International Marketing Chap 2

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Trading Places An overview of World Economies Chapter 2International marketing Consuming Globally, Thinking Locally

by Andrew Macaulay

Narayan Kadel/ Ajeet SinghS - 54 / S 04

FMS PT 2011-14 Batch

August 2000

Submitted by:


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WHAT IMPACTS GLOBAL TRADE

Global Trade is impacted by the Macro events across economies and also by theinteraction of politics, economic and investment policies, state of technology and

institutions.

Global Trade witnessed a very steady and strong growth from 1950 to 1970.

Period from 1950 onwards witnessed a lot of shocks and adjustments.

Oil Crisis in 1970

Third World Debt Crisis in 1982

Collapse of Communism in 1989

Asian Crisis in 1997

Sub-Prime in 2008

EURO Zone Crisis 2010

GLOBAL TRADE Post the WW II Period


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Inspite of the shocks that the Global trade faced the World real GDP was able to

show increments YoY.

The Growth rates also moved in tandem with the shocks and a considerable dip

can be noticed in the 2009 pursuant to the Sub Prime.

GLOBAL TRADE Post the WW II Period (Historical Perspective)

World Real GDP

-

100.00

200.00

300.00

400.00

500.001

Trillions

Year (1961 - 2011)

GDPinUSD

SubPrime


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IMF projects the world output to slow down to 3.30 % in 2012 compared to3.79% in 2011 which is further decline from 5.10 % in 2010.

Current major Economic factors impacting World Trade

EUROZONE Crisis - most impacted countries -Greece, Italy, Spain, Portugal

Low demand from US (Largest consumer)

Sluggish domestic demand in the Emerging Markets

GLOBAL TRADE Current Scenario and Challenges


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Institutional Framework Global Players and Referees

1. WORLD BANK

Founded in 1944 as a cluster of 5 development institutions. International Bank for Reconstruction and Development (IBRD)

International Development Association (IDA)

International Finance Corporation (IFC)

Multilateral Investment Guarantee Agency (MIGA)

International Center for Settlement of Industrial Disputes (ICSID)

Headquartered in Washington D.C; 9000 employees and 100 offices globally.World Bank acts like a Cooperative with 188 member countries.

Objectives

The World Bank is a vital source of financial and technical assistance and

provides help to governments in developing countries to reduce poverty

Provides governments with money and technical expertise they need for

projects such as education, health, infrastructure, communications,

government reforms and for many other purposes.


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2.International Monetary Fund (IMF)

Founded in 1945 to oversee the international monetary system and to ensure

exchange rate stability and encourage its member countries to eliminate exchange

restrictions that hindered trade.

Objectives To promote International Monetary Cooperation.

Facilitate the expansion and balanced growth of International Trade.

Promote Exchange stability

Assist in establishment of a multilateral system of payments.

Make it general resources temporarily available to members experiencing balance

of payments difficulties. Shorten the duration, and lessen the degree of balance of payments of members.


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3. General Agreement for Trade and Tariffs (GATT) to

WORLD TRADE ORGANISATION (WTO)

Formed as General Agreement on Trade and Tariffs (GATT) in 1947 primarily

to avoid future conflicts among nations regarding trade.

Basic Principles of GATT Non Discrimination in Trade.

Domestic Industry should be protected only through Customs Tariff.

Dumping and Subsidies should not interfere with fair competition.

Tariffs should be reduced through multilateral negotiations.

In 1994 GATT had 118 members accounting for 80 % of the World Trade

GATT became WTO in 1995 formed out of the Uruguay round of negotiations of

1984 - 1986 and presently has a membership of 157 countries.

I tit ti l F k Gl b l Pl d R f


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What is WTO ?

WTO is an organization for liberalizing trade.

WTO is a negotiating forum for governments to negotiate trade agreements. WTO operates a system of trade rules and acts as a platform to resolve trade

disputes.

WTO also helps to protect consumers and also avoid spread of disease.

Functions of the World Trade Organisation (WTO)

Administer WTO trade agreements. Provide a forum for trade negotiations.

Handle trade disputes

Monitor National Trade Policies.

Provide technical assistance and training for developing countries.

Cooperate with other international organisations.

Multilateral Trading System (MTS) at WTO

These are WTO negotiated agreements entered into in consensus and

later ratified by the Parliaments of the respective countries.

These are contracts, guaranteeing member countries important trade rights.

The MTS also binds the governments to keep their trade policies within

agreed limits to everybodys benefit.

Institutional Framework

Global Players and Referees

4. WORLD TRADE ORGANISTION (WTO)


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OECD consists of 29 countries who support the principles of a market economy

Pluralist economy and respect for human rights.

Originally formed with 20 member countries from Western Europe and

North America in 1961 as Organization for European Economic Cooperation

which was formed to administer the Marshall Plan scheme for the

reconstruction of Europe

Key Aims Promote policies for achieving sustainable economic growth and employment

and a rising standard of living for the population.

Maintain financial stability and member countries to contribute to the expansion of

World trade on a multilateral and non discriminatory basis.

Undertake to cooperate with each other to ensure economic growth, reduction of

obstacles of trade in goods and services and liberalization of capital movements

to contribute to the economic development of all the worlds countries.

OECD also undertakes collection of economic statistics and dialogues with

non OECD members for the facilitation of trade.

4. Organisation for Economic Cooperation and Development (OECD)


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A number of regional trade agreements are in place across the world and have

notified to GATT and WTO.

Some of the regional trade agreements are

NORTH AMERICAN FREE TRADE AGREEMENTNAFTA

EUROPEAN UNIONEU

ASIA PACIFIC ECONOMIC COOPERATION FORUMAPEC

ASSOCIATION OF SOUTHEAST ASIAN NATIONSASEAN

LATIN AMERICAN INTEGRATION ASSOCIATIONLAIA

Supra National Trading Blocs


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ASEAN was formed in 1967 in Bangkok by 5 members Thailand , Malaysia,

Singapore, Philippines, Indonesia. The membership now stands at 10.

Key Aims

Accelerate Economic growth, social progress and cultural development

in the region.

Promote regional peace and stability.

Promote collaboration and mutual assistance on matters of common interest.

Training and research facilities in the educational technical and administrative

sphere.

Promote South East Asian studies.

Collaborate more effectively for the greater utilizations of the agriculture and

industries.

1. Association of South East Asian Nations (ASEAN)


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ROLE OF NATIONAL GOVERNMENTS

National Governments can play important roles in both

facilitating and restricting trade.

Some measures for Restricting the Trade

Tariff barriers - Duties and Taxes

Non Tariff Barriers - Quotas and Imports restraints, Govt nationalist policies,

Exchange rate controls, administrative and technicalregulation standards for products

Governments promoting the Trade

Govt support trade as it leads to overall economic and political benefits.

Govt support by way of information facilitation. Grants for Marketing research

Provide Export Credit insurance for exports to difficult markets.


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THE HUMAN CONTEXT

Importance

Constantly changing pace of development

In 1978, 1/3rd of entire workforce are in Centrally Planned economies

Only 10% in markets semi-detached from world economy

Another 1/3rdonly partially linked to Intl Trading System

On account of technological changes, the consequences are far reaching

than expected


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THE Fallouts

Insecurity Technological change

Decline of traditional social structures Affects both the rich and poor countries

Increased levels of Poverty


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To tackle Low incomes, poor working

conditions and insecurity

Need for

Sound domestic policy

Supportive international environment

Recommendations of World Bank-

1. Follow market based growth plans

2. Create a demand for labour3. Expand work force skills

4. Raise productivity

5. Open up trade and attract inward investment

6. Construct framework for labour policy

7. complements informal and rural labour markets

8. Supports collective bargaining

9. Protects the vulnerable10. Does not act in favour of better-off workers

11. Encourage as rapid as possible progress in transition

economies without excessive or permanent costs for labour


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The Manager

Skill to look differently

Willing to adjust to new and different conditions (Korey-1995)

To look at problems from multiple perspectives

Analytical ability and Creative thinking to be part of decision

making process.

Perspectives to be used for enhanced creative thinking

Technological- tech and rationality

Organizational- corporate organization, company structure and

social infrastructure

Personal- from the point of view of those affected

International-social responsibility of the transnational businesses,ethical basis, values and morality

Cultural- religion, language, educational and intercultural

dimensions


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The Manager

Market- not to be perceived as domestic or international

Requirement- integration of all marketing activities viz.

-Understanding, Creating, Communicating, delivering

- Innovative approaches reqd for managing in a global economy

Processes reqd for global thinking manager Conceptual/Strategical -(where to invest/divest, cost cutting,

labour costs)

Skills based ( case based mgmt education)

Requirements for global Manager-

Intercultural negotiating skillsAbility to read different markets in different cultural contexts

Ability to understand comparative politics

Ability to understand that cultural frameworks define markets,

pricing and competition


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The Employer

Expectations- to create wealth

Responsibility- thrusted social responsibility while operating

Internationally

Internal measures- Physical working conditions

Womens, multicultural and minority rights

Education and trg. Of employees

Industrial relations

External measures-

Community service Environmental protection

Packaging and its impact on pollution

Transmission of new values


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The Employer

Expectations- to create wealth

Responsibility- thrusted social responsibility while operating

Internationally

Internal measures-

Physical working conditions Womens, multicultural and minority rights

Education and trg. Of employees

Industrial relations

External measures-

Community service

Environmental protection Packaging and its impact on pollution

Transmission of new values

WHAT ORGANISATIONS DO


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WHAT ORGANISATIONS DO

Have people with geocentric attitudes

Have education outside the country of their birth

Who have attended student-exchange

programme

Proficient in more than one international

languages

Best investment- An International Board


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CONCLUSION

Macro trends of future

Globalisation

Shorter supply Chains

Technology Convergence

Drivers of Globalisation

Technology

Faster methods of transportation and

communication

Convergence of Customer needs


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Shorter supply Chains

Shorter Product Life Cycles

Diminishing Brand Values

Smarter and more demanding customers

Increased pressure on prices and financial results

New technology enabled distribution channels

Technology convergence

Transformation of market places

Creation of product and services


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THANK YOU

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International Marketing Chap 2

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