World Trade

1
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

2
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

3
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

4
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

5
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

6
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

7
Top 15 Wired Countries

• 1 USA
• 2 Japan
• 3 Germany
• 4 Canada
• 5 UK
• 6 South Korea
• 7 China
• 8 Italy
• Singapore exceeds US

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

8
The Global Marketing Environment

• Economic Environment
• Political and Legal Environment
• Cultural Environment

9
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)

10
Political and Legal Environment

• Political Issues
• economic sanctions
• nationalization
• expropriation
• Regulatory Issues
• product requirements
• local content rules
• taxation
• Human Rights Issues

11
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

12
Economic Environment

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

13
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

14
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

15
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

16
EthnocentrismBuy 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

17
Market Entry Strategies
Domestic Strategy
Exporting Strategy
Contractual Agreements
Strategic Alliances
Direct Investment
Without equity With equity Joint ventures
Direct export Export merchants
Licensing Franchising Subcontracting
Building Buying
Casual Level of
Commitment Significant
18
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

19
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)

20
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

21
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