International Marketing &
Operations
International and Global
Marketing Environment
By
Sandy De Mel
Chapter 2
Lesson Overview
Intertwined World Economy
Information Technology and the Changing
Nature of Competition
Regional Economic Arrangements
Multinational Corporations
Political Environment - Social Pressures
and Political Risk
Issues Transcending National Boundaries
Chapter 2
Introduction
In 2 0 0 5, the annual global trade in goods
and services amounted to $ 1 2.5 trillion.
D aily international financial flows now exceed
$ 1 .9 trillion.
From 1 99 0 to 2 0 0 4, world G D P grew
some 4 0 percent.
In the same period, total world exports of
merchandise and services increased by almost 1
2 0 percent.
Chapter 2
Introduction
The net result of these factors has been the increased
interdependence of countries/economies and increased
competitiveness and the concomitant need for firms to
keep a constant watch on the international economic
environment.
International marketers should be aware that the
economic interests of their companies can differ widely
from those of the countries in which they do business.
International marketers must abide by various
international agreements, treaties and laws.
Political and legal climates are inherently related and
inseparable because laws are generally a manifestation
of a countrys political processes.
Chapter 2
Intertwined World Economy
As firms invest in manufacturing and
distribution facilities outside their home
countries to expand into new markets
around the world, they have added to the
stock of foreign direct investment.
The weekly volume of international trade in
currencies exceeds the annual value of the
trade in goods and services.
Chapter 2
Country Competitiveness
Chapter 2
Emerging Economies
Over the next two decades, the big emerging markets ( B EMs) will
hold the greatest potential for U.S. exports
The largest B EMs include the Chinese economic area (including
China,
H ong Kong region, and Taiwan), I ndia, C.I.S, ( R ussia, Central Asia,
and the Caucasus states), South Korea, Mexico, B razil, and Argentina
R .I.C. - Russia, I ndia & China (with B razil, its sometimes called B.
R .I.C)
Each of these economies has unique economic, market, and industry
characteristics, that, in turn present opportunities and challenges for
local policy makers, businesses and the international business and
economic community
Chapter 2
Emerging Economies
Chapter 2
Evolution of Cooperative International
Trade Agreements
ITO ( International Trade Organization):
ITO was established after World War II.
GATT (General Agreements on Tariffs & Trade):
After 1 95 0 , GATT succeeded ITO.
The main operating principle of GATT was
the concept of most favored nations (MF N )
.
GATT was successful in lowering trade
barriers.
Chapter 2
Evolution of Cooperative Global Trade
Agreements
WTOs ninth round---called the D oha D
evelopment Agenda (D oha R ound) was launched in
D oha, Qatar in
N ovember 2 0 0 1 ( see Exhibit 2-5) . Interim deal
in
D ecember 2 0 0 5 to end farm export subsidies by 2
0 1 3 prevented collapse of the latest round of the
talks.
The D oha R ound of 2 0 0 1 facilitated the way for
China and Taiwan to get full membership in the WTO.
Chapter 2
10
Evolution of Cooperative Global Trade
Agreements
Chapter 2
11
Information Technology and the
Changing
N ature of Competition
The Trade Related Aspects of
Intellectual Property Rights (T R I P
S ) Agreement was concluded as
part of the GATT Uruguay Round. U
pdate to accord ensuring patent
protection does not block developing
countries access to affordable
medicines is the top of the agenda.
Chapter 2
12
Regional Economic
Arrangements
Types of Regional Economic Arrangements:
Free Trade Areas: Formal agreement
among two or more countries to reduce
or eliminate customs duties and
nontariff barriers. Examples: NAFTA,
MERCOSUR, CAFTA-DR & FTAA
(proposed and currently stalled)
Customs Union: Addition of common
external tariffs to the provisions of free
trade agreements. Example: ASEAN.
Chapter 2
13
Regional Economic
Arrangements
Common Market: Eliminates all tariffs and other
barriers, adopts a common set of external tariffs
on nonmembers, and remove all restrictions on
the flow of capital and labor among member
nations. Example: European Union.
Monetary Union: Represents the fourth level of
integration with a single currency among
politically independent countries. Example: EU
and the euro.
Political Union: Highest level of integration
resulting in a political union. Sometimes,
countries come together in a loose political union
for historical reasons, as in the case of the
British Commonwealth which exists as a forum
for discussion and common historical ties.
Chapter 2
14
Multinational Corporations
One third of multinational
companies trade is accounted
for by intra-firm activities.
Two-thirds of of world trade in
goods and services is controlled
by multinational companies.
Of the 100 largest economies in
the world, 51 are corporations.
Chapter 2
15
Multinational Corporations
By 1995, less than half of the
36,000 multinationals identified
by the United Nations came from
four countries: the United States,
Japan, Germany, and Switzerland.
Chapter 2
16
Political Environment Individual Governments
Government affects almost every
aspect of business life in a country.
National politics affect business
environment directly, through changes
in policies, regulations, and laws.
The political stability and mood in a
country affect the actions a
government will take.
Home Country vs. Host Country.
Chapter 2
17
Political Environment Individual Governments
Ideology
Communism
Capitalism
Socialism
Political Parties
Structure
of Government:
Single-party-dominant country
Dual-party system
Multi-party system
Government Policies and Regulations: It is the role of
government to promote a countrys interests in the
international arena for various reasons and objectives
such as: national security, developing new industries,
and protecting declining industries.
Chapter 2
18
Political Environment Individual Governments
Incentives and Government Programs
Government Procurement
Trade Laws
Tariff and Nontariff Barriers
Embargoes and Sanctions
Export License Requirements
Investment Regulations (ownership &
financial controls)
Macroeconomic Policies (governments
monetary & fiscal policies such as the cost of
capital, level of economic growth, rates of
inflation & international exchange rates)
Chapter 2
19
Political Environment - Individual
Governments
Chapter 2
20
Political Environment - Social
Pressures and Political Risk
Social Pressures and Special Interestsforeign companies also have to consider social
factors as part of the political environment of
host countries, e.g., feelings of nationalistic
sentiment.
Managing the Political Environment :
Expropriation
Confiscation
Nationalization
Domestication Policy/Phase-Out Policy
Countertrade
Chapter 2
21
Political Environment - Social
Pressures and Political Risk
Chapter 2
22
Political Environment - Social Pressures and
Political Risk
Chapter 2
23
Terrorism and the World
Economy
According to an IMF study, the September
11, 2001 terrorist attacks in New York and
Washington D.C. resulted in major losses
for the U.S. economy.
The short-term lost economic output was
estimated as $47 billion.
The stock market lost $1.7 trillion. In
addition, 125,000 workers were laid off for
30 days.
Terrorist activities disrupt international
movement of supplies and merchandise
and financial flows.
Chapter 2
24
International Agreements
G7 (Group of Seven) is an economic policy
coordination group made up of political
leaders from Canada, England, France,
Germany, Italy, Japan, and the United States.
G8 (Group of Eight) consists of G7 and
Russia.
COCOM (The Coordinating Committee for
Multilateral Controls) was founded in 1949
to stop the flow of Western technology to the
former Soviet Union; members countries
include Australia, Japan and the NATO
countries except Iceland.
Chapter 2
25
International Law and
Local Legal Environment
International Law (the law of nations)
comes from three main sources:
Chapter 2
Customs
International treaties
Court decisions
26
International Law and
Local Legal Environments
Local Legal Systems and Laws
Business Practices and the Legal Systems
Issues of green marketing
Regulations on E-Commerce- privacy issues
Types of Legal Systems:
Common Law
Code (written) Law
Islamic Law
Socialist Laws
Civil Law
Commercial Law
Chapter 2
27
International Law and
Local Legal Environment
Cultural Values and Legal Systems:
Japans population of lawyers is low.
In the U.S., emphasis is on explicit
contracts and a reliance on the legal
system is high.
In China, relationships (guanxi) and
verbal contracts are important.
In Brazil, Jeitinho is used to find
solutions outside the legal system.
Planning Ahead
Arbitration and Enforcement
Chapter 2
28
Issues Transcending National
Boundaries
ISO 9000 certification has become an
essential marketing tool for firms.
ISO 14000 is based on the principle of self
regulation, thereby minimizing
surveillance and sanctions.
Intellectual Property Protection:
Chapter 2
TRIPs (Trade-Related Aspects of
Intellectual Property Rights)
Patent (first-to-file & first-to-invent
principles)
29
Issues Transcending National
Boundaries
Copyright
The
Digital Millennium
Copyright Act (DMCA)
Trademark (prior-use, first-to-use &
first-to-file principles)
Trade Secret
Paris Convention
Patent Cooperation Treaty
Patent Law Treaty
Chapter 2
30
Issues Transcending National
Boundaries
European Patent Convention
Berne Convention
Antitrust Laws of the United States:
The Sherman Act
The Clayton Act
Extraterritorial application of U.S.
antitrust laws
Export Trading Company (ETC) Act
of 1982
Chapter 2
31
Issues Transcending National
Boundaries
Antitrust Laws of the European Union:
Foreign Corrupt Practices Act (FCPA) of
1977:
The FCPA was designed to prohibit
the payment of any money or
anything of value to a foreign
official, foreign political party, or
any candidate for foreign political
office for purposes of obtaining,
retaining, or directing business.
Chapter 2
32
Issues Transcending National
Boundaries
Chapter 2
The FCPA does not prohibit so
called facilitating or grease
payments.
Small payments to lower level
officials are allowed to expedite
the process.
FCPA does not prohibit bribery
payments to nongovernmental
personnel.
33
Issues Transcending National
Boundaries
Chapter 2
34
