Marketing Notes Chapter 16.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2320A/B
Kenneth Bowlby

Marketing Notes Chapter 16 Global Marketing Globalization – increased flow of goods, services, people, technology, capital, information, and ideas around the world; has economic, political, social, and environmental impacts Global markets are a result of: reduction/elimination of trade barriers, decrease of concerns of distance and time with regard to moving products/ideas, standardization of laws across borders, and a global production process Globalization creates great interdependency among firms and divisors spread around the world The World Bank ranks countries on their globalization degree Growth Of The Global Economy: Globalization Of Marketing And Production Changes in technology have been the driving force in globalization (communication) Globalization of production (offshoring) – manufactures procurements of goods and services from around the globe to take advantages of national differences in cost and quality of various factors of production (labor, energy, land, and capital) Offshoring now includes knowledge economy (medical, financial, technological, and consulting services) General Agreement on Tariffs and Trade (GATT) – agreement established to lower trade barriers, such as high tariffs on imported goods and restrictions on the number and types of imported product that inhibited the free flow of goods across borders World Trade Organization (WTO) – replaced the GATT in 1994; differs from the GATT in that the WTO is an established institution based in Geneva, Switzerland instead of simply an agreement; represents the only international organization that deals with the global rules of trade among nations WTO has 153 members and controls 97% of global trade International Monetary Fund (IMF) – established as part of the original GATT; primary purpose is to promote international monetary cooperation and facilitate the expansion and growth of international trade World Bank Group – a development bank that provides loans, policy advice, technical assistance, and knowledge sharing services to low- and middle-income countries in an attempt to reduce poverty These organizations make it easier to buy and sell, finance firms, open markets to trade, and raise globe standard of living World bank is critiqued for being merely a puppet of western industries that use the loans to assist their global efforts Also the WB loans to much money to developing countries which in turn are forever in debt Assesing Global Markets We must use PEST analysis Components of a country market assessment: Marketers consider all aspects of PEST when making decisions as well as analyze trade offs for doing foreign business Analyzing The Political And Legal Environment Laws and regulations either enable/restrict growth Two types of policies: Protectionist – restrict trade and global marketing Trade Liberalization – encourage trade and marketing Protectionist Policies Trade Sanctions Trade sanctions – penalties or restrictions imposed by one country for importing and exporting goods, services, and investments Embargo – form of trade sanction hat prohibits trading wit a certain country or trading specific goods by other signatory countries Tariffs Tariffs (Duty) – a tax levied on a good imported into a country Protects domestic industries form foreign competitors Can also be imposed to penalize foreign nations Dumping – the practice of selling a good in a foreign market at a price that is lower than its domestic price or below cost Tariffs counteract dumping Quotas Quota – designates the maximum quantity of a product that may be brought into a country during a specified time period Cons Tariffs artificially raise prices therefore lowering demand Reduces the availability of imported merchandise Pros Reduce foreign competition Boycott Boycott – a group’s refusal to deal commercially with some organization to protest against its policies May be called on by governments or non-government organizations (trade unions, human rights, or environmental groups) Exchange Control Exchange control – regulation of a countries currency exchange rate Exchange rate – measure of how much one currency is worth in relation to another Designated agency usual sets the rules for currency exchange (central banks) In Canada it’s the Bank of Canada Rise of Canadian Dollar has twofold effect: For Canadian firms that depend on US imports the cost of business has fallen dramatically (positive impact on imports) US buyers find Canadian goods more expensive (negative impact for exports) Countertrade – trade between countries where goods are exchange for goods not monetary Trade Liberalization Trade Agreements Trade agreement – intergovernmental agreements designed to manage an dpromote trade activities fro specific regions Trade bloc – countries that have signed a particular trade agreement Trade Agreements: European Union (EU) Economic and monetary union Euro Currency Simplified How multinational firms market their products Patents Data privacy and transmission Advertising Direct selling Eliminated price fluctuations by eliminating currency exchange rates North American Free Trade Agreement (NAFTA) Limited trade-related issues Central American Free Trade Agreement (CAFTA) Trade agreement Mercosur Means southern common market Created in response to NAFTA Association Of Southeast Asian Nations (ASEAN) Originally to promote security during Vietnamese War Now builds economic stability and lowers trade restrictions Political Risk Analysis Usually involves change looking at changes in governments, violence, analyzing trade policies, and takes place over a specific period of time Canada relies on Export Development Canada, and Foreign Affairs and International Trade Canada to provide insight Analyzing the Economic Enviornment General Economic Environment Healthy economic condition is better for global marketing expansions Determined by level of imports and exports: Trade deficit – results when a country imports more goods than it exports Trade surplus – more exports than its imports Surplus provides good opportunity to export products to more markets Size and market potential: Gross domestic product (GDP) – The market value of the goods and services produced y a country in a year; most widely used standardized measure of output Growth means that production and consumption in the country is expanding Slow growth means that production and consumption in the country is falling Purchasing power parity (PPP) – theory that states if the exchange rates of two countries are in equilibrium, a product purchased in one will cost the same in the other, expressed in the same currency Example: The Economist’s Big Mac Index These two measures only provide insight into economic conditions based on output Human development index (HDI) – a composite measure of three indicators of the quality of life in different countries: life expectancy, educational attainment, and whether the average incomes are sufficient to meet the basic needs of life in that country This determines lifestyle elements that ultimate drive consumption HDI Scale Less than 0.5 = low HDI 0.5 – 0.8 = medium HDI Above 0.8 = high HDI Evaluating Market Size And Population Growth Rate Global population is on the rise Less-developed nations are rapidly growing while developed nations are experiencing zero or negative natural population growth Distribution of populations (rural vs. urban) affects the supply chain Long supply chain for rural is more exp
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