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Chapter 16

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Dave Ashberry

BU352 Chapter 16 – Global Marketing Week 12 Introduction -Globalization – refers to the increased flow of goods, services, people, technology, capital, information, and ideas around the world; has economic, political, social, cultural, and environmental impacts Growth of the Global Economy: Globalization of Marketing and Production -Changes in technology, especially communications technology have been the driving force for growth in global markets for decades -Globalization of production – refers to manufacturer’s procurement of goods and services from around the globe to take advantage of national differences in the cost and quality of various factors of production (ex. Labour, energy, land, capital) – also known as offshoring -Not all offshoring is about inexpensive labour – it is also about a global hunt for talent -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 products 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 -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 Assessing Global Markets -Because different countries, at their various stages of globalization, offer marketers a variety of opportunities, firms must assess the viability or a variety of international markets -This assessment is done through an environmental analysis similar to a PEST analysis (Political, Economic, Technology, Socio-cultural) Analyzing the Political and Legal Environment -Trade sanctions – penalties or restrictions imposed by one country over another country for importing and exporting of goods, services, and investments -Tariff – a tax levied on a good imported into a country -Dumping – the practice of selling a good in a foreign market at a price that is lower than its domestic price or below its cost -Quota – designates the maximum quantity of a product that may be brought into a country during a specified time period -Boycott – a group’s refusal to deal commercially with some organization to protest against its policies -Exchange control – refers to the regulation of a country’s current exchange rate -Exchange rate – the measure of how much one currency is worth in relation to another -Countertrade – trade between two countries where goods are traded for other goods and not for hard currency -Trade agreement – intergovernmental agreement designed to manage and promote trade activities for specific regions -Trading bloc – consists of those countries that have signed a particular trade agreement -European Union – Austria, Belgium, Bulgaria, etc. -NAFTA – Canada, Mexico, the United States -CAFTA – Costa Rica, Dominican, El Salvador, Guatemala, Honduras, Nicargua, the United States -Mercosur – Argentina, Brazil, Paraguay, Uraguay, Venezuela BU352 Chapter 16 – Global Marketing Week 12 -ASEAN – Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam Analyzing the Economic Environment -Trade deficit – results when a country imports more goods than it exports -Trade surplus – results when a country exports more goods than it imports -Gross Domestic Product (GDP) – the market value of the goods and services produced by a country in a year; the most widely used standardized measure of output -Purchasing Power Parity (PPP) – a theory that states that 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 -Human Development Index (HDI) – a composite measure of three indicators of the quality of life in different countries: life expectancy at birth, educational attainment, and whether the average incomes are sufficient to meet the basic needs of life in that country -Evaluate market size and population growth rate -Evaluate real income – income adjusted for inflation Analyzing Socio-cultural Factors -Understanding another country’s culture is crucial to the success of any global marketing initiative -One important cultural classification scheme that firms can use is Geert Hofstede’s cultural dimension concept: 1. Power distance – willingness to accept social inequality as natural 2. Uncertainty avoidance – the extent to which the society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in daily life 3. Individualism – perceived obligation to and dependence on groups 4. Masculinity – the extent to which dominant values are male-oriented. A lower rating indicates that men and women are treated equally in all aspects of society 5. Time orientation – short vs. long-term orientation. A country that tends to have a long-term orientation values long-term commitments and is willing to accept a longer time horizon for, say, the success of a new product introduction -Another means of classifying cultures distinguishes them according to the importance of verbal communication – Ex. In Canada, business relationships are governed by what is said and written down, often through formal contracts -Culture affects every aspect of consumer behaviour: why people buy, who is in charge of buying decisions, and how, when, and where people shop Analyzing Technology and Infrastructure Capabilities -Infrastr
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