted to restrain the rapid growth of
exports of specific manufactured goods
The exporting country voluntarily
restrains the export of the specified
product in order to either help the other
country to reduce its trade deficit or to
protect domestic industry
Environment
Administered Protection
Administration protection encompasses a

wide range of bureaucratic government
actions, which have grown in absolute as
well as relative importance over the last
decade or more
More recent VERs are in fact regarded as
the outgrowth of administered protection
actions
Environment
Customs procedures
Consular formalities
Government procurement
State trading
Monetary control
Environmental protection laws
Foreign exchange regulations
Environment
Impact of NTBs
Affects many exporting countries

Apparel exports is the most affected of
the developing countries because of
such barriers
Causes diversion of production and
exports
Environment
NTBs and Indias Exports
NTBs prevent the industry from making

full use of technological potential and
economies of scale for garment firms in
India.
The problem for NTBs for Indian
exports has increased recently
Environment
Commodity Agreements
International Commodity Agreements are

inter-governmental
arrangements
concerning the production of , and trade
in, certain primary products with a view to
stabilizing their prices.
In its final act, the UNCTAD-I made a
comprehensive statement on the functions
international commodity agreements
Environment
Quota Agreements
International quota agreements seek to

prevent a fall in commodity prices by
regulating their supply
Quota agreements have already been
tried in case of coffee and sugar, and
commodities like tea and bananas have
been
suggested
as
prospective
candidates for new agreements
Environment
Buffer Stock Agreements
International buffer stock agreements

seek to stabilize commodity prices by
maintaining the demand-supply balance
The buffer pool method has already
been tried in case of tin, cocoa, and
sugar, and commodities like rubber, tea
and copper has been suggested as
prospective candidates
for new
Marketing
agreements Chapter-2 International
Environment
Bilateral/Multilateral Contracts
Bilateral contract to purchase and sell

certain quantities of a commodity at
agreed prices may be entered into
between a major importer and exporter
of the commodity.
The best known example of this type of
commodity
agreement
is
the
International Wheat Agreement
Environment
Cartels
International cartels are agreements

between producer located in different
countries or between governments of
countries to restrict competition.
Examples include the Organization of
Petroleum Exporting Countries (OPEC)
and
International
Air
Transport
Association (IATA)
Environment
State Trading
State trading means import and export

transactions of a state owned or state
controlled agency involving purchase of
goods for commercial resale.
Recently ,developing countries have
significantly reduced the role of state
trading
Environment
State Trading in India

Objectives
To help reduce the difficulties experienced

in expanding trade with centrally planned
countries
To help maintain quantitative regulations
of imports and some equilibrium in the
prices of commodities and indigenous
products
To provide developmental finance for
organized production and boost exports of
small scale sector
Environment
Canalisation
Canalisation means established of state

monopoly in foreign trade
Most of the objectives of state trading
mentioned earlier are also the
objectives canalisation
Environment
Trading Blocs and Growing

Intra-Regional Trade
An important trend in international

trade has been the growth of intraregional trade
Regional integration schemes tend to
increase intra-regional trade
There is a worldwide trend towards
forming new regional arrangements and
to strengthen the
existing ones
Environment
Forms of Economic Integration
Free Trade Area

Customs Union
Common Market
Economic Union
Economic Integration
Environment
European Union
EU is the most successful of the

regional economic integration schemes
THE EEC which originally comprised sex
nations, namely, Belgium, France,
Federal Republic of Germany, Italy,
Luxembourg and Netherlands was
brought into being on 1st January,
1958,by the Treaty of Rome, 1957
Environment
The Treaty of Rome required every member

country to
Eliminate tariffs, quotas and other barrier on intracommunity trade

Devise a common internal tariff on imports from
rest of the world
All the free movement of factors of production
within the community
Harmonize their taxation and monetary policies
and social security policies
Adopt a common policy on agriculture, transport,
and competition in Industry
Environment
The Euro
Euro, the common currency of the EU,

was launched by 11 members of the
Union, on January 1, 1999.
The Monetary policy decisions for the
Euro are made by the European Central
Bank(ECB), which along with National
Central Banks(NCBs) of all EU
members.
Environment
Implications of Euro for India
The Euro land accounts for about onefifth of Indias foreign trade
Indian businessmen benefit, like their
counterparts in other countries , form
the benefits of a single currency instead
of many
Large opportunities are emerging in the
computer software
field.
Environment
Indo-EU Trade
The EC, taken as a single unit, is Indias

largest partner.
The EEC accounts for more than a onefifth of Indias total foreign trade
The EC is a very potential market and
India should pay sufficient attention to
taking advantage of this enlarging
market
Environment
Other Regional Groupings
The
European
Free
Trade
Association(EFTA),brought into being by
the Stockholm Convention , 1960
Latin American Free Trade Area-LAFTA
The Australia New Zealand Closer
Economic Relations Trade Agreement
North American Free Trade Agreement
Environment
Other Regional Groupings
Central American Common Market

CACM
Gulf Cooperation Council
Preferential Trade Area
The Economic Community of Central
African States- CEEAC
The Association of South East Asian
Nations-ASEAN
Environment
SAARC
South Asian Association for Regional

Cooperation
SAARC involves seven countries namely
, India, Bangladesh, Pakistan, Nepal ,
Bhutan, Sri Lanka and Maldives.
Environment
SAPTA
SAARC Preferential Trading Agreement

Basic Principles
Overall reciprocity and mutuality of

advantages
Step-by-step negotiations and extension of
PTA
Inclusions of all types of products
Special and favorable treatment to Least
Development Countries
Environment
Indo-Lanka Free Trade

Agreements
India has offered to permit as much as

1000 items of zero duty from Sri Lanka
and Sri Lanka will allow duty free
imports of 900 items from India
As India is a very large market, the FTA
is likely to benefit Sri Lanka a lot an the
benefits to India
Environment
GATT/WTO and Trade

Liberalization
The desire of nations to liberalize trade

resulted in the establishment of the
General Agreement on Tariffs and
Trade
As a result of Uruguay Round the GATT
was transformed into a World Trade
Organization (WTO) with effect from
January , 1995
Environment
India is one of the founder members of

the IMF, World Bank, GATT and the
WTO
The primary objective of GATT was to
expand
international
trade
by
liberalizing trade so as to bring about
all-round economic prosperity.
Environment
GATT-Principles
1.
2.
3.
Non-discrimination
Prohibition of Quantitative Restrictions
Consultation
Environment
8th Uruguay Round

1.
2.
3.
Reducing specific trade barriers and

improving market access
Strengthening GATT disciplines
Problems of liberalization of trade in
services, trade related aspects of
intellectual property rights(TRIPS) and
trade
related
investment
measures(TRIMs)
Environment
Differences between GATT and

WTO
GATT
WTO
Ad hoc and provision
Agreements
are
permanent
Contracting parties
Has members
Allowed existing domestic
legislation to continue Does not permit this
even if it violated a GATT
agreement
Less
powerful, dispute More powerful , dispute
settlement system was
settlement mechanism is
slow and less efficient, it
faster and more efficient,
ruling could be easily
very
difficult to block the
International
Marketing
blocked
rulings
Environment
Functions of WTO
The WTO facilitate the implementation,

administration and operation and the
objectives of the Multilateral Trade
Agreements
Forum for negotiations among its
members concerning their multilateral
trade relations
Environment
Understanding on rules and procedures

governing the settlement of disputes
Administration of the Trade Review
Mechanism
Environment
Salient Features of UR
Agreements
Tariff Barriers
Expansion of tariff bindings

Reduction in the tariff rates
Expansion of duty-free access
Agricultural trade
Tariffication
Tariff binding
Tariff cuts
Reduction in subsidies and domestic support
Environment
General Agreement on Trade

in Services-GATS
Extends
multilateral
rules
and
disciplines to services is regarded as
landmark achievement of the UR
The GATS defines services as the
supply of services
Environment
Coverage of GATS
Cross-border supply
Commercial presence
Consumption abroad
Movement of personnel
Environment
Trade Related Investment

Measures(TRIMS)
TRIMS refers to certain conditions or

restrictions imposed by a government in
respect of foreign investment in the
country.
Local content requirement

Trade balancing requirement
Trade and foreign exchange requirements
Domestic sales requirements
Environment
Trade Related Aspects of Intellectual

Property Rights(TRIPS)
Intellectual Property Rights may be

defined as information with a
commercial value
IPRs may be legally protected by
patents, copy rights, industrial designs,
geographical indications, and trade
marks.
Environment
Coverage of TRIPS
Copyright and related rights

Trade mark
Geographical indications
Industrial designs
Patents
Layout designs
Undisclosed information
Environment
Indian Patent Law and UR

Agreement
There are significant differences between the

UR agreement on patents and the Indian
Patent Act, 1970
Under the Indian act, patentability of inventions
relating to substances intended for use as food,
drug or medicines, or substance produced by
chemical processes is limited to the methods or
processes of manufacture only.
While as per UR requires both product and
process patents
Environment
Anti-dumping Measures
A product is regarded as dumped when its

export price is less that the normal price in
the exporting country or its cost of
production plus a reasonable amount for
administrative , selling and any other costs
and for profits
Anti-dumping measure can be employed
only if dumped imports are shown to
cause serious damage to the domestic
industry in the importing country
Environment
Safeguard Actions
Members may take safeguard actions, i.e.

import restrictions to protect a domestic
industry from the negative effect of an un
unforeseen import surge, if a domestic
industry is threatened with serious injury
Safeguard measures would not be
applicable to developing countries where
their share in the member country's
imports of the product concerned is
relatively small
Environment
Implementation Issues
The developing countries are virtually

deceived in several cases as the UR
Agreement have not been implemented
in letter and spirit by the developed
countries .
They have resorted to covert measures
to deny the developing countries the
legitimate benefits of the proposed
liberalizations.
Environment
Doha Declaration
The Doha Declaration comprising of a

main Declaration on TRIPS, Public
Health
and
a
decision
on
implementation of related issues and
concerns-launches the future work
program me of the WTO and includes
elaboration and timetables for the
current negotiations in agriculture and
services in aChapter-2
range
of other
International
Marketing issues
Environment
United Nations Conference on

Trade and Development
To promote international trade

To formulate principles of and policies
on international trade and related
problems of economic development
To
negotiate
multinational
trade
agreements
To make proposals for putting its
principles and International
policies
into effect.
Marketing
Environment
United Nations Industrial

Development Organization-UNIDO
Direct technical assistance to industries

and in-plant training programmes
whereby groups of technicians and
engineers from developing countries
facing a common industrial problem are
brought together to consider, how
industry in the more advanced countries
avoid or solves similar problems
Environment
International Trade Centre
ITC can advise developing countries on

their overall approach to marketing
communications , as well as on
individual information and publicity
activities
ITC in brief assistances in marketing
areas to member countries
Environment
International Legal
Environment
The legal systems that exist in different

countries can be classified into three
categories, viz, common law, civil law
and theocratic law
Environment
Settlement of Disputes
Disputes are not uncommon in

international trade. Disputes of certain
nature are settled by the WTO or in
accordance WTO principles
In other cases there are two avenues
Judicial dispute settlement

Extra-judicial dispute settlement
Environment
Laws of Foreign Countries
Regulations related products

Packing and labeling regulations
Regulation of price
Regulation of promotion
Regulation of trade practices
Environment
Summary
The environmental factors which affect

international
business
involved
economic , social, demographic, political
,
government
and
technological
environments
Trade barriers , blocks and agreements
plays vital role in international trade
Environment
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Chapter 2

International Marketing Environment

What are the important

It is the differences in the marketing

The nations of the world are broadly

The social environment encompassing

Size of population, population growth

Political and Government

The political environment includes the

The main objective of imposing trade

Tariffs in international trade refer to the

NTBs are new protection measures

Licensing, quota etc. are used by

A quota on the export of a product from

Voluntary Export Restraints

Administration protection encompasses a

Affects many exporting countries

NTBs and Indias Exports

NTBs prevent the industry from making

International Commodity Agreements are

International quota agreements seek to

Buffer Stock Agreements

International buffer stock agreements

Bilateral contract to purchase and sell

International cartels are agreements

State trading means import and export

State Trading in India

To help reduce the difficulties experienced

Canalisation means established of state

Trading Blocs and Growing

An important trend in international

Forms of Economic Integration

Free Trade Area

EU is the most successful of the

The Treaty of Rome required every member

Eliminate tariffs, quotas and other barrier on intracommunity trade

Euro, the common currency of the EU,

Implications of Euro for India

The EC, taken as a single unit, is Indias

Other Regional Groupings

Other Regional Groupings

Central American Common Market

South Asian Association for Regional

SAARC Preferential Trading Agreement

Overall reciprocity and mutuality of

Indo-Lanka Free Trade

India has offered to permit as much as

GATT/WTO and Trade

The desire of nations to liberalize trade

India is one of the founder members of

8th Uruguay Round

Reducing specific trade barriers and

Differences between GATT and

The WTO facilitate the implementation,

Understanding on rules and procedures

Expansion of tariff bindings

General Agreement on Trade

Trade Related Investment

TRIMS refers to certain conditions or

Local content requirement

Trade Related Aspects of Intellectual

Intellectual Property Rights may be

Copyright and related rights