1 General Overview n Interdependence of World Economies n Emergence of New Economic Players n Formation of More Distinct Trading Groups n Shift in Economic

1

General Overview Interdependence of World Economies Emergence of New Economic Players Formation of More Distinct Trading Groups Shift in Economic and Political Ideologies Sophistication of Technology Increase in Market Concentration Crisis in National Identity Greater Divergence Between Haves and Have-Nots Greater Internationalization of Business Relations Growth in “Global” markets

2

General Overview

Self-Reference Criterion/Marketing Relativism– stages of involvement—foreign marketing

• None• Infrequent• International• Global

– Strategic orientation• Domestic market extension• Multidomestic market concept• Global market concept

– role of culture– sociological, psychological, anthropological factors

3

General Overview

Cateora’s Int’l Marketing Task Paradism– controllables vs. uncontrollables– interaction between controllables &

uncontrollables– static vs. dynamic behaviour

4

General Overview

Levitt’s Globalization Concept

– Commonality of Wants and Desires Presumed

– Marketing Program Driven by Cost Considerations

– Minimizes Adherence to “Marketing Concept”

– Provides Cohesiveness and Order for Planning

– Management Led to Believe “controllables” are actually controllable

5

General Overview

Economic Prosperity Derives from Trade– Absolute Advantage

– Comparative Advantage

– Heckscher-Ohlin Factor Endowment Theory

– Foreign Direct Investment– market imperfections

– market failure

– Multinational Enterprise– internalization

– diversification

– eclectic

6

General Overview

Porter’s Comparative Advantage of Nations– Focus on Firm’s “Value Chain”

– Highlights Government’s Role in Business Relations

– Evaluates Factors Employed to Create Value– unique factors

– lowest production costs

– maximum market potential

– optimal risk-return tradeoff

– importance of strategic positioning

Porter’s Diamond of National Competitive Advantage

GOVERNMENT

Firm Strategy Structure and Rivalry

FactorConditions

Demand Conditions

Related and Supporting Industries

CHANCE

8

General Overview

Govt’s Role in Creating Wealth and Value

– Balanced vs. Unbalanced Growth

– Facilitators of Trade

– Protectionism– tariffs

– quotas

– voluntary restraints

– monetary barriers

– technical standards

– local content rules

9

General Overview

Multilateral Trade Organizations

– GATT (General Agreement on Tariffs and Trade)

– WTO (World Trade Organization)

– IMF (International Monetary Fund)

– IBRD (International Bank for Reconstruction and Development--World Bank)

– Regional Development Banks

– Common Market Arrangements

– Free Trade Agreements

– Direct Foreign Aid Agencies

10

General Overview

Growth of Transnational/Multinational Enterprise

– Marshall Plan in the U.S.

– U.S. Foreign Direct Investment

– Development of Information Technology

– Market Failure to signal efficiencies and profits

– Desire to Diversify

– New, More Profitable Markets

– Response to Gov’t Policy which emphasized national defense and internal market protection

11

General Overview

World Response to Multinationals and DFI

– Canada

– United States

– Western Europe

– Asia

– Developing Nations

– Newly Emerging Democracies

12

General Overview

Factors Shaping Attitudes Towards Multinationals

– Development Needs -- Pro and Con

– Technology Needs -- Pro and Con

– Risk Sharing Needs -- Pro and Con

– Market Organization Needs -- Pro and Con

– Government Policy Needs -- Pro and Con

13

Foreign Exchange

Function and Nature of Foreign Exchange Markets

– Transactions-- Currency Needs Credit

– Hedging -- Interest arbitrage Swaps

– Speculation Monetary Institutions

– Commercial Banks

– Central Banks

– Money Markets

– Bond and Equity Markets

14

Foreign Exchange

Foreign Exchange

– Factors Affecting Demand

– Factors Affecting Supply

Quantity

Supply (Exports)

Demand (Imports)

Dollar

De

Qe

Df

Qf

15

International Trade and Foreign Exchange

Demand and Supply of Foreign and Local Currancies Relationship to Terms of Trade

– Product Price (in Canadian Dollars) / Product Price (in Yen) Factors that Impact upon Volume of Trade

– Internal Efficiencies

– Financial Strength of Nations Currency and Credit

– Dynamic Innovativeness

16

Balance of Payments

Relationship between flows of financial assets within a country over a year’s period.– Current Account

– Exports and Imports– Unilateral Transfers– Net Trade Balance– Net Capital Account Balance

– Capital Account– Portfolio Investment– Foreign Direct Investment– Net Capital Account Balance

– Official Reserve Account– Stock of Foreign Currencies– Gold and other precious metals– Bank IOUs etc.

17

Balance of Payments

Relationship Between Balance of Trade and Balance of Payments

Relationship Between Balance of Trade and Exchange Rates

Relationship Between Interest Rates and Capital Account

Government’s Role in Affecting Trade, Exchange Rates, and Balance of Payments

18

Public Policy Impact Chain

National Goalsand

Strategies

National Policies

Policy Instruments &

Institutions

Industries andFirms

EconomicPoliticalCulturalDemographic

19

Culture

What is Culture?

– Ways of thinking, viewing, and responding to stimuli which is learned

– socialization

– acculturation

– values (terminal and instrumental)

Core Values of Cultures

– Canadian Asian Indian

– American Native Aboriginal Mexican

– European African Winnipeg

20

Culture

Cross-Cultural Analysis

– A systematic comparison of similarities and diff-erences in material and behavioral aspects of culture.

– Descriptive

– Analytical/functional

– Outline of Elements in Cross-cultural Analysis– Determine Relevant Motivations

– Determine Characteristic Behavior Patterns

– Determine Relevant Cultural Values

– Determine Important Institutions

– Determine Relevant Rules, Norms, and Laws

– Evaluate all the above with respect to mix variables

21

Culture

Group and Sub-group Identification

– Relevant In-Group Identities

– Relevant Out-Group Identities

– Boundaries Between In- and Out-Groups Egocentrism Ethnocentrism

– Ethnocentrism in the Extended Fishbein Model of Consumer Behavior

Role of Country-Of-Origin in Purchase Decision

– “Made in Canada”

22

Culture

Nine Nations of North America

– New England

– The Foundry

– Quebec

– Dixie

– The Breadbasket

– The Empty Quarter

– MexAmerica

– Ecotopia

– The Islands

23

Culture

Culture and Change

– Cultural Borrowing

– Resistance to Change

– Change Congruency

– Strategies for Change– planned

– unplanned

– Consequences of Cultural Intervention

– Examples– Quebec Atlanta, GA

– Vietnam Faculty of Management

24

Political Environment

Types of Governments

– Formation and implementation of legislation

– Degree of Political Participation

– Orientation to Free Market Nationalism

– Concept of the nation-state

– Economic Manifestations of Nationalism

– Conflict with Multinationalism

– Fear of Foreign Ownership and/or Control

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Response to Nationalistic Fears

– Confiscation

– Expropriation

– Domestication

– Nationalization

– Direct Economic Sanctions– exchange controls

– local content rules

– import restrictions

– tax controls

– gov’t intervention into factor resource markets

26


– Direct Political Sanctions– Censure for Actions in Domestic Country

– Complaint Lodged with Multilateral Body

– Violence

– Issue of Foreign Direct Investment– Need to Conduct Thorough Risk Analysis

– Factors of Importance to Identify

– Need to Consider the Method of Entry

– Patterns in Canada

– Canadians Investing into Other Economies

27

International Legal Environment

No Single International Law or Agency

– As Many Legal Systems as there are Nations

– Issues of Interest to Marketers– Competition Rules Product Quality Rules– Packaging Rules Warranty Law Advertising – Price Maintenance Price Regulations– Channel Agreements Patents, Trademark, & Copyright Law– Transport/Distribution Environmental

Bases for Legal System

– Common vs Code Law

– Other Systems

28

International Legal System

Issue of Jurisdiction

– World Court

– International Court of Justice

– Determining Jurisdiction– Jurisdictional Clauses in Contract

– Where Contract was Entered Into

– Where Provisions of the Contract were Performed

– Special Issues Legal Recourse

– Why Not Litigate

– Why Litigate

29


– Options to Litigation– Placate Agrieved Party

– Conciliation

– Arbitration

Protection of Intellectual Property Rights

– Difficulty of Policing Property Rights

– What is Counterfeit?

– Prior Use vs. Registration

– Conventions and Treaties

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Marketing Laws: A Cross-Cultural Comparison– Advertising– Pricing– Channel Relations– Competition – Extraterritoriality– Transport/Distribution

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Researching World Markets

Major Source of Error is a result of faulty information Tools and techniques remain the same regardless of

domestic vs. international basis of research -- differences lie in application and the environmental differences.

Major questions to ask:– Can the Information be Collected?– What are the Cost and Time requirements?– How Reliable is the information?– For what Purposes is the Information Being Collected?– Is the Information Primary or Secondary?– Does the Information Already Exist?

The Market Intelligence Gathering ProcessInternational Issues

Identification and Definitionof the Problem

Selection of an AppropriateResearch Design

Selection of the Sample(s)

Collection of Relevant Dataand Information

Analysis and Interpretationof

Data and Information

Dissemination of Research Results

Spatial and CulturalMultiple PerspectivesLack of Market Knowledge

Meaning of Concepts Response to MeasurementSample Equivalence

Secondary Data

AccuracyComparabilityReliabilitySource of Data

Primary Data Respondent biases Researcher biases

Organizational Complexity

33

Market Intelligence Gathering: Research Design Issues

What is the Project Attempting to Accomplish? Who are the Recipients of the Information? What is the nature of the Management Decision? What Length of Time is Available for the Project? What Funds are Available for the Project?

34

Market Intelligence: Problem Formulation Issues

Spatial and Cultural Separation Multiple Perspectives Meaning of Ideas and Concepts

– Functional Equivalence

– Conceptual Equivalence

– Definitional Equivalence

– Temporal Equivalence

– Market Structure Equivalence

35


Measurement Issues– Single versus Cross-cultural Measurement– Translation Issues

– Verbal Translation• Back Translation• Parallel Blind Translation• Committee Translation

– Non-verbal Translation– Scale Development Issues

36


Sampling Issues– Definition of the Population– Representativeness of the Sample

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Market Intelligence Gathering: Secondary and Primary Data Issues

Data Issues– Accuracy– Comparability– Reliability– Affordability

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Market Intelligence Gathering: Sources of Information

Secondary Sources– Federal Government

– Department of Foreign Affairs

– Statistics Canada

– Regional International Trade Centres

– Department of Commerce (US)

– European Commission (EU)

– Country Desks, Trade Missions, Embassies

– Trade Opportunities Program

– Overseas Business Reports

– Government Intelligence Units

39


Secondary Sources (cont.)– Service Organizations

– Major Banks– Investment Companies– Public Accounting Firms– Transportation Companies– Advertising and Consulting Firms

40


Secondary Sources (cont.)– Others

– Economist Intelligence Unit– Business International– Specialized Newsletters– Internet– Industrial Directories– Universities

41


Provincial/State Governments– Manitoba Industry, Trade, and Tourism– Economic Development Agencies– Various Sectoral Offices

– Aerospace– Agriculture– Health Care– etc.

42


International Organizations– IBRD (World Bank)– WTO (World Trade Organization)– WHO (World Health Organization)– FAO (Food and Agriculture Organization)– ILO (International Labour Organization)– OECD (Organization for Economic Coop. &

Dev.)– Trade Groups (LAFTA, EFTA, etc.)

43

Market Information Gathering: Sources of Information

Trade Associations– Chambers of Commerce– IATA (International Air Transport Association)– OPEC (Organization of Petroleum Exporting

Countries)– Canadian Manufacturers Association– Foreign Trade Tribunals

44

Market Information Gathering: Sources of Information

Organization’s Own Experience– Foreign National Employees– Experienced Executives– Subsidiaries

45

Developing Markets and Market Behaviour

Rapid Changes in National Economies

– Closed Economies

– Developing Economies

– Newly Industrialized Economies

– Socialist Developed Economies

– Capitalist Developed Economies

– New Hybrids

46


Marketing and Economic Development– Challenges “Doing Business as Usual”– Marketer Influences Direction and Magnitude of dev.– Role of Marketer in Static vs. Dynamic Society– Dealing with Expectations??? – W.W. Rostow’s Stages of Development Thesis

– Traditional Society– Preconditions for Takeoff– Takeoff– Drive to Maturity– High Mass Consumption– ??????

47


– Actual Experiences in Development– Export Driven vs. Import Substitution Bases for Dev.– Differences between Growth and Development– Issue of Income Distribution and Marketing– Need for Awareness of National Development Object.

Areas where Marketers can Aid in Development– Transfer of Entrepreneurial Spirit– Transfer of hard and soft Technology– Development of Infrastructure--distribution – Orient society to Demand as well as Supply Planning– Promote Trade as a stimulus for growth in employment

48


Marketing Functions in Developing vs. Developed Econ.– Nature of Goods & Service Storage Activities– Means of Exchange Production sophistication– Local vs. Out-sourcing Transport Infrastructure– Communication Infrastructure Sales & Promotion Methods– Pricing bases--Role of Bargaining Product Assortment– Market Organization Customer Service Issues– Role of Planning & Analysis Role of Credit– Status Issues Importance of Geography– Impact of Business Cycles Entrepreneur Orientation – Role of the Family and Other Institutions

49

Multinational Market Groups

Factors Regarding Economic/Political Integration

– Economic Political Legal

– Cultural Social Patterns of Integration

– Regional Cooperative Group

– Free Trade Area

– Customs Union

– Common Market

– Economic Union

– Political Union

50


Examples of Integration– European Economic Community (EEC)– Enlargement of EEC (6 to 9 to 12)– Single European Act--1992– Canada-US Free Trade Agreement (FTA)– North American Free Trade Agreement (NAFTA)– European Free Trade Agreement (EFTA)– Andean Common Market– African Integration Experiences– Association of Southeast Asian Nations (ASEAN)

51

The Trading BlocsEuropean American Asian

EU

EEA

EFTA

NED

FormerUSSR

Lome

NAFTA

EEI

Canada-US

FTA

Mexico

MERCOSUR

ANCOM

CARICOM

CACM

ASEAN

AFTA

CBI AUS, NZ, JAP

SK, US, CD

HK, JAP, SK

TH

Other Pacific

Nations(Africa)

52


– Marketing Implications– Marketing Strategy– Tactical Issues– Explicit Barriers and Potentials– Marketing Mix Implications at Operative Level

53

Global Marketing Management:Planning and Organization

Global Marketing Restated:– product life cycle design segmentation

– competition production consumers

– product price promotion

– distribution

Benefits and Costs of Global Marketing– transfer of experience--benefit

– control and coordination--benefit

– uniformity--benefit

– unresponsiveness to consumers--cost

– inflexibility--cost

– tendency toward marketing relativism--cost

– control and coordination--cost

54

Global Marketing Management:Planning and Organization

Alternative Marketing Strategies

– Exporting Licensing Joint Venture

– Consortia Management Contracts Market Planning Process

– Study Chart on Planning Process in Text– Analysis and Definition

– Marketing Mix Definition

– Marketing Plan Development

– Implementation, Evaluation, & Control

Methods of Control

– Centralized - New Forms

– Decentralized

55

International Product AnalysisSupport Service

ComponentsRepair &Maintenance

Installation

Instructions

Other Related Services

Deliveries

Warranty

Spare Parts

PackagingComponent

Trademark

Brand Name

Price

Quality

PackagingStyling

Country-of-Origin

CoreComponent

Physical Product

56

International Product Analysis

Degree of Standardization– What is the aspect of the product to be made adaptable?

– What aspect of the product can be standardized?

– Which aspects of the product are critical for competitive advantage?

– Begs the question of identification and ranking of attributes and

consumer preferences. How should it be done? Who should do it?

– Preference dimensions• status taste achievement aspiration

material value

57

International Product Analysis Innovation, Adaptation, and Diffusion

– Degree of Newness– Newness and Product Life Cycle– Degree of Perceived Newness

CongruentInnovation

Continuous Innovation

DynamicallyContinuousInnovation

DiscontinuousInnovation

58

International Product Analysis

Perceived Attributes of the Product– Relative Advantage

– Compatability Relative to core and

– Complexity non-core attributes

– Trialability

– Observability

Relative to Coreand Non-Core attributes

59

Marketing Industrial Products

Who are Industrial Customers?– Commercial Enterprises

– Original Equipment Manufacturers

– User Customers

– Industrial Distributors

– Government Organizations

– Local

– Provincial

– Federal

– Institutional Customers

– Schools

– Hospitals

– Churches

60

Why Enter International Markets?

Domestic Market Saturation Life Cycle Stages Inherent Perceived Quality Differences Protect Existing Market Share

61

Why Not to Enter International Markets

Home Country Sufficient Lack of Sound Marketing Information re

Foreign Opportunities High Costs Organizational Inertia

62

Information on International Markets

Dunn & Bradstreet’s Principal International Businesses

Predicast’s F & S Index Europe’s 1500 Largest Companies Major Firms in Europe and Far East

63

Industrial Market Considerations

Product Strategy– Specifications R&D Support Services New Competition – Licensing FDI Mgmt Contract Turn-Key Counter-trade

Channel Strategy– Resident Buyers Mfg’s Reps Distributors Trading Companies

Promotion Strategy– Use of Trade Fairs and Exhibits– Expert Testimonials and Reputation

Pricing Strategy– Price/Quality Relationship Most Important– Bid System– Role of Physical Distribution and Demand Management Important– Prices Often Difficult to Determine at Time of Sale

64

International Distribution

Components of Distribution– Physical Handling– Transportation– Transfer of Ownership– Buying and Selling Negotiations

– Customer Satisfaction--GOAL!! Alternative Distribution Channels

– Direct and Indirect Exporting– Merchants and Agents

65


Critical Considerations for Merchant/Agent– Availability

– Cost of Service

– Functions Performed

– Extent of Control Desired

Alternative 1 - Direct -- Own Sales Force

66


Alternative 2 - Indirect--Merchant Middleman– Domestic Merchant Middleman

– Purchase on Own Account– Minimum Credit Risk– Handles Functions Outside Domestic Market

67

International Distribution Alternative 2 - (cont.)

– Varieties of Domestic Merchant Middlemen– Export Merchants

– Export Jobbers

– Export Buyers

– Trading Companies

– Complementary Marketers

– Foreign Merchant Middlemen

68

International Distribution Alternative 2 - (cont.)

– Varieties of Foreign Merchant Middlemen– Distributors

– Import Jobbers

– Wholesalers and Retailers

– Affiliated Middlemen

69


Alternative 3 - Agent Middlemen– Domestic Agents

– Export Management Companies

– Manufacturer’s Export Agent

– Broker

– Buyer

– Export Commission House

70


Alternative 3 - Agent Middlemen– Foreign Agents

– Broker

– Manufacturer’s Rep

– Factor

– Managing Agent

71


General Issues– Issue of Social Acceptance

– Line Breadth

– Costs and Margins

– Channel Length

– Maintenance of Customer Value

– Channel Existence

– Channel Cost and Control

– Conflict

– Cooperation

– Leadership

72

Stages of Export Development

Completely Uninterested Exporter Partially Interested Exporter Exploring Exporter Experimental Exporter Small Experienced Exporter Large Experienced Exporter

73

Export Operations:Preparing for Export Markets

Set Objectives Determine Commitment Devise Preliminary Export Budget Determine Organizational Fit for Exporting Develop Export Information Assess Potential Markets Devise Marketing Plan Fully Assess and Reassess Company Readiness

74

Export Operations: Export Market Strategy

Market Research and Analysis Product Design Pricing Distribution Promotion Packing, Marking, & Labeling Transportation

75

Export Operations: Export Payment Methods

Cash with Order Cash on Delivery (COD) Open Account Electronic Transfer Bills of Exchange Letter of Credit (revocable, irrevocable, confirmed) Barter (compensation deals, swaps, offsets, counterpurchase

Advanced Purchase Arrangement

76

Export Operations

Transportation Documentation

– Bill of Lading

– A8A Customs Cargo Control Document Licenses

– General License

– Validated License

– Commodity Control List Import Restrictions

– Tariffs Import License Quotas Exchange Permits

77

Export Operations: Logistics

Choice of Transport Mode

– Domestic– Truck Rail Water Air Freight Pipeline

– Foreign– Truck Rail Water Air Freight

Choice of Carrier

– Cost Dependability Timeliness Risk Service Other Logistics Functions

– Inventory Order Processing Customer Service

– Packaging Storage Materials Handling

78

Export Operations

Export Documentation– Commercial Invoice

– Consular Invoice

– Certificate of Origin

– Certificate of Value

– Packing List

– Health Certificate

– Insurance Certificate

– Export Permit

– Export Declaration

79

Assessing Organizational Readiness

Capitalize on Strengths in Domestic Markets Provide the Financial Resources for the Job Human Resource Requirements are High Must Possess Export-Related Skills

– Ability to Speak Foreign Languages

– Familiarity with Foreign Languages/Business Practices

– Possess Contacts in Potential Foreign Target Markets

– Develop Contacts in Canadian Export Community

– Gain Experience in International Negotiating

– Experience Technical Aspects of International Trade

– Develop Ability to Assess Market Potential

– Be Involved in Continuous Training to Acquire Expertise

80

Assessing Organizational Readiness (cont.)

Must Have Top-Level Commitment– Any Reservations About Entering Foreign Markets?

– Is Exporting Viewed as Peripheral or Sporadic?

– Resistance to Developing a Strategic Export Market Plan?

– Willing to Devote Many Hours to Export Development

– Prepared to Trade-Off Profits in Short-Run?

– Interested in Long-Term International Relationships?

81

Assessing Organizational Readiness (cont.)

Is the Organization Structured for Expansion?– Past Growth Experience--Foreign or Domestic?

– Young, Energetic Staff with Drive and Ambition?

– Sound Organizational Structure– Boundary Spanning

– Interorganizational Communication

– Continuous Learning Culture

– Market Intelligence Sensing Capability

– Flexibility, Adaptability, Viability

82

Marketing Communications

Public Relations Sales Promotions International Advertising

– The message• Information source

• Encoding

• Message channel

• Decoding

• Receiver

• Feedback

• Noise

83


Legal Issues– Puffing– Comparative Advertising– Specific Product prohibitions– Use of media– Truth in advertising

Language and symbolism Issues

84


Production and Cost Limitations International Control of

Information/Advertising

85

Sales Force Management

Sources of Personnel– Expatriates

– Virtual Expatriates

– Local Nationals

– Third-Country Nationals

– Host-Country Restrictions

86


Selection of Personnel– Maturity– Knowledge– Positive Outlook– Cultural Empathy– Flexibility– Tolerance– Hard Working

87


Training– Generally poor– Minimal criteria

• Awareness of cultural setting• Cultural imperatives and restrictions• Economic reward• Good communication• Proper training re products/services• Support of family

88

Pricing in International Markets

Pricing Objectives– Enhance Market Share

– Enhance ROI

– Manage Demand

– Cost Recovery

89


Major Issues to Consider– Nature of the Product

– Degree of Competition

– Degree of Substitutibility

– Channel Efficiency

– Price and Income Elasticity Considerations

90


Major Pricing Components– Production Costs– Marketing Costs– Profit Margins– Transportation and Distribution Costs– Taxes, Tariffs, Duties, etc.– Documentation Costs– Exchange Rate Movements– Interest Rates– Insurance and Risk Bearing Costs– Inflation

91

Approaches to International Pricing

Cost-Based Methods– Cost Plus

– Fully Allocated Cost

Market Based Methods– Zone Pricing

– “What the Market Will Bear”

– Incremental Cost Pricing

Transfer Pricing Countertrade Dumping

Manufacturing Price (Domestic) $362.00 $362.00Transportation to Wholesaler 18.00 23.00

$380.00Export Documentation 4.00Overseas Shipping & Handling 2.50Overseas Freight and Insurance 58.50

$450.00Import Tariff: 20% of Landed Cost 90.00

$540.00Handling at Foreign Port of Entry 3.00

$543.00Transportation form Port to Importer 17.00

$560.00Importer Margin ( to Wholesaler) 10% 56.00

$616.00Wholesale Margin: 8% 30.40 49.28

$410.40 $665.28Retail Margin: 40% 164.16 266.12FINAL RETAIL PRICE $574.56 $931.40________________________________________________________

Documents

1 General Overview n Interdependence of World Economies n Emergence of New Economic Players n Formation of More Distinct Trading Groups n Shift in Economic