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

* Singapore exceeds US

9 France
10 Australia
11 Taiwan
12 Netherlands
13 Sweden
14 Spain
15 Russia

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
Exporting
Strategy
Strategy

Direct export
Export merchants

Casual

Contractual
Contractual
Agreements
Agreements

Licensing
Licensing
Franchising
Franchising
Subcontracting
Subcontracting

Strategic
Direct
Strategic
Direct
Alliances
Alliances Investment
Investment
Without equity
With equity
Joint ventures

Level of Commitment

Building
Buying

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