Specific requirements:Current events play an important role in this course. Therefore, you are encouraged to regularly read articles related to international marketing in newspapers and (business) magazines, such as The Wall Street Journal, The Globe and Mail, The Economist, Business Week, Canadian Business, Fortune, Forbes, and even in publications like Time and Maclean’s.To structure this effort during the semester, you are required to complete a portfolio of executive summary briefs of newspaper/magazine articles. This activity involves reading one article per week (from Jan 22nd to Feb 14th – 4 weeks) that is relevant to one of the topics in the course and completing a short write-up (typed, maximum 1 page, single-spaced) of that article. A summary brief report template will be handed out in class. A copy of the newspaper/magazine article should be stapled to each brief. A complete citation and the source and date of the article should appear at the top of the summary. For each weekly summary brief, the article summarized must have been published within 2 weeks of the summary dateIn your brief, you should summarize the article and identify the marketing outcome (such as the success or failure of the new product or venture). You should also discuss how the underlying issue relates to one of the marketing topics discussed in class or in the textbook (i.e., what marketing concepts or text materials explain the outcome) and include your own opinion on the issue. Keep in mind that the summarized articles must have been published within two weeks of the summary date.And this is my schedule: Jan 22 Economic EnvironmentJan 24 Economic Environment (continued) Jan 29 Political & Legal Environment -Chapter 5 Jan 31 International Marketing Research- Chapter 6 Feb 5 Global Segmentation -Chapter 7 Feb 7 Market Entry Strategies -Chapters 8 & 9 Feb 12 Feb 14 Market Entry Strategies (continued)
exec_summary_portfolio_template.docx
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political___legal_environment.pptx
_intl_mktg_research__1_.pptx
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Article Title:
Author’s Name:
Date Published:
Full Citation:
Section #1 – Summary of article and discussion of the marketing outcome
Section #2 – Application of theory from the text/class to issues in the article
Section #3 – Your opinion about the issue/article
MKTG 3375
ECONOMIC
ENVIRONMENT
The World Economy
—An Overview
• In the early 20th century economic integration
was at 10%; today it is 50%
• EU and NAFTA are very integrated
• Global competitors have displaced or absorbed
local ones
2
The World Economy—An Overview
The new realities:
• Capital movements have replaced trade as
the driving force of the world economy
• Production has become uncoupled from
employment
• The world economy, not individual
countries, is the dominating factor
• The struggle between capitalism and
socialism began in 1917 is over
• E-Commerce diminishes the importance of
national barriers and forces companies to
re-evaluate business models
3
Characteristics of Economic
Systems
Stage of market development
Type of Government
Trade and capital flows
Control of transportation,
communications & energy sectors
• Services provided by the state or state
funded
• Institutions
• Markets
•
•
•
•
Video: Crash Course – Economic Systems
4
Economic Systems
Resource Allocation
Market
Private
Resource
Ownership
State
Command
Market
Capitalism
Centrally Planned
Capitalism
Market
Socialism
Centrally Planned
Socialism
Globalization has made it harder to pigeonhole
economies within the four-cell matrix
5
Economic Freedom
• Rankings of economic freedom among
countries
• “free” “mostly free” “mostly unfree”
“repressed”
• Variables considered include such things as:
• Trade policy
• Taxation policy
• Capital flows and foreign investment
• Banking policy
• Wage and price controls
• Property rights
• Black market
6
Economic Freedom — 2015 Rankings
Free
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Hong Kong
Singapore
New Zealand
Australia
Switzerland
Canada
Chile
Estonia
Ireland
Mauritius
Denmark
United States
Repressed
169.
170.
171.
172.
173.
174.
175.
176.
177.
178.
Argentina
Republic of Congo
Iran
Turkmenistan
Equatorial Guinea
Eritrea
Zimbabwe
Venezuela
Cuba
North Korea
Not ranked: Afghanistan, Iraq, Kosovo, Libya, Liechtenstein,
Somalia, Sudan, Syria
7
Stages of Market
Development
• The World Bank has defined four categories
of development using Gross National
Income (GNI) as a base
• Today, the focus is on BRICS emerging
markets: Brazil, Russia, India, China and
South Africa
8
World Economic Pyramid
9
(1) Low-Income Countries
(or subsistence economies)
• GNI per capita of $1,045 or less
• Characteristics
– Limited industrialization
– High percentage of population in farming
– High birth rates
– Low literacy rates
– Heavy reliance on foreign aid
– Political instability and unrest
– Concentrated in Sub-Saharan Africa
10
(2) Lower-Middle-Income
Countries
• GNI per capita: $1,046 to $4,125
• Characteristics
– Rapidly expanding consumer markets
– Cheap motivated labor
– Mature, standardized, labor-intensive
industries like footwear, textiles and toys
• India is the only BRIC nation in this category
11
(3) Upper-Middle-Income Countries
(or industrializing economies)
GNI per capita: $4,126 to $12,745
Characteristics:
•Rapidly industrializing, less agricultural
employment
•Increasing urbanization
•Rising wages (but lower wage costs than in
advanced countries
•High literacy rates and advanced education
•BRICS: Brazil, China, South Africa fall in this
group
12
Mistaken Assumptions about
Least Developed Countries (LDCs)
1.
2.
3.
4.
5.
The poor have no money.
The poor will not “waste” money on nonessential goods.
Entering developing markets is fruitless
because goods there are too cheap to make
a profit.
People in BOP (bottom of the pyramid)
countries cannot use technology.
Global companies doing business in BOP
countries will be seen as exploiting the
poor.
13
(4) High-Income Countries
(or industrialized countries)
• GNI per capita: $12,476 or more
• Characteristics:
• Sustained economic growth through
innovation
• Service sector is more than 50% of GNI
• Households have high ownership levels of
basic products
• Importance of information processing and
exchange
• Ascendancy of knowledge over capital,
intellectual over machine technology,
scientists and professionals over engineers
and semiskilled workers
14
Class Activity
The seven criteria for describing a nation’s
economy are as follows:
•
•
•
•
•
•
•
Stage of market development
Type of Government
Trade and capital flows
Control of trans, comm, & energy sectors
Services provided by the state
Institutions
Markets
1. Use the seven criteria to develop a
profile of (1) Canada and (2) one of the
BRICS countries.
2. What implications does this profile have
for marketing opportunities in the BRICS
country?
15
Product Saturation Levels
• The percent of potential buyers or households
who own a product
• India: 20% of people have telephones
• Autos: 1 per 43,000 Chinese, 21 per 100 Poles,
49 per 100 EU adults, 8 per 1,000 in India, 200
out of 1,000 in Russia, 565 out of 1,000 in
Germany
• Computers: 1 PC per 6,000 Chinese; 11 PCs per
100 Poles; 34 PCs per 100 EU citizen
16
Balance of Payments
• Record of all economic transactions between
the residents of a country and the rest of the
world
• Current account–record of all recurring
trade in merchandise and services, and
humanitarian aid
• trade deficit—negative current account
• trade surplus—positive current account
• Capital account–record of all long-term
direct investment, portfolio investment, and
capital flows
17
GATT & WTO
• General Agreement on Tariffs and Trade
• Treaty among nations to promote trade
among members established in 1947
• Handled trade disputes
• Replaced by World Trade Organization (WTO) in
1995
• Forum for trade-related negotiations among
160 members
• Serves as a dispute mediator
• Has enforcement power & can impose
sanctions
18
Preferential Trade
Agreements
• Many countries seek to lower barriers to
trade within their regions
• PTAs give partners special treatment and
may discriminate against others
• Over 300 PTAs have been notified to the
WTO
19
Economic Integration
• Economic Integration – process whereby
countries coordinate to reduce trade barriers
• Trading Bloc – a group of countries that join
together and agree to increase trade between
themselves
• Success of blocs depend on:
✓Leadership
✓Proximity
✓Commitment to cooperation
20
Levels of Economic Integration
Economic Union – economic/political
harmonization
Common Market – factor movement
Customs Union – common external tariffs
Free Trade Agreement – abolish tariffs
21
Economic Union
Full evolution of economic union:
✓creation of unified central bank
✓use of single currency
✓common policies on issues such as
agriculture, social policy, transport,
competition, mergers, taxation
✓requires extensive political unity
✓would lead to a central government in
time
22
North America—NAFTA
• NAFTA established as a free trade area in
1994
• All three nations pledge to promote
economic growth through tariff reductions
and expanded trade and investment
• No common external tariffs
• Restrictions on labor and other movements
remain
• To replaced by the USMCA (once ratified)
23
NAFTA Income and Population
24
U.S. Goods Exports in 2014
$1.6 Trillion
25
U.S. Goods Imports in 2014
$2.3 Trillion
26
The European Union (EU)
• Initially began with the
1958 Treaty of Rome
• Objective is to harmonize
national laws and
regulations so that goods,
services, people, and
money could flow freely
across national
boundaries
• 1991 Maastricht Treaty
set stage for transition to
an economic union with a
central bank and single
currency (the Euro)
27
European Union
•
•
•
•
•
•
•
28 countries
450 million people
$15 trillion GNI
Euro currency, 1999
Harmonization of laws and regulations
Price transparency
No customs at national borders
28
European
Union
29
Latin America: SICA, Andean
Community, Mercosur, CARICOM
• Includes the Caribbean, Central, and
South America
• History of no growth, inflation, debt,
and protectionism has given way to free
markets, open economies, and
deregulation
• Some concern for further growth with
the rise of left-leaning politicians
30
Central American Integration
System (SICA)
• El Salvador,
Honduras, Guatemala,
Nicaragua, Costa Rica,
and Panama
• Moving towards a
common market
• Common External
Tariff of 0 to 15%
•Retains tariffs on
goods also produced in
importing country
31
DR-CAFTA
• SICA members El Salvador,
Honduras, Guatemala, Nicaragua,
Costa Rica joined the Dominican
Republic and the United States in
a FTA
• 80% of US goods and 50% + of
agricultural goods are duty free
• Paperwork is reduced
• Reduced risks mean more direct
foreign investment
32
Andean Community
• Bolivia, Colombia, Ecuador, Peru
• 45th anniversary in 2014
• Customs Union
• Abolished foreign exchange, financial
and fiscal incentives, and export
subsidies
• Established common external tariffs
33
Common Market of the South
(MERCOSUR)
• Argentina, Brazil, Paraguay, Uruguay,
Venezuela
• Customs union, seeks to become common
market
• Internal tariffs eliminated
• Established common external tariffs up to 20%
• In time, factors of production will move freely
through member countries
• Bolivia, Chile, Ecuador, Peru
• Associate members
• Participate in free trade area but not customs
union
34
CARICOM
Founded in 1973 by 15 members
17 million population
Stagnant for 20 years
Customs Union in 1991 with common
external tariffs
• Rejected the idea of a economic union in
1998 as a single currency would not be
especially beneficial.
•Caribbean Basin Trade Partnership Act
exempts textile and apparel exports to the U.S.
market access from duties and tariffs.
Caribbean Basin Initiative of 20 nations
includes CARICOM.
•
•
•
•
35
Asia-Pacific: The Association of
Southeast Asian Nations (ASEAN)
• Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines, Singapore,
Thailand, Vietnam
• Top trading partners U.S., Japan, EU,
China
• Geographically close; historically divided
• “ASEAN plus six” (Japan, China, Korea,
Australia, New Zealand, India) working
towards an economic community
• China/ASEAN FTA established in 2010
removes 90% of tariffs on traded goods
36
The Middle East
• Afghanistan, Bahrain, Cyprus, Egypt, Iran, Iraq,
Israel, Jordan, Kuwait, Lebanon, Oman, Qatar,
Saudi Arabia, Syria, the United Arab Emirates,
Yemen
• Primarily Arab, some Persian and Jews
• 95% Muslim, 5% Christian and Jewish
• Wide variation in Economic Freedom rankings
• Bahrain is 18th, UAE is 25th, Saudi Arabia is
77nd
• Oil prices drive commerce
• 25% of world’s oil in Saudi Arabia
• Arab Spring 2011
37
Gulf Cooperation Council
•Established in
1981 by 6
countries with
45% of world’s
oil, only 18% of
output
•These countries
are attempting
to diversify
industries
38
Africa
• 54 nations over three distinct areas
– Republic of South Africa
– North Africa
– Black Africa or sub-Saharan Africa
• Mena: Middle East and North Africa
–Viewed as a regional entity
• Regional agreements
– Economic Community of West African
States
– East African Cooperation
– South African Development Community
39
MKTG 3375
POLITICAL & LEGAL
ENVIRONMENT
Political/Legal Environment
When considering the legal/political
environment, you need to consider 3
areas:
• The political and legal circumstances
of the home country
• The political and legal circumstances
of the host country
• The bilateral and multilateral
agreements between countries
2
Sovereignty
Sovereignty: Supreme and independent
political authority
➢Some believe that global market
integration is eroding national
economic sovereignty
3
Political Risk
• Risk of change in political environment
or in government policy that would
adversely affect a company’s ability to
operate effectively and profitably.
• When perceived political risk is high, a
country will have a difficult time
attracting foreign direct investment.
• Major types (categories) of political
risk
• Ownership risk
• Operating risk
• Transfer risk
4
Political Risk
Examples of activities that lead to political risk
include:
✓War
✓Social unrest
✓Politically motivated violence
✓International disputes
✓Change in gov’t/pro-business orientation
✓Social conditions
✓Corruption, nepotism
✓Crime
✓Labor costs
✓Tax discrimination
✓Exchange controls, tariff barriers
✓Dependence on a major hostile power
✓Repatriation restrictions
5
Seizure of Assets
Government policies that contribute to
political risk include actions to seize
company assets:
• Expropriation
• Nationalization
• Nationalization is acceptable
(according to international law) if:
• it satisfies public purpose
• it includes compensation
• Confiscation
6
Seizure of Assets
Domestication and Creeping expropriation
– limits economic activities of foreign
firms
• May include:
✓Limits on repatriation of profits/royalties
✓Increased local content laws
✓Quotas for hiring local nationals
✓Price controls
✓Discriminatory tariff and nontariff barriers
✓Discriminatory laws on patents and
trademarks
7
Taxes
• Government taxation policies
➢High taxation can lead to black market
growth and cross-border shopping
• Corporate taxation
➢Companies attempt to limit tax liability
by shifting location of income
8
International Relationships
International law – the rules and
principles that nation-states consider
binding among themselves.
Things to keep in mind:
• No enforceable body of international
law exists
• Treaties and agreements respected
by a number of countries influence
international business operations
• Firms are restricted by both homeand host-country laws
9
Common, Civil, and Islamic Law
•Common Law
• Disputes are decided by reliance on
the authority of past judicial decisions
• Civil Law (Code law)
• Legal system reflects the structural
concepts and principles of the Roman
Empire
• Islamic Law
• Legal system in many Middle Eastern
countries
10
Understanding Legal Issues
• Prevent conflicts
✓Establish jurisdiction
✓Protect intellectual property (via
patents, trademarks, and
copyrights)
✓Protect licenses and trade secrets
✓Advertising & promotion
✓Avoid bribery and corruption
11
Bribery and Corruption
• US Foreign Corrupt Practices Act (FCPA)
• Requires internal accounting controls
recording all transactions
• Makes it a crime for a U.S. corporation
to bribe an official of a foreign gov’t
• Prohibits payments to third parties
• Corruption of Foreign Public Officials Act
(CFPOA) – Canadian equivalent of FCPA
• US Omnibus Trade and Competitiveness
Act
• Allows for facilitation “grease”
payments to cut through red tape
• There is no allowance for facilitation
payments in Canada
12
2014 Corruption Rankings
13
Antitrust
Antitrust Laws are designed to combat
restrictive business practices and to
encourage competition
➢Enforced by FTC in the U.S., Fair
Trade Commission in Japan, European
Commission in the EU, Competition
Bureau in Canada
• Sherman Act of 1890
• Applies to U.S. companies outside
U.S. borders and to foreign
companies operating in the U.S.
• Competition Act (Canada)
14
MKTG 3375
INTERNATIONAL
MARKETING RESEARCH
Marketing Research
The American Marketing Association
defines market research as:
• The function that links the
consumer, customer, and public to
the marketer through information
2
Marketing Research
Marketing research is used to:
• Identify marketing opportunities and
problems
• Generate, refine and evaluate
marketing actions
• Monitor marketing performance
• Improve understanding of marketing
as a process
3
International versus Domestic
Research
Four primary differences:
• New parameters
• New environment
• Number of factors involved
increases
• Broader definition of competition
4
Recognizing the Need for
Research
Firms are reluctant to engage in
international marketing research
activities due to:
• Lack of sensitivity to consumer
differences
• Limited appreciation for the different
marketing environments
• Lack of familiarity with data sources
• International activity may be gradual
5
Formal Marketing Research
Process
1.
2.
3.
4.
5.
6.
7.
8.
9.
Firm objective
Information requirement
Problem definition
Choose unit of analysis
Examine data availability
Assess value of research
Research design
Data Analysis
Interpretation and presentation
6
Step 2: Information Requirement
7
Step 5: Examine Data
Availability
Secondary Data – Data from sources
that already exist. They have not been
gathered for the specific research
project.
• Pros: Minimal effort and cost
• Possible problems:
• accuracy
• availability
• timeliness
• comparability of data
8
Secondary data for international marketing
research can be procured from:
• Governments
• US Census Bureau
• StatsCan
• Eurostat
• Canadian Trade Commissioner Service
• CIA World Factbook
• International organizations
• UN Statistical Yearbook
• World Bank World Atlas
• Service organizations
• MarketResearch.com
• Trade associations
• Directories and newsletters
• Other firms
9
Step 6: Assess Value of
Research
• If secondary data are not available,
managers may conduct further
studies
• Assess the cost of research vs. what
the information is worth
• Would the company enter the market
without spending big money on
research?
• Small markets may merit only modest
research expense
10
Step 7: Research Design
• Primary Data
• when secondary data not available
• provides accurate data which give
exact answers to a given research
problem
• Possible problems
• difficulties in gaining the data
• cost
• more time is necessary to gather
the data
11
Common Research Methodologies
• Survey Research: Qualitative or
Quantitative
• Make use of back-translation
technique to insure accuracy
• Consumer Panel: Respondents behavior
tracked over time; Nielsen Media tracks
television audience measurement (TAM)
• Observation: Trained observers or a
mechanical device (video camera)
watch & record actual or potential
consumers
• Focus Groups: Moderator leads 6-10
person discussion
12
Step 9: Interpretation &
Presentation
• The report should clearly link to the
problem or opportunity indentified in
Steps 1-3
• Use language with which managers
are comfortable
• Simplify complex quantitative analysis
13
In Class Activity
Using some of the secondary data sources that we
discussed today (and any other sources that you
feel are credible), find the following information as
it relates to the country chosen for your project:
• Recent population data
• Top 3 trading partners (for imports and exports)
• Purchase power parity gross national income
• Literacy rate
• Telephones per capita
• Life expectancy
• Primary industries
• List of top 20 foreign companies doing business in
the country. How many are American companies?
➢Be sure to provide the source for each piece of
data
14
MKTG 3375
GLOBAL
SEGMENTATION
Global Market Segmentation
• The process of dividing the world market
into distinct subsets of customers that
have similar needs (for example, country
groups or individual interest groups).
• Pluralization of Consumption or segment
simultaneity theory was advanced by
Professor Theodore Levitt four decades
ago stating that consumers seek variety
and new segments will appear in many
natio …
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