GMS week 4
Week 3 review
Which is not a form of protectionism
(d) cultural distance
Which model could be used to explain int trade flows
a) hecksher ohlin
The theory of comparative adv argues that in trade is a
a) positive sum game
The economic environment is an uncontrollable variable for the global
Dealing with variables such as
o Interest rates
o Exchange rates
These variables affect the demand for importing products
The economic environment has significant impact on:
o The selection of countries for foreign market entry
o The firms local market strategy in the foreign country
In assessing foreign markets we need to examine
o Market size:
Population is an indicator of market potential.
Demand for imported products is linked to population size.
o Income levels
Represents purchasing power and is a good indicator of
market potential for most products
The two most populous countries (China and India) have low
income levels, compared to industrialized countries (us &
Income distribution is also important!!!
Is the income in the country equally divided amongst
the citizens or is there a clear distinguishing factor.
o Exchange Rates
Impacts the demand for imported goods and services
Is the currency is weak; more of the local currency will
be needed to finance imports.
For global marketer exchange rates stability is more important
than the absolute value of the exchange rate Always compare the national incomes of countries
using PPP (purchases power parity) exchange rates
PPP is defined as the number of units of a foreign
country’s currency required purchasing an identical
basket of goods and services in the local country.
o Consumption Patterns
The share of income that is spent on necessities/luxury goods
Global marketers rely heavily on services p