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http://www.consumerpsychologist.com/international_marketing.html

Marketing Environment - PEST Analysis

PEST & PESTLE analysis

A PEST analysis is used to identify the external forces affecting an organisation .This is a simple analysisof an organisations Political, Economical, Social and Technological environment. A PEST analysisincorporating legal and environmental factors is called a PESTLE analysis.

Political The first element of a PEST analysis is a study of political factors. Political factors influenceorganisations in many ways. Political factors can create advantages and opportunities for organisations.Conversely they can place obligations and duties on organisations. Political factors include the followingtypes of instrument:

- Legislation such as the minimum wage or anti discrimination laws.

- Voluntary codes and practices- Market regulations- Trade agreements, tariffs or restrictions- Tax levies and tax breaks- Type of government regime eg communist, democratic, dictatorship

Non conformance with legislative obligations can lead to sanctions such as fines, adverse publicity andimprisonment. Ineffective voluntary codes and practices will often lead to governments introducinglegislation to regulate the activities covered by the codes and practices.

Economical

The second element of a PEST analysis involves a study of economic factors.All businesses are affected by national and global economic factors. National and global interest rate andfiscal policy will be set around economic conditions. The climate of the economy dictates howconsumers, suppliers and other organisational stakeholders such as suppliers and creditors behave withinsociety. An economy undergoing recession will have high unemployment, low spending power and lowstakeholder confidence. Conversely a booming or growing economy will have low unemployment, highspending power and high stakeholder confidence. A successful organisation will respond to economicconditions and stakeholder behaviour. Furthermore organisations will need to review the impacteconomic conditions are having on their competitors and respond accordingly. In this global businessworld organisations are affected by economies throughout the world and not just the countries in whichthey are based or operate from. For example: a global credit crunch originating in the USA contributedtowards the credit crunch in the UK in 2007/08. Cheaper labour in developing countries affects thecompetitiveness of products from developed countries. An increase in interest rates in the USA will affectthe share price of UK stocks or adverse weather conditions in India may affect the price of tea bought inan English caf. A truly global player has to be aware of economic conditions across all borders andneeds to ensure that it employs strategies that protect and promote its business through economicconditions throughout the world.
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Social

The third aspect of PEST focuses its attention on forces within society such as family, friends, colleagues,neighbours and the media. Social forces affect our attitudes, interest s and opinions. These forces shapewho we are as people, the way we behave and ultimately what we purchase. For example within the UKpeoples attitudes are changing towards their diet and health. As a result the UK is seeing an increase in

the number of people joining fitness clubs and a massive growth for the demand of organic food. Productssuch as Wii Fit attempt to deal with societys concern, about childrens lack of exercise. Populationchanges also have a direct impact on organisations. Changes in the structure of a population will affect thesupply and demand of goods and services within an economy. Falling birth rates will result in decreaseddemand and greater competition as the number of consumers fall. Conversely an increase in the globalpopulation and world food shortage predictions are currently leading to calls for greater investment infood production. Due to food shortages African countries such as Uganda are now reconsidering theirrejection of genetically modified foods. In summary organisations must be able to offer products andservices that aim to complement and benefit peoples lifestyle and behaviour. If organisations do notrespond to changes in society they will lose market share and demand for their product or service.

Technological

Unsurprisingly the fourth element of PEST is technology, as you are probably aware technologicaladvances have greatly changed the manner in which businesses operate.Organisations use technology in many ways, they have

1. Technology infrastructure such as the internet and other information exchange systems includingtelephone2. Technology systems incorporating a multitude of software which help them manage their business.3. Technology hardware such as mobile phones, Blackberrys, laptops, desktops, Bluetooth devices,photocopiers and fax machines which transmit and record information. Technology has created a societywhich expects instant results. This technological revolution has increased the rate at which information isexchanged between stakeholders. A faster exchange of information can benefit businesses as they are ableto react quickly to changes within their operating environment. However an ability to react quickly alsocreates extra pressure as businesses are expected to deliver on their promises within ever decreasingtimescales.. For example the Internet is having a profound impact on the marketing mix strategy oforganisations. Consumers can now shop 24 hours a day from their homes, work, Internet cafs and via3G phones and 3G cards. Some employees have instant access to e-mails through Blackberrys but this canbe a double edged sword, as studies have shown that this access can cause work to encroach on theirpersonal time outside work. The pace of technological change is so fast that the average life of a computerchip is approximately 6 months. Technology is utilised by all age groups, children are exposed totechnology from birth and a new generation of technology savvy pensioners known as silver surfershave emerged. Technology will continue to evolve and impact on consumer habits and expectations,organisations that ignore this fact face extinction.

PESTLE A PEST analysis is sometimes expanded to incorporate legal and environmental factors; this isknown as a pestle analysis. There are many statutes books containing company law as almost every aspectof an organisations operation is controlled through legislation from treatment of employees through tohealth and safety. Legal factors are important as organisations have to work within legislativeframeworks. Legislation can hinder business by placing onerous obligations on organisations. On theother hand legislation can create market conditions that benefit business


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Benefits of global marketing:

How many phenomenons have a global impact? If you are to count, they could be counted on your finger

tips. Globalization is one of them. So before going to the advantages and disadvantages of globalization,

lets us try to grasp this concept first. Simply put,globalizationis an ongoing process of integration of

regional economies into global network of communication and execution. Let me explain this a bit.

Assume that you are a mango farmer in India and you grow very good quality mangoes over there.

Obviously, your fruit is highly appreciated in India, but you also know that you shall get a better value in

US. So the network of communication and execution that allows you to sell your fruit in US is basically,

the phenomenon of globalization. (At least the Indian farmer is happy about advantages of globalization

in India, he is earning a quick buck.) The advantages and disadvantages of globalization in India and

other developing countries are very profound. Read more onadvantages of globalization.

Globalization: Advantages and Disadvantages

Instead of giving a few pointers here and a few pointers there, explanation on these concepts should do

more justice to the subject. Have a look at the following

Advantages and Disadvantages of Global Marketing

There has to be operational differences between various companies in different countries. What I mean to

say is, a car manufacturer of UK will manufacture a car with a different operation than a car manufacturer

in Italy (for example Jaguar and Ferrari). Both are trying to take advantage of the operational difference

that they have between them. And both companies are trying to sell a car in America for a greater value.

So if you want your product to have an appeal on a global scale, then obviously, marketing on a global

scale is required.

Advantages of Global Marketing

Lower Marketing Costs: If you are to consider lump-some cost then, yes, it is high, but the samecost even goes even higher if the company has to market a product differently in every countrythat it is selling.

Global Scope: Scope of this kind of marketing is so large that it becomes a unique experience. Brand image Consistency: Global marketing allows you to have a consistent image in every

region that you choose to market. Quick and Efficient Use of Ideas: A global entity is able to use a marketing idea and mould it into

a strategy to implement on a global scale. Uniformity in Marketing Practices: A global entity can keep some degree of uniformity in

marketing through out the world.

Disadvantages of Global Marketing

Inconsistency in Consumer Needs: American consumer will be different from the South African.Global marketing should be able to address that.

Consumer Response Inconsistency: Consumer in one country may react differently than aconsumer in another country.
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Country Specific Brand and Product: A Japanese might like a product to have a traditional touch,where as an American might like to add a retro modern look to it. In this case, a global strategy isdifficult to device.

The Laws of the Land Have to be Considered: Original company policies may be according to thelaws of home countries. The overseas laws may be conflicting in these policies.

Infrastructural Differences: Infrastructure may be hampering the process in one country andaccelerating in another. Global strategy cannot be consistent in such a scenario.

Advantages and Disadvantages of Globalization in Developing Countries

Overallglobalizationhas been a big boon for the developing countries, but there are a few who say that it

has been a curse. Let us take a look at both these aspects of globalization.

The Advantages

GDP Increase: If the statistics are any indication, GDP of the developing countries haveincreased twice as much as before.

Percapita Income Increase: The wealth has had a trickling effect on the poor. The averageincome has increased to thrice as much.

Unemployment is Reduced: This fact is quite evident when you look at countries like India andChina.

Education has Increased: Globalization has been a catalyst to the jobs that require higher skill set.This demand allowed people to gain higher education.

Competition on Even Platform: The companies all around the world are competing on a singleglobal platform. This allows better options to consumers.

The Disadvantages

Uneven Distribution of Wealth: Wealth is still concentrated in the hands of a few individuals anda common man in a developing country is yet to see any major benefits of globalization.

Income Gap Between Developed and Developing Countries: Wealth of developed countriescontinues to grow twice as much as the developing world.

Different Wage Standards for Developing Countries: A technology worker may get more valuefor his work in a developed country than a worker in a developing country.

Reversal of Globalization: In future, factors such as war may demand the reversal of theglobalization (as evident in inter world war years), current process of globalization may just beimpossible to reverse. You can also like to read more onpros and cons of globalization.

Entry strategies

There are a variety of ways in which organisations can enter foreign markets. The three main ways are bydirect or indirect export or production in a foreign country

Exporting

Exporting is the most traditional and well established form of operating in foreign markets. Exporting canbe defined as the marketing of goods produced in one country into another. Whilst no directmanufacturing is required in an overseas country, significant investments in marketing are required. Thetendency may be not to obtain as much detailed marketing information as compared to manufacturing inmarketing country; however, this does not negate the need for a detailed marketing strategy. Direct
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export. The organization produces their product in their home market and then sells them to customersoverseas. Indirect export The organizations sell their product to a third party who then sells it on withinthe foreign market. Exporting methods include direct or indirect export. In direct exporting theorganisation may use an agent, distributor, or overseas subsidiary, or act via a Government agency. Ineffect, the Grain Marketing Board in Zimbabwe, being commercialised but still having Governmentcontrol, is a Government agency. The Government, via the Board, are the only permitted maize exporters.

Bodies like the Horticultural Crops Development Authority (HCDA) in Kenya may be merely apromotional body, dealing with advertising, information flows and so on, or it may be active in exportingitself, particularly giving approval (like HCDA does) to all export documents. In direct exporting themajor problem is that of market information. The exporter's task is to choose a market, find arepresentative or agent, set up the physical distribution and documentation, promote and price theproduct. Control, or the lack of it, is a major problem which often results in decisions on pricing,certification and promotion being in the hands of others. Certainly, the phytosanitary requirements inEurope for horticultural produce sourced in Africa are getting very demanding. Similarly, exporters areprice takers as produce is sourced also from the Caribbean and Eastern countries. In the months June toSeptember, Europe is "on season" because it can grow its own produce, so prices are low. As such,producers are better supplying to local food processors. In the European winter prices are much better, butproduct competition remains.

Foreign production

Besides exporting, other market entry strategies include licensing, joint ventures, contract manufacture,ownership and participation in export processing zones or free trade zones.

Licensing: Licensing is defined as "the method of foreign operation whereby a firm in one country agreesto permit a company in another country to use the manufacturing, processing, trademark, know-how orsome other skill provided by the licensor".

It is quite similar to the "franchise" operation. Coca Cola is an excellent example of licensing. InZimbabwe, United Bottlers have the licence to make Coke.

Licensing involves little expense and involvement. The only cost is signing the agreement and policing itsimplementation.

Licensing gives the following advantages:

Good way to start in foreign operations and open the door to low risk manufacturing relationships Linkage of parent and receiving partner interests means both get most out of marketing effort Capital not tied up in foreign operation and Options to buy into partner exist or provision to take royalties in stock.

The disadvantages are:

Limited form of participation - to length of agreement, specific product, process or trademark Potential returns from marketing and manufacturing may be lost Partner develops know-how and so licence is short Licensees become competitors - overcome by having cross technology transfer deals and Requires considerable fact finding, planning, investigation and interpretation.


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Those who decide to license ought to keep the options open for extending market participation. This canbe done through joint ventures with the licensee.

Joint ventures

Joint ventures can be defined as "an enterprise in which two or more investors share ownership andcontrol over property rights and operation". Joint ventures are a more extensive form of participation thaneither exporting or licensing. In Zimbabwe, Olivine industries have a joint venture agreement with HJHeinz in food processing.

Joint ventures give the following advantages:

Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process

Joint financial strength

May be only means of entry and

May be the source of supply for a third country.

They also have disadvantages:

Partners do not have full control of management May be impossible to recover capital if need be Disagreement on third party markets to serve and Partners may have different views on expected benefits.

If the partners carefully map out in advance what they expect to achieve and how, then many problemscan be overcome.

Ownership: The most extensive form of participation is 100% ownership and this involves the greatestcommitment in capital and managerial effort. The ability to communicate and control 100% mayoutweigh any of the disadvantages of joint ventures and licensing. However, as mentioned earlier,repatriation of earnings and capital has to be carefully monitored. The more unstable the environment theless likely is the ownership pathway an option.

These forms of participation: exporting, licensing, joint ventures or ownership, are on a continuum ratherthan discrete and can take many formats. Anderson and Coughlan8 (1987) summarise the entry mode as a

choice between company owned or controlled methods - "integrated" channels - or "independent"channels. Integrated channels offer the advantages of planning and control of resources, flow ofinformation, and faster market penetration, and are a visible sign of commitment. The disadvantages arethat they incur many costs (especially marketing), the risks are high, some may be more effective thanothers (due to culture) and in some cases their credibility amongst locals may be lower than that ofcontrolled independents. Independent channels offer lower performance costs, risks, less capital, highlocal knowledge and credibility. Disadvantages include less market information flow, greatercoordinating and control difficulties and motivational difficulties. In addition they may not be willing to


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spend money on market development and selection of good intermediaries may be difficult as good onesare usually taken up anyway.

Once in a market, companies have to decide on a strategy for expansion. One may be to concentrate on afew segments in a few countries - typical are cashewnuts from Tanzania and horticultural exports fromZimbabwe and Kenya - or concentrate on one country and diversify into segments. Other activities

include country and market segment concentration - typical of Coca Cola or Gerber baby foods, andfinally country and segment diversification. Another way of looking at it is by identifying three basicbusiness strategies: stage one - international, stage two - multinational (strategies correspond toethnocentric and polycentric orientations respectively) and stage three - global strategy (corresponds withgeocentric orientation). The basic philosophy behind stage one is extension of programmes and products,behind stage two is decentralisation as far as possible to local operators and behind stage three is anintegration which seeks to synthesize inputs from world and regional headquarters and the countryorganisation. Whilst most developing countries are hardly in stage one, they have within themorganisations which are in stage three. This has often led to a "rebellion" against the operations ofmultinationals, often unfounded.

Franchising

Franchising is another form of licensing. Here the organisation puts together a package of the successfulingredients that made them a success in their home market and then franchise this package to overseainvestors. The Franchise holder may help out by providing training and marketing the services or product.McDonalds is a popular example of a Franchising option for expanding in international markets.

5.Contracting

Another of form on market entry in an overseas market which involves the exchange of ideas iscontracting. The manufacturer of the product will contract out the production of the product to anotherorganisation to produce the product on their behalf. Clearly contracting out saves the organisationexporting to the foreign market.

6.Manufacturing abroad

The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country.The government of the host country may give the organisation some form of tax advantage because theywish to attract inward investment to help create employment for their economy.

q) Dumping - Anti-Dumping

If a company exports a product at a price (export price) lower than the price it normally charges on itsown home market (normal value), it is said to be 'dumping' the product.

Dumping can harm the domestic industry by reducing its sales volume and market shares, as well as itssales prices. This in turn can result in decline in profitability, job losses and, in the worst case, in thedomestic industry going out of business.


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Often, dumping is mistaken and simplified to mean cheap or low priced imports. However, it is amisunderstanding of the term. On the other hand, dumping, in its legal sense, means export of goods by acountry to another country at a price lower than its normal value. Thus, dumping implies low pricedimports only in the relative sense (relative to the normal value), and not in absolute sense.

Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade

distortive effect. Thus, the purpose of anti dumping duty is to rectify the trade distortive effect ofdumping and re-establish fair trade. The use of anti dumping measure as an instrument of fair competitionis permitted by the WTO. In fact, anti dumping is an instrument for ensuring fair trade and is not ameasure of protection for the domestic industry. It provides relief to the domestic industry against theinjury caused by dumping.

Anti dumping measures do not provide protection per se to the domestic industry. It only serves thepurpose of providing remedy to the domestic industry against the injury caused by the unfair tradepractice of dumping

Q) what is protectionism in a country?

Protectionism represents any attempt by a government to impose restrictions on trade in goods andservices between countries:

o Tariffs - import taxes.o Quotas - quantitative limits on the level of imports allowed.o Voluntary Export Restraint Arrangementswhere two countries make an agreement to limit

the volume of their exports to one another over an agreed period of time.o Embargoes - a total ban on imported goods.o Intellectual property laws (patents and copyrights).o

Export subsidies - a payment to encourage domestic production by lowering their costs.o Import licensing - governments grants importers the license to import goods.o Exchange controls - limiting the amount of foreign exchange that can move between countries.

Quotas, embargoes, export subsidies and exchange controls are all examples of non-tariff barriers tointernational trade.

Tariffs

A tariff is a tax that raises the price of imported products and causes a contraction in domestic demandand an expansion in domestic supply. The net effect is that the volume of imports is reduced and thegovernment received some tax revenue from the tariff.

Average import tariffs between OECD countries are around 3 per cent; but tariff peaks reach 506 per centin the EU, and 350 per cent in the US. The highest tariffs are typically levied on goods from thedeveloping world. Among non-agricultural products, the EU has 135 tariff lines over 15 per cent andabout 600 tariff lines between 10 and 15 percent, many in labour-intensive products in which developingcountries have a comparative advantage. The USA has 230 tariff lines above 15 per cent, and Australiahas nearly 800.

import Quotas


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The Government might seek to limit the level of imports through a quota. Examples of quotas werefound in the textile industry under the terms of the Multi-Fibre Agreement which expired in January2005 and which led, in 2005, to atrade dispute between the EU and China over the issue of textileimports. Quotas introduce a physical limit of the volume (number of units imported) or value (value ofimports) permitted

Administrative Barriers

Countries can make it difficult for firms to import by imposing restrictions and being 'deliberately'bureaucratic. These trade barriers range from stringent safety and specification checks to extensive hold-ups in the customs arrangements. A good example is the quality standards imposed by the EU on importsof dairy products.

Preferential Government Procurement Policies and State Aid

Free trade can be limited by preferential behaviour by the government when allocating major spendingprojects that favour domestic rather than overseas suppliers. These procurement policies run against theprinciple of free trade within the EU Single Marketbut they remain a feature of the trade policies ofmany developed countries within Western Europe. Good examples include the award of contracts tosuppliers of defence equipment or construction companies involved in building transport infrastructureprojects.

The use offinancial aid from the state can also distort the free trade of goods and services betweennations, for example the use of subsidies to a domestic coal or steel industry, or the widely criticized useof export refunds (subsidies) to European farmers under the Common Agricultural Policy (CAP) which iscriticized for damaging the profits and incomes of farmers in developing countries.

Economic justifications for protectionism

Infant Industry Argument

The essence of the argument is that certain industries possess a potential (latent) comparative advantagebut have not yet exploited the potential economies of scale. Short-term protection from establishedforeign competition allows the infant industry to develop its comparative advantage. At this point thetrade protection could be relaxed, leaving the industry to trade freely on the international market. Thedanger of this form of protection is that the industry will never achieve full efficiency. The short-termprotectionist measures often start to appear permanent.

Protectiona reaction against import dumping

The nature of dumping

Dumping is a type ofpredatory pricing behaviour and is also a form ofprice discrimination. Theconcept is used most frequently in the context of trade disputes between nations, where businesses in oneor more countries may seek to produce evidence that manufacturers in another country are exportingproducts at a price below the true cost of production. True dumping according to the definitions employedby the World Trade Organisation is illegal under WTO rules. But it can be difficult, time-consuming andcostly to prove allegations of dumping, not least the problems in calculating the production costs of asupplier in their own domestic market.
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Export subsidies and dumping in developing countries

Many developing countries have complained about the effects of dumping caused by the system ofexport refunds (subsidies) offered to producers by the European Union. These subsidies have the effectof reducing the costs of suppliers and allow them to offload their surplus production into overseasmarkets. This can have a very damaging effect on prices, demand and profits for the domestic producers

of developing countries trying to compete in their home markets.

The charity Oxfam has been especially vocal in its criticism of the effects of the trade policies of thedeveloped world in sustaining high levels of poverty in many of the worlds poorest nations. You canread more about their current campaign on trade by accessing this site:

Protection against dumpingAnti-dumping is designed to allow countries to take action against dumped imports that cause or threatento cause material injury to the domestic industry. Goods are said to be dumped when they are sold forexport at less than their normal value. The normal value is usually defined as the price for the like goodsin the exporters home market.

Anti-dumping tariffs - recent examples

Tyres:India has initiated anti-dumping investigations against imports of bus and truck tyres from China andThailand

Norwegian salmon:The European Union (EU) has imposed anti-dumping measures on Norwegian farmed salmon in the formof a minimum import price of 2.80 Euro per kilogram. The EU acted in response to complaints from EUsalmon farmers, mainly in Scotland and Ireland, that a sudden surge in imports from Norway was drivingthem out of business.

Television picture tubesThe European Commission has opened an investigation into claims that Chinese, Korean, Malaysian andThai companies are selling cathode-ray colour television picture tubes in Europe at prices below theircost. The EU industry group provided evidence that cathode ray imports had increased volume andmarket share. In the recent past, the EU has antidumping duties against a range of Chinese products fromaluminium foil to zinc oxides. China is the EU's second largest trading partner after the United States,accounting for 12 percent of all EU imports in 2004 - mostly machinery, vehicles and other manufacturedgoods.

Shoes:European shoemakers have alleged that China and Vietnam shoe producers are illegally dumping leather,

sports and safety shoes on the European market. The EU Trade Commissioner Peter Mandelson has saidthat China has a responsibility to ensure that illegal dumping does not take place and an investigation isnow underway.

If a company exports a product at a price lower than the price it normally charges on its own homemarket, it is said to be dumping the product. In the short term, consumers benefit from the low pricesof the foreign goods, but in the longer term, persistent undercutting of domestic prices will force thedomestic industry out of business and allow the foreign firm to establish itself as a monopoly. Once thisis achieved the foreign owned monopoly is free to increase its prices and exploit the consumer. Therefore
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protection, via tariffs on 'dumped' goods can be justified to prevent the long-term exploitation of theconsumer.

The World Trade Organisation allows a government to act against dumping where there is genuinematerial injury to the competing domestic industry. In order to do that the government has to be able toshow that dumping is taking place, calculate the extent of dumping (how much lower the export price is

compared to the exporters home market price), and show that the dumping is causing injury. Usually ananti-dumping action means charging extra import duty on the particular product from the particularexporting country in order to bring its price closer to the normal value.

Externalities, Market Failure and Import Controls

Protectionism can also be used to take account ofexternalities and dealing with de-merit goods. Goodssuch as alcohol, tobacco and narcotic drugs have adverse social effects and are termed de-merit goods.Protectionism can safeguard society from the importation of these goods, by imposing high tariff barriersor by banning the importation of the good altogether.

Non-Economic Reasons

Countries may wish not to over-specialise in the goods in which they possess a comparative advantage.One danger of over-specialisation is that unemployment may rise quickly if an industry moves intostructural decline as new international competition emerges at lower costs

The government may also wish to protect employment in strategic industries, although clearly valuejudgements are involved in determining what constitutes a strategic sector. The recent trade disputearising from the decision by the United States to introduce a tariff on steel imports is linked to thisobjective. The US steel tariff was declared unlawful by the WTO in July 2003 and eventually the UnitedStates was pressurized into withdrawing these tariffs in the late autumn of 2003.

Tariffs are not usually a major source of tax revenue for the Government that imposes them. In the UK forexample, tariffs are estimated to be worth only 2 billion to the Treasury, equivalent to only around 0.5%of the total tax take. Developing countries tend to be more reliant on tariffs for revenue.

Economic Arguments against Import Controls

ProtectionismHurting ConsumersTariffs, non-tariff barriers and other forms of protection serve as a tax on domestic consumers. Moreover,they are very often a regressive form of taxation, hurting the poorest consumers far more than the betteroff. In the EU for instance, the nature of existing protection means that the heaviest taxes tend to fall onthe necessities of life such as food, clothing and footwear.Source: DTI Economics Report on Trade Liberalisation and Investment, April 2004www.dti.gov.uk

According to ProfessorJagdish Bhagwati,the fact that trade protection hurts the economy of thecountry that imposes it is one of the oldest but still most startling insights economics has to offer.

The folly of protection has been confirmed by a range of studies from around the world. These indicatethat that it has brought few benefits but imposed substantial costs. Among the main criticisms ofprotectionist policies are the following:
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Market distortion: Protection has proved an ineffective and costly means of sustainingemployment.

a. Higher prices for consumers: Trade barriers in the form of tariffs push up the pricesfaced by consumers and insulate inefficient sectors from competition. They penaliseforeign producers and encourage the inefficient allocation of resources both domestically

and globally. In general terms, import controls impose costs on society that would notexist if there was completely free trade in goods and services. It has been estimated forexample that the recent tariff and other barriers placed on imports of steel into the USincreased the price of every car produced there by an average of $100

b. Reduction in market access for producers:Export subsidies, depressing world pricesand making them more volatile while depriving efficient farmers of access to the worldmarket. This is a major criticism of the EU common agricultural policy. In 2002 the EUsugar regime lowered the value of Brazil, Thailand and South Africas sugar exports byover $700 millioncountries where nearly 70 million people survive on less than $2 aday.

Loss of economic welfare: Tariffs create a deadweight loss of consumer and producer surplusarising from a loss of allocative efficiency. Welfare is reduced through higher prices andrestricted consumer choice.

Regressive effect on the distribution of income: It is often the case that the higher prices thatresult from tariffs hit those on lower incomes hardest, because the tariffs (e.g. on foodstuffs,tobacco, and clothing) fall on those products that lower income families spend a higher share oftheir income. Thus import protection may worsen the inequalities in the distribution of incomemaking the allocation of scarce resources less equitable

Production inefficiencies: Firms that are protected from competition have little incentive toreduce production costs. Governments must consider these disadvantages carefully

Little protection for employment: One of the justifications for protectionist tariffs and otherbarriers to trade is that they help to protect the loss of relatively low skilled and low paid jobs inindustries that are coming under sever international competition. The evidence suggests that, in

the long term, tariffs are a costly and ineffective way of protecting such jobs. According to theDTI study on trade published in 2004, since 1997 UK employment in textiles manufacturing hasfallen by 45%, in clothing manufacture by nearly 60%, and in footwear manufacturing by around50% - and this despite the protection afforded to European Union textile manufacturers. The costof protecting each job runs into hundreds of thousands of Euros for the EU as a whole. Might thatmoney have been spent more productively in other ways? Often there is a huge opportunity costinvolved in imposing import tariffs.

Trade wars: There is the danger that one country imposing import controls will lead toretaliatory action by another leading to a decrease in the volume of world trade. Retaliatoryactions increase the costs of importing new technologies

Negative multiplier effects: If one country imposes trade restrictions on another, the resultant decrease in

total trade will have a negative multiplier effect affecting many more countries because exports are aninjection of demand into the global circular flow of income. The negative multiplier effects are morepronounced when trade disputes boil over and lead to retaliation. In a new study of the benefits of globaltrade and investment published in May 2004, the UK Department of Trade of Industry outlined theiropposition to import controls (protectionism)

Higher taxes and higher pricesProtectionism imposes a double burden on tax payers and consumers. In the case of European


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agriculture, the cost to tax payers is about 50 billion a year, plus around 50 billion a year to consumersvia artificially high food pricestogether the equivalent of over 800 a year on the annual food budget ofan average family of four.Furthermore huge distortions in international agriculture markets prevent the worlds poorest countriesfrom trading in the products they are best able to produce. Continuing barriers to trade are costing theglobal economy around $500 billion a year in lost income.

Protectionist policies rarely achieve their aims. They can be costly to administer and they nearly alwaysprovide domestic suppliers with a protectionist shield that encourages inefficiencies leading to highercosts.

Protectionism is a second best approach to correcting for a countrys balance of payments problem orthe fear of rising structural unemployment. And import controls go against the principles of free tradeenshrined in the theories of comparative advantage. In this sense, import controls can be seen as examplesof government failure arising from intervention in markets.

EPRG MODEL:

Dr. Howard V. Perlmutter is a world authority on globalisation and pioneer on the internationalisation of

firms, cities and other institutions. Trained as a mechanical engineer and as a social psychologist,

Perlmutter joined Wharton's faculty in 1969. He specialised in the evolution of multinational corporations

(MNCs) making predictions to how their viability and legitimacy would change.

Perlmutter is the first academic who identified distinctive managerial orientations of international

companies. "The more one penetrates into the living reality of an international firm, the more one finds it

necessary to give serious weight to the way executives think about doing business around the world".

These organisational world views are shaped by a number or factors such as the circumstances duringwhich the company was formed, the CEO's leadership style, its administrative processes, the

organisational myths and traditions. Perlmutter stated that these cultural orientations determine the way

strategic decisions are made and how the relationship between headquarters and its subsidiaries is shaped.

In 1969 he bundled his insights by publishing the EPG model.

Perlmutter's EPG model states that senior management at an international organisation holds one of three

primary orientations when building and expanding its multinational capabilities:

1. ETHOCENTRIC (home country orientation)

The general attitude of a firm's senior management team is that nationals from the organisation's home

country are more capable to drive international activities forward than non-native employees working at

its headquarters or subsidiaries. The practices and policies of headquarters and of the operating company

in the home country become the default standard to which all subsidiaries need to comply. This mind set

has as advantages that it overcomes a potential shortage of qualified managers in host nations by

expatriating managers from the home country, creates a unified corporate culture and helps transfer core

competences more easily by deploying nationals throughout the organisation. The main disadvantages are

that an ethnocentric mindset can lead to cultural short-sightedness and to not promoting the best and


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brightest in a firm.

2. POLYCENTRIC (host country orientation)

This world view has as dominant assumption that host country cultures are different making a centralised,

one-size-fits-all approach unfeasible. Local people know what is best for their operation and should b

given maximum freedom to run their affairs as they see fit. This view alleviates the chance of culturalmyopia and is often less expensive to implement than ethnocentricity because it needs less expatriate

managers to be send out and centralised policies to be maintained. The drawbacks of this attitude are that

it can limit career mobility for both local and foreign nationals, isolate headquarters from foreign

subsidiaries and reduces opportunities to achieve synergy.

3. GEOCENTRIC (world orientation)

This orientation does not equate superiority with nationality. Within legal and political limits, executives

try to seek the best men, regardless of nationality, to solve the company's problems wherever in the world

they occur. This attitude uses human resources efficiently and furthermore helps to build a strong culture

and informal management networks. Drawbacks are that national immigration policies may put limits to

its implementation and it might be a bit expensive compared to polycentrism. It attempts to balance both

global integration and local responsiveness.

Perlmutter's observation was that most MNCs start out with an ethnocentric view, slowly evolve to

polycentrism and finally adopt geocentrism as the organisation familiarises itself more and more with

conducting business on a global playing field.

the R stands for a regiocentric approach falling in between a polycentric and geocentric orientation.

Regiocentric or regional orientation is defined as a functional rationalization on a more-than-one country

basis. Subsidiaries get grouped into larger regional entities. Regions are consistent with some natural

boundaries, such as the Europe, America and Asia-Pacific. Both polycentric and regiocentric approaches

allow for more local responsiveness, with less corporate integration.

What is overvalued currency?

Acurrency tradingsituation whereby thevalueof acurrencyis higher than theopen marketacceptsat the

currentexchange rate. Often acentral bankof the originatingcountrywillincreasedemandthrough the

purchaseof thelocal currency, thereby tighteningsupply.

Endosulfan ban:

What is endosulfan?
http://www.investorwords.com/6780/currency_trading.htmlhttp://www.investorwords.com/6780/currency_trading.htmlhttp://www.investorwords.com/6780/currency_trading.htmlhttp://www.investorwords.com/5209/value.htmlhttp://www.investorwords.com/5209/value.htmlhttp://www.investorwords.com/5209/value.htmlhttp://www.investorwords.com/1240/currency.htmlhttp://www.investorwords.com/1240/currency.htmlhttp://www.investorwords.com/1240/currency.htmlhttp://www.investorwords.com/3446/open_market.htmlhttp://www.investorwords.com/3446/open_market.htmlhttp://www.investorwords.com/37/accept.htmlhttp://www.investorwords.com/37/accept.htmlhttp://www.investorwords.com/37/accept.htmlhttp://www.businessdictionary.com/definition/current.htmlhttp://www.investorwords.com/1806/exchange_rate.htmlhttp://www.investorwords.com/1806/exchange_rate.htmlhttp://www.investorwords.com/1806/exchange_rate.htmlhttp://www.investorwords.com/801/Central_Bank.htmlhttp://www.investorwords.com/801/Central_Bank.htmlhttp://www.investorwords.com/801/Central_Bank.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.investorwords.com/10007/increase.htmlhttp://www.investorwords.com/10007/increase.htmlhttp://www.investorwords.com/1396/demand.htmlhttp://www.investorwords.com/1396/demand.htmlhttp://www.investorwords.com/1396/demand.htmlhttp://www.investorwords.com/3952/purchase.htmlhttp://www.investorwords.com/3952/purchase.htmlhttp://www.investorwords.com/8633/local_currency.htmlhttp://www.investorwords.com/8633/local_currency.htmlhttp://www.investorwords.com/8633/local_currency.htmlhttp://www.investorwords.com/4822/supply.htmlhttp://www.investorwords.com/4822/supply.htmlhttp://www.investorwords.com/4822/supply.htmlhttp://www.investorwords.com/4822/supply.htmlhttp://www.investorwords.com/8633/local_currency.htmlhttp://www.investorwords.com/3952/purchase.htmlhttp://www.investorwords.com/1396/demand.htmlhttp://www.investorwords.com/10007/increase.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.investorwords.com/801/Central_Bank.htmlhttp://www.investorwords.com/1806/exchange_rate.htmlhttp://www.businessdictionary.com/definition/current.htmlhttp://www.investorwords.com/37/accept.htmlhttp://www.investorwords.com/3446/open_market.htmlhttp://www.investorwords.com/1240/currency.htmlhttp://www.investorwords.com/5209/value.htmlhttp://www.investorwords.com/6780/currency_trading.html


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Environmental Protection Agency(EPA). The EPA estimates that 1.38 million lb of endosulfan wereused annually from 1987 to 1997.[12]The US exported more than 300,000 lbs of endosulfan from 20012003, mostly to Latin America,[77]but production and export has since stopped.

In California, endosulfan contamination from theSan Joaquin Valleyhas been implicated in theextirpationof themountain yellow-legged frogfrom parts of the nearbySierra Nevada Mountains.[78]In

Florida, levels of contamination theEvergladesandBiscayne Bayare high enough to pose a threat tosome aquatic organisms.

What is export?

Definition: Exports are the goods and services that are made in the U.S. and transmitted toforeigners. It doesn't matter what the good or service is or how it is sent. It can be shipped, sentby email, or hand-carried in personal luggage on a plane. If it is produced in the U.S. and sold tosomeone from a foreign country, it is an export. For example, tourism products and services arepart of exports, even though they are sold to foreigners who are visiting here.(Source:Department of Commerce)
http://en.wikipedia.org/wiki/United_States_Environmental_Protection_Agencyhttp://en.wikipedia.org/wiki/United_States_Environmental_Protection_Agencyhttp://en.wikipedia.org/wiki/Endosulfan#cite_note-RED-11http://en.wikipedia.org/wiki/Endosulfan#cite_note-RED-11http://en.wikipedia.org/wiki/Endosulfan#cite_note-RED-11http://en.wikipedia.org/wiki/Endosulfan#cite_note-Smith-76http://en.wikipedia.org/wiki/Endosulfan#cite_note-Smith-76http://en.wikipedia.org/wiki/Endosulfan#cite_note-Smith-76http://en.wikipedia.org/wiki/San_Joaquin_Valleyhttp://en.wikipedia.org/wiki/San_Joaquin_Valleyhttp://en.wikipedia.org/wiki/San_Joaquin_Valleyhttp://en.wikipedia.org/wiki/Local_extinctionhttp://en.wikipedia.org/wiki/Local_extinctionhttp://en.wikipedia.org/wiki/Mountain_yellow-legged_froghttp://en.wikipedia.org/wiki/Mountain_yellow-legged_froghttp://en.wikipedia.org/wiki/Mountain_yellow-legged_froghttp://en.wikipedia.org/wiki/Sierra_Nevada_Mountainshttp://en.wikipedia.org/wiki/Sierra_Nevada_Mountainshttp://en.wikipedia.org/wiki/Endosulfan#cite_note-pmid15378994-77http://en.wikipedia.org/wiki/Endosulfan#cite_note-pmid15378994-77http://en.wikipedia.org/wiki/Endosulfan#cite_note-pmid15378994-77http://en.wikipedia.org/wiki/Evergladeshttp://en.wikipedia.org/wiki/Evergladeshttp://en.wikipedia.org/wiki/Evergladeshttp://en.wikipedia.org/wiki/Biscayne_Bayhttp://en.wikipedia.org/wiki/Biscayne_Bayhttp://en.wikipedia.org/wiki/Biscayne_Bayhttp://en.wikipedia.org/wiki/Biscayne_Bayhttp://en.wikipedia.org/wiki/Evergladeshttp://en.wikipedia.org/wiki/Endosulfan#cite_note-pmid15378994-77http://en.wikipedia.org/wiki/Sierra_Nevada_Mountainshttp://en.wikipedia.org/wiki/Mountain_yellow-legged_froghttp://en.wikipedia.org/wiki/Local_extinctionhttp://en.wikipedia.org/wiki/San_Joaquin_Valleyhttp://en.wikipedia.org/wiki/Endosulfan#cite_note-Smith-76http://en.wikipedia.org/wiki/Endosulfan#cite_note-RED-11http://en.wikipedia.org/wiki/United_States_Environmental_Protection_Agency

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