Chap.

4 Global Analysis
Created @November 25, 2022 3:05 PM

Class Marketing

Type Seminar

Materials

Reviewed

Marketing Review

Nature of International Trade

The global marketplace exists because countries need to trade with each other.

Continues to expand because of the reduction of trade restrictions

throughout the world.

Everyone in the world are potential customers and potential employees and
potential employers.

Reduce Trade restrictions allow for the increase in international trade

International Trade: the exchange of goods among nations.

Imports: goods and services purchased from other countries.

Exports: goods and services sold to other countries.

These exchanges occur between businesses but are controlled by

governments.

Interdependence of Nations

Most countries don't produce all the goods they need

They receive or send them to and from other countries.

Economic interdependence happens because each country possesses unique

resources and capabilities.

This principle is fundamental to marketing in a global environment.

Chap. 4 Global Analysis 1

 Absolute advantage and comparative advantage

Nations specialize in certain areas due to availability of resources

An absolute advantage occurs when a country has economic resources that

allow it to produce a product at a lower unit cost than any other country.

Brazil has an absolute advantage in coffee over most other countries.

Comparative advantage is when a country has an absolute advantage in more

than one product.

They must compare the unit cost of each product.

The U.S has a comparative advantage in tech products due to infrastructure,

raw materials, and educated workforce.

Main products include airplanes, computers, high-tech machinery,

entertainment, and telecommunications.

Some emerging nations have large, unskilled labor forces available at low
costs.

Labor intensive industries rely on these nations.

Benefits of International Trade

Consumers, producers, workers, and nations benefit from international trade in

different ways.

Consumers

Competition from foreign companies

Pushes for higher quality and lower prices

Larger variety of products

Producers

More opportunities for companies

Increased profits

Examples include Hewlett Packard, IBM, and HJ. Heinz reports that 50
percent of their sales are made overseas.

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 One third of the profits of U.S. businesses come from international trade
and foreign investments.

Both large and small businesses sell worldwide.

Workers

Higher employment rates

Toyota has more than 30,000 Americans employed in the U.S.

Nations

Increased foreign investment

Improves standard of living

More options for citizens

Economic alliances and political alliances to foster peace

Government Involvement in International Trade

All nations control and monitor their trade with businesses in other countries

The U.S monitors imports through the customs division of the U.S. treasury
department.

All goods that enter the U.S are subject to search and review by U.S.
customs officials.

Customs requirements of other nations must also be met.

Balance of trade

Nations must keep track of their international trade to be aware of their

economic status.

Balance of trade: The difference in value between exports and imports.

Trade surplus occurs when a nation exports more than it imports

Trade deficit occurs when a nation imports more than it exports

Trade deficit in the U.S is due to Americans purchasing goods and services
at higher rates than other nations.

Unfavorable balance of trade reduces revenue.

Chap. 4 Global Analysis 3

 When more money leaves a nation than enters it, that country is in debt
and is called a debtor nation.

Can lead to unemployment

Trade Barriers

Many countries around the world favor and practice free trade.

This is the commercial exchange between nations that is conducted on free

market principles without any regulations.

However some nations impose trade barriers or restrictions

These control the flow of goods and services among nations

The three main types of trade barriers are:

Tariffs

Tax on imports

Used to produce revenue for a country

Used in the U.S. before the establishment of federal income tax in

1913.

Still exist today but are as low as 25 cents per item or pound.

A protective tariff is high to increase the price of imported goods so that

domestic products can compete with them.

This protects domestic jobs and new domestic industries from

foreign competition, especially foreign nations.

Quotas

Limits either the quantity or the monetary value of a product that may
be imported.

The US can put a quota on the amount of cars entering the nation
which can control the influx of cars in the U.S.

Gives a nation's own industry a better chance at competition over

foreign industries.

Can be used to improve trade relations between the two nations.

Chap. 4 Global Analysis 4

 Embargoes

Is a total ban on specific goods entering and leaving a country.

Can be imposed for health reasons.

More often used for political reasons.

Can last very long times

Protectionism is a government's establishment of economic policies that

systematically restrict imports in order to protect domestic industries.

Opposite of free trade

Is done through the use of tariffs, quotas and embargoes

A country can choose to conduct very little trade

Protectionist countries use their own resources to meet the needs of its
population.

Hard for nations that do not have many resources.

Governments can accomplish the same goal by subsidizing domestic

industries.

Allows them to be more competitive against foreign competition.

Countries may retaliate against other countries' tariffs or quota.

A cycle of tariffs and quotas is called a trade war.

Trade Agreements and Alliances

Governments make agreements with each other to establish guidelines for

international trade and trade alliances.

The World Trade Organization is a global coalition of nations that make the
rules governing international trade.

Formed in 1995 as the successor to the GATT (General Agreement on

Tariffs and Trade).

GATT was an international trade agreement designed to open markets

and promote global free trade.

GATT reduced tariffs and created a common set of trading rules.

Chap. 4 Global Analysis 5

 GATT had no enforcement power so WTO was created.

Studies important issues and evaluates the health of the world economy.

Deals with activities that GATT was unable to address.

Supporters of the WTO and free trade stress that globalization and the
expansion of trade has created enormous wealth in both rich and previously
poor countries.

Free trade supporters believe a borderless economy is the only way to

achieve global prosperity.

This requires a set of rules that are universally accepted.

Critics of the WTO raise concerns about democracy, labor rights, and
the environment.

North American Free Trade Agreement is an international trade agreement

among the U.S, Canada and Mexico.

Went into effect on January 1, 1994

The principal benefit is to increase trade with Mexico.

Abolish all trade barriers and investment restrictions among the three
countries.

Tariffs were eliminated on thousands of goods.

The European Union is Europe's trading bloc.

Created by the Maastricht Treaty and established free trade among its
member nations.

Created a single European currency (the euro) and a central bank.

To be considered part of the European Union, all countries had to conform

to the EU's political, economic, and legal standards.

Doing Business Internationally

The global marketplace has been growing with the increased acceptance of
capitalism around the world, advance in tech and reduction of trade barriers.

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 Global news coverage is instantaneous, connecting people throughout the
world.

These factors encourage business into foreign countries.

Trade agreements by governments set the guidelines for businesses to operate

in the global marketplace.

Means importing, exporting,licensing, contract manufacturing, joint

ventures, or foreign direct investment.

Importing

Involves purchasing goods from a foreign country.

A domestic company that wants to expand its product selections can begin
importing goods.

Products imported into the U.S must meet the standards imposed by the Food
and Drug Administration.

A quota can be used to limit entry of certain goods into the country.

If a quota is reached no more of that item can enter the country.

U.S customs keep shipments above a quota.

Customs brokers are specialists licensed by the U.S treasury

department

These people know the laws, procedures and tariffs governing imports.

Exporting

Enter into the global market with minimal risk and control.

Domestic companies that want to export their goods and services can get help
from the US government through its internet export portal at its BuyUSA web
site.

Licensing

Licensing involves letting another company, or licensee, use a trademark,

patent, special formula, company name, or some other intellectual property for
a fee or royalty.

Chap. 4 Global Analysis 7

 Pros and Cons

The product can be made with instructions but if the product fails future
entry into the market is hard.

Franchising

In a franchise agreement, a franchisor grants the franchisee the rights to

operate under the company name.

The agreement involves following specific guidelines for operation to foster

a unified image of the franchisor.

Contract Manufacturing

Has become popular as emerging countries offer facilities, know-how, and

inexpensive labor.

Involves hiring a foreign manufacturer to make products according to a

company's specifications.

Benefits include lower wages, which allow companies to be more competitive in

their pricing.

One of the main problems is that proprietary information must be given to these
companies.

Leads to the problem of counterfeit products based on original products due

to leaks in proprietary information.

Joint ventures

Is a business enterprise that a domestic company and a foreign company

undertake together.

Foreign investors are not permitted to own 100 percent of a business.

If a company wants to conduct business in those countries it must find a

local business partner.

Foreign direct investment

Is the establishment of a business in a foreign country.

Many forms and many purposes

Chap. 4 Global Analysis 8

 Can vary from having an office with a small amount of staff in a foreign country
to the acquisition of foreign companies and construction facilities.

Multinationals are large corporations that have operations in several countries.

One third of the world's private sector assets are controlled by more than
37,000 transnational corporations.

The affiliates are companies that do business in international markets.

Mininationals are midsize or smaller companies that have operations in foreign

countries.

Multinationals and mini-nationals are different from domestic businesses because of

how they generate revenue.

Multinationals make their money from foreign investments referred to as FDIs.

PEST Analysis of Global Environment Scan

Political Factors

Government stability

If there are changes in the government, investors may become wary.

Trade Regulations and Laws

A business must keep abreast of new trade regulations, which can

force companies to reconsider doing business in a country.

Include review of trade agreements, tariffs, and laws to protect

intellectual property rights and foreign direct investments

Domestic laws must be followed by foreign marketers.

Economic Factors

Infrastructure

Things like undependable telephone service or inadequate roads would

rule out a location for some businesses.

These can also be opportunities for companies which create these

infrastructures.

Labor Force

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 Quality and cost of a labor force is another important element in the
decision to enter the market in another country.

The educational and skill levels of the workers, as well as the

customary wages and employment laws are important pieces of
information.

Employee Benefits

Employers must pay for mandated employee benefits in some

countries.

Payroll taxes and employee benefits that are high can turn away some
companies.

Taxes

Costs of taxes on property and profits.

Countries that want to attract foreign investment may offer reduced

taxes for a period of time as an incentive

Standard of Living

Can be a consideration if a business is considering a country as a

market.

The number of middle-income workers is increasing in poorer nations.

This increases the demand for all types of ordinary consumer

goods.

Foreign Exchange rate

Changes in a nation's exchange rate can affect business abroad.

Foreign exchange rates are described as the price of one country's

money currency if purchased with another country's currency.

Socio Cultural Factors

Language, symbols, holidays, religious observances, and social and

business etiquette.

Differences in language and customs make international trade more

challenging.

Chap. 4 Global Analysis 10

 Holidays and religious observances are part of a country's culture too.

Social and business etiquette is critical when doing business abroad

Gift giving is another area of concern since it can vary from being a
part of business etiquette to illegal bribes.

Technological

Not only refers to basic technology like phones but also to measurement
systems and eclectic voltage standards.

Also the use of computers, faxes, voicemail, wireless phones, and the
internet.

The CIA's World Factbook Website provides information about the

number of telephones, radio and television broadcast stations, and
internet users in a given country.

Global marketing strategies

There are three marketing strategies marketers can use when selling abroad.

Globalization means complete standardization.

New product development and complete customization are also

options.

Globalization is selling the same product and using the same promotion
methods in all countries.

Mass marketing on a global scale

Very few products can use this marketing strategy

Companies can use the same product and same promotion if they have
found a common need across cultures.

Benefits include global brand recognition and reduced marketing costs.

A company only has to design one logo and one ad campaign.

A challenge is that it is difficult to translate words and phrases into other

languages.

Adaptation

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 Companies study the characteristics of a country and find ways to
target consumers with similar needs and wants.

Adaptation is a company's use of an existing product or promotion from

which changes are made.

This type of market segmentation has the advantage of addressing very

specific cultural tastes and interests, which makes market acceptance
more reliable.

Product adaptation: changing a product to meet different consumer

needs or to reflect the cultural differences in a foreign market.

Promotion adaptation: involves changing the advertising message to

reflect the values, familiar images, and cultural differences in a foreign
market.

Customization

Involves creating specifically designed products or promotions for

certain countries or regions.

Each geographical area where a product is sold or a service is offered

becomes a unique market segment.

Customization is the optimized form of market segmentation.

This means companies spend a lot of time researching

demographic, geographic, psychographic, and behavioral
characteristics.

This means customization has the advantage of reaching a very

specific target market.

The disadvantage of customization is the increased cost involved.

Educating the new market about the benefits of a new product is

more costly than introducing a brand extension of an existing
product.

New promotions are equally costly and risky.

Chap. 4 Global Analysis 12