Post on 15-Dec-2014
description
transcript
www.nataliaceruti.com · contact@nataliaceruti.com
Global MarketingDoing Business in Latin America
4. Economical, Political and Legal Environments
This presentation (and extra material) belongs to Natalia Ceruti´s Global Marketing Course, within the Leading the Way to Success in Latin America Program. Should not be copied, nor reproduced, in full or in parts, without Natalia Ceruti´s permission.
Economical Environment
www.nataliaceruti.com · contact@nataliaceruti.com
Source: World Bank - http://geo.worldbank.org/
Income Analysis 2010World Economies
www.nataliaceruti.com · contact@nataliaceruti.com
Economic Freedom 2010
Source: The Heritage Foundation - http://www.heritage.org/
www.nataliaceruti.com · contact@nataliaceruti.com
Economic Freedom 2010
Germany
23
Argentina
135
Chile
10
Finland
17
France
64
www.nataliaceruti.com · contact@nataliaceruti.com
Doing Business 2009
Source: World Bank - http://rru.worldbank.org/businessplanet/
• Starting a Business
• Dealing with Licenses
• Employing Workers
• Registering Property
• Getting Credit
• Protecting Investors
• Paying Taxes
• Trading Across Borders
• Enforcing Contracts
• Closing a Business
www.nataliaceruti.com · contact@nataliaceruti.com
Argentina - Economical Facts
http://data.worldbank.org/country/argentina
www.nataliaceruti.com · contact@nataliaceruti.com
Patterns of Multinational Cooperation
Regional Cooperation Groups: Governments agree to participate jointly to develop basic industries beneficial to
each economy.
Free Trade Area: An agreement between two or more countries to reduce or eliminate customs duties and nontariff trade barriers among partner countries. Members maintain
individual tariff schedules for external countries.
Customs Union: Enjoys free trade area’s reduced or eliminated internal tariffs. Adds a common external tariff on products
imported from countries outside the union.
Common Market: Eliminates all tariffs and other restrictions on internal trade. Adopts a set of common external tariffs.
Removes all restrictions on the free flow of capital and labor among member nations.
www.nataliaceruti.com · contact@nataliaceruti.com
• NAFTA• Canada, United States, Mexico• FTA • Promote economic growth through
tariff reductions and expanded trade and investment
• No common external tariffs• Restrictions on labor and other
movements remain
http://www.nafta-sec-alena.org/
North America - NAFTA
www.nataliaceruti.com · contact@nataliaceruti.com
Key Provisions of NAFTA
www.nataliaceruti.com · contact@nataliaceruti.com
• Sistema de la Integración Centroamericana (SICA) • El Salvador, Honduras,
Guatemala, Nicaragua, Costa Rica, Belize and Panama
• Moving towards a common market
• Common External Tariff of 0 to 15%
• Retains tariffs on goods also produced in importing country
http://www.sica.int/
Central American Integration System (SICA)
www.nataliaceruti.com · contact@nataliaceruti.com
CARICOM
http://www.caricom.org/
www.nataliaceruti.com · contact@nataliaceruti.com
• Comunidad Andina (CAN)• Bolivia, Colombia, Ecuador, Peru• Customs Union• Abolished foreign exchange,
financial and fiscal incentives, and export subsidies
• Established common external tariffs
http://www.comunidadandina.org/
Andean Community
www.nataliaceruti.com · contact@nataliaceruti.com
• MERCOSUR• Argentina, Brazil, Paraguay, Uruguay• Customs union, seeks to become common
market• Internal tariffs eliminated• Established common external tariffs up to 20%• In time, factors of production will move freely
through member countries• Associate members
• Bolivia, Chile, Colombia, Ecuador, Peru, and Venezuela
• Participate in free trade area but not in customs union
http://www.mercosur.org.uy/
Mercosur
• UNASUR • Argentina, • Brasil, • Bolivia, • Colombia, • Chile, • Ecuador, • Guyana, • Paraguay, • Perú, • Surinam, • Uruguay, • Venezuela.
www.nataliaceruti.com · contact@nataliaceruti.com
UNASUR
http://www.pptunasur.comwww.nataliaceruti.com · contact@nataliaceruti.com
Competitive Landscape
• Players (5 Types)1. Large Domestic Firms (FCs)2. State Owned Enterprises (SOEs)3. Multinational Corporations (MNCs) 4. Small and Medium-Sized Enterpises (SMEs)5. Microenterprises
• Informal Economy???
www.nataliaceruti.com · contact@nataliaceruti.com
1. Large Domestic Firms
• Family Conglomerates (FCs)• Large, privately-owned companies, highly diversified, that
control economic activity and employment in emerging markets
• Grandes Grupos Económicos (GGE)
• Origin:• Early 1900, ISI period after WWII, 1990s• Expansion based on development of Natural Resources• Growth based on Diversification (Vertical Int)• Acquisition of businesses in their industries
www.nataliaceruti.com · contact@nataliaceruti.com
2. SOEs
• Govenment owns them because of:• Ideology (nationalism & populism) (Venezuela?)• Income (profit generation)• Finance (foreign financial institutions)• Employment (employers of least resort, political patronage)
• Pattern of Poor Perfomance:• State ownership is abstract (Profit Claims?)• Managers are shield from stock market effects• Managers have to satisfy objectives set by politicians• Government subsides protect internal inefficiencies
www.nataliaceruti.com · contact@nataliaceruti.com
3. SMEs
• Nearly 90% of Private-Sector Activity
• Main activities:• Agriculture• Manufacturing (Textile)• Retailing• Services• Transportation
• Principal Market: Domestic
www.nataliaceruti.com · contact@nataliaceruti.com
3. SMEs: Microenterprises
• Owner-operated
• ! 10 employees
• Financed out of personal savings
• Fixed assets ! U$S 20.000
• 30% to 60% female owners
• Members of the family are workers
www.nataliaceruti.com · contact@nataliaceruti.com
4. Multi National Companies
• MNCs are positioning themselves to maintain and expand their competitive advantages through the development of networks, technology and management savy
• MNCs need to concentrate on• Design of Organizational Structure• Management Processes• Culture, values and behaviour
www.nataliaceruti.com · contact@nataliaceruti.com
Microenterprises
• Owner-operated
• ! 10 employees
• Financed out of personal savings
• Fixed assets ! U$S 20.000
• 30% to 60% female owners
• Members of the family are workers
• Limited access to financing
www.nataliaceruti.com · contact@nataliaceruti.com
Informal Economy
• Nearly 60% of Latin American workers are empoyed in the Informal Sector
• Street vendors, Home workers, Electricians, Carpenters, Plumbers, Beauticians, Mechanics, Maids, etc.
• Underground Activities: those that have legal ends but employ illicit means
• Informal activities: those involved in them, as well as society in general, benefit more if the law is violated than if it is not. (Why???)
• Movement of people from formal to informal sector
• Poorly educated people´s first paid job
www.nataliaceruti.com · contact@nataliaceruti.com
La Salada
http://ferialasalada.com.ar/
www.nataliaceruti.com · contact@nataliaceruti.com
Economic Risks
Exchange controlsStem from shortages of foreign exchange held by a country.
Local-content lawsCountries often require a portion of any product sold within
the country to have local content.
Import restrictionsSelective restrictions on the import of raw materials to force foreign industry to purchase more supplies within the host
country and thereby create markets for local industry.
www.nataliaceruti.com · contact@nataliaceruti.com
Economic Risks
Tax controlsA political risk when used as a means of controlling foreign
investments.
Price controlsEssential products that command considerable public interest.
Pharmaceuticals, Food, Gasoline.
Labor problemsLabor unions have strong government support that they use effectively in obtaining special concessions from business.
Political Environment
www.nataliaceruti.com · contact@nataliaceruti.com
Stability of Government Policies
• Issues that can affect the stability of a government• Radical shifts in government philosophy when an opposing political
party ascends to power• Pressure from nationalist and self-interest groups• Weakened economic conditions• Bias against foreign investment• Conflicts between governments
• Five main political causes of international market instability • Some forms of government seem to be inherently unstable• Changes in political parties during elections can have major effects
on trade conditions• Nationalism• Animosity targeted toward specific countries• Trade disputes themselves
www.nataliaceruti.com · contact@nataliaceruti.com
A Sampling of Government Types
www.nataliaceruti.com · contact@nataliaceruti.com
Political Parties
• In countries where two strong political parties typically succeed one another, it is important to know the direction each party is likely to take• Great Britain: The Labour Party vs. the Conservative Party
• Unpredictable and drastic shifts in government policies deter investments, whatever the cause of the shift
• A current assessment of a country’s political philosophy and attitudes is important in gauging their stability and attractiveness in terms of market potential
www.nataliaceruti.com · contact@nataliaceruti.com
Political Parties
www.nataliaceruti.com · contact@nataliaceruti.com
Nationalism
• An intense feeling of national pride and unity• An awakening of a nation’s people to pride in their country
• National interest and security are more important than international relations
• Countries use nationalism to protect themselves against intrusions • Threats from outside forces • Declines in the domestic economy
• Nationalism comes and goes • As conditions and attitudes change• Foreign companies welcomed today may be harassed
tomorrow and vice versa
www.nataliaceruti.com · contact@nataliaceruti.com
Risk
Political Risk: Risk of change in political environment or
government policy that would adversely affect a company’s
ability to operate effectively and profitably. When perceived
political risk is high, a country will have a difficult time attracting foreign direct
investment.
http://www.euromoney.com
www.nataliaceruti.com · contact@nataliaceruti.com
Political Risks of Global Business
Confiscation: the seizing of a company’s assets without payment.
Expropriation: where the government seizes an investment but makes some reimbursement for the
assets.
Domestication: when host countries gradually cause the transfer of foreign investments to national control
and ownership through a series of government decrees. Mandating local ownership. Greater national
involvement in a company’s management.
www.nataliaceruti.com · contact@nataliaceruti.com
Confiscation
www.nataliaceruti.com · contact@nataliaceruti.com
Expropriation
www.nataliaceruti.com · contact@nataliaceruti.com
Political and Social Activists
• Not usually government sanctioned
• Can interrupt the normal flow of trade
• Range from those who seek to bring about peaceful change to those who resort to violence and terrorism to effect change
• The Internet has become an effective tool of PSAs to spread the word
www.nataliaceruti.com · contact@nataliaceruti.com
Piqueteros
www.nataliaceruti.com · contact@nataliaceruti.com
Politically Sensitive Products and Issues
• Politically sensitive products• Perceived to have an effect on the environment, exchange
rates, national and economic security, and the welfare of people
• Are publicly visible or subject to public debate
• Health is often the subject of public debate, and products that affect or are affected by health issues can be sensitive to political concern
• The European Union has banned hormone-treated beef for more than a decade
www.nataliaceruti.com · contact@nataliaceruti.com
Forecasting Political Risk
• Political risk assessment • An attempt to forecast political instability • To help management identify and evaluate political events • To predict their potential influence on current and future
international business decisions
• Government failure is greatest risk to international marketers • Causing chaos in the streets and markets
• Risk assessment of investments• Used to estimate the level of a risk a company is assuming• Helps determine the amount of risk a firm is prepared to
accept
www.nataliaceruti.com · contact@nataliaceruti.com
Lessening Political Vulnerability
• Relations between governments and MNCs are generally positive if the investment• Improves the balance of payments by increasing exports or
reducing imports through import substitution• Uses locally produced resources• Transfers capital, technology, and/or skills• Creates jobs• Makes tax contributions
• Political parties often focus public opinion on the negative aspects of MNCs whether true or false• As scapegoats for their own failure • To serve their own interests
www.nataliaceruti.com · contact@nataliaceruti.com
Lessening Political Vulnerability
• Strategies that MNCs use to minimize political vulnerability and risk• Joint ventures• Expanding the investment base• Licensing • Planned domestication• Political bargaining• Political payoffs
www.nataliaceruti.com · contact@nataliaceruti.com
Summary
• The foreign firm must strive to make its activities politically acceptable or it may be subjected to a variety of politically condoned harassment
• The foreign marketer frequently faces the problem of uncertainty of continuity in government policy
• Marketing firms accepted under one administration might find its activities undesirable under another • As governments change political philosophies
• Unfamiliar or hostile political environment does not necessarily preclude success for foreign marketers• If the company becomes a local economic asset and responds
creatively to the issues raised by political and social activities• If a company is considered vital to achieving national economic
goals, the host country often provides an umbrella of protection
Legal Environment
www.nataliaceruti.com · contact@nataliaceruti.com
Protection of Intellectual Property Rights
• Companies spend millions of dollars establishing brand names or trademarks• To symbolize quality and design• To entice customers
• Millions are spent on research • To develop products, processes, designs, and formulas
• Intellectual or industrial properties are among the most valuable assets
• New technologies developed to prevent piracy
www.nataliaceruti.com · contact@nataliaceruti.com
Property Rights
http://www.inpi.gov.ar
www.nataliaceruti.com · contact@nataliaceruti.com
Property Rights
www.nataliaceruti.com · contact@nataliaceruti.com
Inadequate Protection
• Failing to adequately protect intellectual property rights can lead to the legal loss of rights in potentially profitable markets
• There have been many cases where companies have legally lost the rights to trademarks and have had to buy back these rights or pay royalties for their use
• Many businesses fail to take proper steps to legally protect their intellectual property
www.nataliaceruti.com · contact@nataliaceruti.com
Prior Use Versus Registration
• A company that believes it can always establish ownership in another country by proving it used the trademark or brand name first is wrong and risks the loss of these assets
• It is best to protect intellectual property rights through registration
Prior UseWhoever can establish first use is typically considered the
rightful owner.
RegistrationThe first to register a trademark or other property right is
considered the rightful owner.
www.nataliaceruti.com · contact@nataliaceruti.com
Marketing Laws
• All countries have laws regulating marketing activities• Promotion• Product development• Labeling• Pricing• Channels of distribution
• Discrepancies across markets cause problems for trade negotiators – particularly for managers and their firms• Some countries only have a few marketing laws with lax
enforcement• Others have detailed, complicated rules that are stringently
enforced
www.nataliaceruti.com · contact@nataliaceruti.com
Law Enforcement - Football & TV Rights
www.nataliaceruti.com · contact@nataliaceruti.com
www.nataliaceruti.com · contact@nataliaceruti.com
Sources
• Cateora, P., Gilly, M. and Graham, J. (2009). International Marketing, 14th ed. New York: MacGraw-Hill.
• Czinkota, M. and Ronkainen, I. (2010). International Marketing, 9th ed. New York: Cengage Learning.
• Keegan, W. and Green, M. (2011). Global Marketing, 6th ed. New Jersey: Pearson Education.
• Kerin, R., Hartley, S. and Rudelius, W. (2007). Marketing The Core, 2nd ed. New York: MacGraw-Hill Irwin.
• Kotler, P. and Armstrong, G. (2006). Principles of Marketing, 11th ed. New Jersey: Pearson Education.
• Kotler, P. and Keller, K. L. (2009). Marketing Management, 13th ed. New Jersey: Pearson Education.