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GlobalMarketing

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Objectives1. Discuss some of the fundamental concepts that underlie

international business.

2. Identify aspects of marketing strategy that are important in the global marketplace.

3. Outline the environment for international business.

4. Explain how the marketing mix may be affected by competition in a global environment.

5. Outline various approaches to global marketing that are taken by companies.

6. Discuss the various modes of entry into international markets.

7. Discuss the different types of trade agreements.

8. Discuss NAFTA.

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Balance of Trade and Payments

Balance of Trade

• The relationship between a country’s exports and its imports.

Balance of Payments

• The flow of money into or out of a country.

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Exchange Rate

• The rate at which a nation’s currency can be exchanged for other currencies or gold.

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Devaluation

• Situation in which a nation reduces the value of its currency in relation to gold or some other currency.

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Revaluation

• Situation in which a country adjusts the value of its currency upward.

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Absolute Advantage

• A nation has an absolute advantage in the marketing of a product if it is the sole producer or can produce a product for less than anyone else.

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Comparative Advantage

• A nation has a comparative advantage if it can produce a given product more efficiently per unit of output than it can produce other products.

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Company Approaches to Global Marketing (1 of 2)

• Ethnocentric Company– Firm that assumes that its way of doing business in

its home market is the proper way to operate, and tries to replicate this in foreign markets.

• Polycentric Company– Firm that assumes that every country is different

and that a specific marketing approach should be developed for each separate country.

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Company Approaches to Global Marketing(2 of 2)

• Regiocentric Company– Firm that recognizes that countries with

similar cultures and economic conditions can be served with a similar marketing mix.

• Geocentric Company– Firm that develops a marketing mix that

meets the needs of target consumers in all markets.

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Modes of International Activity

• Indirect Exporting and Importing

• Direct Exporting and Importing

• Licensing

• Joint Venture

• Foreign Production and Marketing

• Multinational Enterprise

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Indirect International Trade

• Exporting and/or importing only through other domestic companies that trade internationally.

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Direct International Trade

• Exporting directly to markets and/or importing directly from suppliers in other countries.

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Licensing

• Granting authority to produce and sell a product developed in one country in another.

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Joint Venture

• A partnership of firms from different countries, often to set up a local business in a country that is foreign to one of the partners.

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Direct Investment

• The ownership and management of production and/or marketing facilities in a foreign country.

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Multinational Corporation (MNC)

• A corporation that produces and markets goods and services in several countries.

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Culture

• An integrated system of learned behaviour patterns that are distinguishing characteristics of the members of any given society.

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Local Content Laws

• Laws specifying the portion of a product that must come from domestic sources.

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Cartel

• The monopolistic organization of a group of firms.

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Friendship, Commerce and Navigation (FCN) Treaties• Treaties that address many aspects of

commercial relations with other countries; such treaties constitute international law.

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World Trade Organization (WTO)

• The international body that deals with the rules of trade between nations.

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Principles of the Trading System

• Without discrimination

• Freer

• Predictable

• More competitive

• More beneficial for less developed countries

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Integration of World Markets (1 of 2)

• Free Trade Area– Areas established by agreement among two

or more nations within which participants agree to free trade of goods and services among themselves.

• Customs Union– Agreement among two or more nations that

establishes a free trade area, plus a uniform tariff with nonmember nations.

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Integration of World Markets (2 of 2)

• Common Market– A customs union that also allows factors of

production such as labour, capital, and technology to flow freely among members.

• Economic Union– A common market that also requires members to

harmonize monetary policies, taxation, and government spending. In addition, a common currency is used by members.

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North American Free Trade Agreement (NAFTA)• The agreement establishing a free

trade area among Canada, the United States, and Mexico that followed the FTA.

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Free Trade Agreement (FTA)

• The agreement establishing a free trade area between Canada and the United States that preceded NAFTA.

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Trade Restrictions

• Tariff– A tax levied against products imported from

abroad.

• Import Quota– A limit set on the amount of products that may be

imported in a certain category.

• Embargo– A complete ban on importing a particular product.

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Tariff

• A tax levied against products imported from abroad.

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Import Quota

• A limit set on the amount of products that may be imported in a certain category.

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Embargo

• A complete ban on importing a particular product.

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Exchange Control

• Requirement that firms gaining foreign exchange by exporting must sell their foreign exchange to the central bank or agency, and importers must buy foreign exchange from the same organization.

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Dumping

• Practice of selling products at significantly lower prices in a foreign market than in a nation’s own domestic market.

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Import Quota

• A limit set on the amount of products that may be imported in a certain category.

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