Defination of International Marketing

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 1/50

1

INTERNATIONAL MARKETING

AND

WTO (WORLD TRADE ORGANISATION)

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 2/50

2

Chapter 1

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 3/50

3

A. DEFINITION OF INTERNATIONAL MARKETING

International Marketing can be defined as exchange of goods and services between different

national markets involving buyers and sellers.

According to the American Marketing Association, ―International Marketing is the multi-

national process of planning and executing the conception, prices, promotion and

odistribution of ideal goods and services to create exchanges that satisfy the individual and

organizational objectives.‖ 

B. CONCEPTS OF INTERNATIONAL MARKETING 

I. Domestic Marketing:

Domestic Marketing is concerned with marketing practices within the marketer‘s home country. 

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 4/50

4

II. Foreign Marketing: 

It refers to domestic marketing within the foreign country.

III. Comparative Marketing: 

When two or more marketing systems are studied, the subject of study is known as comparative

marketing. In such a study, both similarities and dis-similarities are identified. It involves an

analytical comparison of marketing methods practiced in different countries.

IV. International Marketing: 

It is concerned with the micro aspects of a market and takes the company as a unit of analysis.

The purpose is to find out as to why and how a product succeeds or fails in a foreign country and

how marketing efforts influence the results of international marketing.

V. International Trade:

International Trade is concerned with flow of goods and services between the countries. The

 purpose is to study how monetary and commercial conditions influence balance of payments and

resource transfer of countries involved. It provides a macro view of the market, national and

international.

VI. Global Marketing: 

Global Marketing consider the world as a whole as the theatre of operation. The purpose of 

global marketing is to learn to recognize the extent to which marketing plans and programmes

can be extended world wide and the extent to which they must be adopted.

C. DIFFERENCE BETWEEN DOMESTIC MARKETING AND

INTERNATIONAL MARKETING

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 5/50

5

Marketing is the process of focusing the resources and objectives of an organisation on

environmental opportunities and needs. It is a universal discipline. However, markets and

customers are different and hence the practice of marketing should be fine tuned and adjusted to

the local conditions of a given country. The marketing man must understand that each person is

different and so also each country which means that both experience and techniques obtained and

successful in one country or countries. Every country has a different set of customers and even

within a country there are different sub-sets of customers, distribution channels and media are

different. If that is so, for each country there must be a unique marketing plan. For instance,

nestle tried to transfer its successful four  – flavour coffee from Europe to the united states lost a

1% market share in the us. It is important in international marketing to recognize the extent to

which marketing plans and programmes can be extended to the world and the extent to which

marketing plans must be adapted. Prof.Theodore Levitt thought that the global village or the

world as a whole was a homogeneous entity from the marketing point of view. He advocated

organisation to develop standardized high quality word products and market them around the

world using standardized advertising, pricing and distribution. The companies who followed

Prof. Levitt‘s prescription had to fail and a notable failure amongst them was Parker pen. Carl

Spiel Vogel, Chairman and CEO of the Backer Spiel Vogel Bates worldwide advertising agency

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 6/50

6

expressed his view that Levitt‘s idea of a homogeneous world is non – sensible and the global

success of Coca Cola proved that Prof. Levitt was wrong. The success of Coca Cola was not

 based on total standardization of marketing mix. According to Kenichi Ohmae, Coke succeeded

in Japan because the company spent a huge amount of time and money in Japan to become an

insider. Coca Cola build a complete local infrastructure with its sales force and vending machine

operations. According to Ohmae, Coke‘s success in Japan was due to the ability of the company

to achieve global localisation or ‗Glocalisation‘ i.e. the ability to be an insider or a local

company and still reap the benefits of global operations. Think global and act local is the

meaning of Glocalisation and to be successful in international marketing, companies must have

the ability to think global and act local. International marketing requires managers to behave

 both globally and locally simultaneously by responding to similarities and dissimilarities in

international markets. Glocalisation can be a source of competitive advantage. By adapting sales

 promotion, distribution and customer service to local needs, Coke capture 78% of soft drink 

market share in Japan. Apart from the flagship brand Coca Cola, the company produces 200

other non- alcoholic beverages to suit local beverages. There are other companies who have

created strong international brands through international marketing. For instance, Philip Morris

has made Marlboro the number one cigarette brand in the world. In automobiles, Daimler 

Chrysler gained global recognition for its Mercedes brand like his competitor Bayerische. Mc

Donald‘s has designed a restaurant system that can be set up anywhere in the world. Mc

Donald‘s customizes its menu in accordance with local eating habits.  

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 7/50

7

D. SCOPE OF INTERNATIONAL MARKETING 

International Marketing constitutes the following areas of business:-

Exports and Imports: International trade can be a good beginning to venture into international

marketing. By developing international markets for domestically produced goods and services a

company can reduce the risk of operating internationally, gain adequate experience and then go

on to set up manufacturing and marketing facilities abroad.

Contractual Agreements: Patent licensing, turn key operations, co – production, technical and

managerial know – how and licensing agreements are all a part of international marketing.

Licensing includes a number of contractual agreements whereby intangible assets such as

 patents, trade secrets, know – how, trade marks and brand names are made available to foreign

firms in return for a fee.

Joint Ventures: A form of collaborative association for a considerable period is known as joint

venture. A joint venture comes into existence when a foreign investor acquires interest in a local

company and vice versa or when overseas and local firms jointly form a new firm. In countries

where fully owned firms are not allowed to operate, joint venture is the alternative.

Wholly owned manufacturing: A company with long term interest in a foreign market may

establish fully owned manufacturing facilities. Factors like trade barriers, cost differences,

government policies etc. encourage the setting up of production facilities in foreign markets.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 8/50

8

Manufacturing abroad provides the firm with total control over quality and production.

Contract manufacturing: When a firm enters into a contract with other firm in foreign country to

manufacture assembles the products and retains product marketing with itself, it is known as

contract manufacturing. Contract manufacturing has important advantages such as low risk, low

cost and easy exit.

Management contracting: Under a management contract the supplier brings a package of skills

that will provide an integrated service to the client without incurring the risk and benefit of 

ownership.

Third country location: When there is no commercial transactions between two countries due to

various reasons, firm which wants to enter into the market of another nation, will have to operate

from a third country base. For instance, Taiwan‘s entry into china through bases in Hong Kong. 

Mergers and Acquisitions: Mergers and Acquisitions provide access to markets, distribution

network, new technology and patent rights. It also reduces the level of competition for firms

which either merge or acquires.

Strategic alliances: 

A firm is able to improve the long term competitive advantage by forming a strategic alliance

with its competitors. The objective of a strategic alliance is to leverage critical capabilities,

increase the flow of innovation and increase flexibility in responding to market and technological

changes. Strategic alliance differs according to purpose and structure. On the basis of purpose,

strategic alliance can be classified as follows:

i. Technology developed alliances like research consortia, simultaneous engineering agreements,

licensing or joint development agreements.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 9/50

9

ii. Marketing, sales and services alliances in which a company makes use of the marketing

infrastructure of another company in the foreign market for its products.

iii. Multiple activity alliance involves the combining of two or more types of alliances. For 

instance technology development and operations alliances are generally multi- country alliances.

On the basis of structure, strategic alliance can be equity based or non equity based. Technology

transfer agreements, licensing agreements, marketing agreements are non equity based strategic

alliances.

Counter trade: Counter trade is a form of international trade in which export and import

transactions are directly interlinked i.e. import of goods are paid by export of goods. It is

therefore a form of barter between countries. Counter trade strategy is generally used by UDCs

to increase their exports. However, it is also used by MNCs to enter foreign markets. For 

instance, PepsiCo‘s entry in the former USSR. There are different forms of counter trade such as

 barter, buy back, compensation deal and counter purchase. In case of barter, goods of equal value

are directly exchanged without the involvement of monetary exchange. Under a buy back 

agreement, the supplier of a plant, equipment or technology. Payments may be partly made in

kind and partly in cash. In a compensation deal the seller receives a part of the payment in cash

and the rest in kind. In case of a counter purchase agreement the seller receives the full payment

in cash but agrees to spend an equal amount of money in that country in a given period.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 10/50

10

Chapter 2 

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 11/50

11

A.GLOBALISATION OF INDIAN BUSINESS: 

Globalization, liberalization and privatization were the three cornerstones of India‘s New

Economic Policy of 1991. The year 1991 marks the beginning of a new era in the Indian

economy. The new objective to be pursued by the policy makers, strategists and executives was

to make India the largest free market economy of the 21st century. In pursuit of this objective,

the Indian economy was to be integrated with the world economy through a programme of 

structural adjustment and stabilization. While the stabilization programme included inflation

control, fiscal adjustment and BOP adjustment, the structural reforms included trade and capital

flows reforms, industrial deregulation, disinvestment and public enterprise reforms and financial

sector reforms. The programme of economic reforms has not been entirely successful and as a

result, the globalization process of the Indian economy has not gathered momentum. Indian

 business continues to face a number of difficulties and obstacles in their effort to globalize their 

 business. These obstacles are as follows:

B. GOVERNMENT POLICY AND PROCEDURES: 

Government policy and procedures in India are extremely complex and confusing. Swift and

efficient action is a pre-requisite for globalization- which sadly missing. The procedures and

 practice continue to be bureaucratic and hence a speed breaker in the globalization effort.

HIGH COST OF INPUTS AND INFRASRUCTURAL FACILITIES: 

The cost of raw materials, intermediate goods, power, finance, infrastructural facilities etc. in

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 12/50

12

India is high which reduces the global competitiveness of Indian business. The quality and

adequacy of infrastructural facilities in India is far from satisfactory. Further the technology

employed by Indian industries and the style of operation is generally out dated.

C. RESISTANCE TO CHANGE: 

The pre-reform era (1951- 1991) breeded lethargy, created rigid structures, systems, practices

and procedures and generally instilled a laid back attitude. These factors are a hindrance to the

 processes of modernization, rationalization and efficiency improvement. Technological change is

generally perceived to be employment reducing and hence resisted to the extent possible. For 

instance, information technology was introduced in India in the early eighties. However,

computerization process of nationalized banks began only in the mid nineties. Excess labour is

 particularly employed in the public sectors in areas such as banking, insurance, and the railways

and Indian industry in general. As a result, labour productivity is low and cheap labour in many a

cases turns out to be dear.

D. NON – TARIFF BARRIERS (NTBs) 

Member nations of the World Trade Organizations are bound to progressively reduce tariff rates

across the board over a definite period of time so that level playing field is created in global

trade. Tariff barriers are therefore not of much concern. What concerns developing nations in

 particular, are non- tariff barriers imposed by the developed countries. Issues such as child labor 

content in some of the products exported by India to the developed nations had cropped up and

remain unresolved.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 13/50

13

E. ADVANTAGES OF GLOBALISATION: 

For successful globalization, countries need to chalk out strategies and policies to open up the

doors for the inflows of foreign direct investment (FDI). The FDI by the MNCs brings with it

flow of foreign exchange/ foreign capital, inflow of technology, real capital goods, managerial

and technical skills and know- how.

Globalization can easily promote exports of the country by exploiting its export potentials in a

right way. Globalization can be the engine of growth by facilitating export- led growth strategy

of developing country. ASEAN countries such as Indonesia, Malaysia and Thailand have

demonstrated their success of export- led growth strategy supported by the FDI under 

globalization approach.

Globalization can provide sophisticated job opportunities to the qualified people and check 

‗brain drain‘ in a country. Globalization would provide varieties of products to consumers at a

cheaper rate when they are domestically produced rather than imported. This would help in

improving the economic welfare of the consumer class.

Under globalization, the rising inflow of capital would bring foreign exchange into the country.

Consequently, the exchange reserve and balance of payments position of the country can

improve. This also helps in stabilizing the external value of the country‘s currency. 

Under global finance, companies can meet their financial requirements easily. Global banking

sector would facilitate e banking and e-business. This would integrate countries economy

globally and its prosperity would be enhanced.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 14/50

14

F. DISADVANTAGES OF GLOBALIZATION 

Globalization is never accepted as unmixed blending. Critics have pessimistic views about its ill-

consequences.

When a country is opened up and its market economy and financial sectors are well liberalized,

its domestic economy may suffer owing to foreign economic invasion.

A developing economy hen lacks sufficient maturity; globalization may have adverse effect on

its growth.

Globalization may kill domestic industries when they fail to improve and compete with foreign

well-managed, well-established firms.

Globalization may result into economic imperialism.

Unguarded openness may become a playground for speculators. Currency speculation and

speculators attacks, as happened in case of Indonesia, Malaysia, Philippines, Thailand, etc.

recently, may lead to economic crisis. It may lead to unemployment, poverty and growing

economic inequalities.

G. STRATEGIES FOR GLOBALISATION: 

Ans. When a company makes the commitment to go international, it must choose an entry

strategy. This decision should reflect an analysis of market potential, company capabilities and

the degree of marketing involvement and commitment management is prepared to make. The

approach to foreign marketing can range from minimal investment with infrequent and indirect

exporting with little thought given to market development, to large investments of capital and

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 15/50

15

management in an effort to capture and maintain a permanent, specific share of world markets.

Depending on the firm‘s objectives and market characteristics, either approach can be profitable.

In fact, a company in various country markets may employ a variety of entry modes since each

country market poses a different set of conditions. Having more than one strategy allows the

company to match its expertise with the specific needs of each country market.

The various strategies available to Indian firms to enter the international environment are

discussed as follows:

H. EXPORTING 

Exporting is perhaps the first step for a company to go global. It is the first of the attempts to

understand the international environment develop markets abroad.

Exporting can be direct or indirect. With direct exporting the company sells to a customer in

another country. This is the most common approach employed by companies taking their first

international step because the risks of financial loss can be minimized. In contrast, indirect

exporting usually means that the company sells to a buyer in the home country who in turn

exports the product. Customers include large retailers like Wal-Mart or Sears, Wholesale supply

houses, trading companies, and others that buy to supply customers abroad.

In a global environment, the sourcing of finance, materials, managerial inputs etc. will also be

global. However, with 0.5 percent share in the world trade, India is an insignificant player. There

are a number of products with large export potential but these have not been tapped properly.

With a more pragmatic and realistic export policy, procedural reforms and institutional support,

with technological development, modernization and expansion of production facilities, India can

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 16/50

16

definitely improve its share in the world trade from its present poor status. There are three

strategies to increase export revenue. These are:

1. Increase the average unit value realization,

2. Increase the quantity of exports and

3. Export new products.

Value added exports assume significance in the context of increasing the average unit value

realization. The bulk of India‘s manufactured exports constitute the low price segment of 

international markets. Quality improvement and aggressive marketing is required to enter the

high price segments of the markets. This can be achieved by technology imports and or foreign

collaborations.

The size of India‘s export basket needs to be expanded by adding new products. In order to

identify new products for exports, export opportunities needs to be explored and products with

high foreign demand also need to be identified.

There are also market segments, and industries which are abandoned by the developed countries

on account of factors such as environmental consideration, lack of competitiveness etc. For 

instance, developed countries are progressively vacating production of a range of chemicals due

to higher expenditure on overheads and wages. Yet another strategy available to Indian

Companies is Niche Marketing.

I. FOREIGN INVESTMENT

It refers to investment in foreign country. Foreign investment by Indian Companies have been

negligible because of factors such as assured domestic market, want of global orientation,

 protective government regulation etc. However, this inward orientation has undergone

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 17/50

17

substantial change after the adoption of the new economic policy 1991. With the economic

liberalization and growing global orientation, many Indian firms are setting up manufacturing,

assembling and trading bases overseas. These facilities are either wholly owned or foreign

 partnership firms.

Further, through acquisition route, Indian companies have made substantial investments abroad.

The Aditya Birla Group has been pioneer in making foreign investments much before the

adoption of the new economic credo. Indian companies are also setting up production bases in

foreign countries to get an easy entry into the regional trade blocks. For instance, a production

facility in Mexico opens the doors to the NAFTA area for Arvind Mills. Yet another example is

that of Cheminoor Drugs by Dr. Reddy‘s Labs in New Jersey which is set up as a subsidiary.

J. MERGERS AND ACQUISITIONS 

In merger, two companies come together but only one survives and the other goes out of 

existence as it is merged in the other company. While in acquisition, one company (acquirer)

gets control over the other company (acquired) at the willingness of each of the companies.

Mergers and acquisitions is an important entry strategy in international business. Mergers and

acquisitions can be used to acquire new technology, reduce the level of competition and provides

quick access to markets and distribution network. Many Indian firms have resorted to the

acquisition route to gain a foothold in the foreign market. For instance, Indian companies had

spent $ 711.4 million in acquisitions abroad in 2000 in industries such as InfoTech, drugs and

 pharmaceuticals, paints, tele-communication, petroleum and broadcasting. Some of the major 

acquisitions include investments by Zee Telefilms, Leading Edge System BPL Software and

Tata Tea. Dataline Transcription, Teamasia semiconductors, Goa Carbons, Wockhordt and Acro

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 18/50

18

lab are few other firms to name from a long list.

A very important acquisition has been the $ 271 billion leveraged buy out of Tetley by Tata Tea.

With the acquisition of Tetley, Tata Tea, having been the largest integrated tea producer in the

world, also got possession of the second largest global tea marketer.

Indian companies have also acquired foreign brands. Nicholas Piramal India has acquired the

Indian rights for three anti-infective brands from the US firm Eli Lilly.

Ranbaxy interred the German pharma market by acquiring the generics business of Bager Ali.

The Indian Rayon acquired Madura Garments; a subsidiary of the UK based coats Viyella and

also acquired global rights for Coats Viyella brands such as Louis Phillipe, Allen Solly and Peter 

England.

K. JOINT VENTURES

Joint Ventures as a means of foreign market entry have accelerated sharply since the 970s. Joint

ventures refer to joining with foreign companies to produce or market the products or services.

Besides serving as a means of lessening political and economical risks by the amount of the

 partner‘s contribution to the venture, JVs provide a less risky way to enter markets that pose

legal and cultural barriers than would be the case in an acquisition of an existing company.

There are two types of JVs, namely:

1. Contractual JVs and

2. Equity based JVs.

A contractual JV consists of a contractual arrangement between two or more companies in which

certain assets and liabilities are shared for a specific purpose and time. Contractual JVs are

common in the construction, extractive and consultancy services.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 19/50

19

An equity JV is a capital sharing arrangement between an MNC and a local company or another 

MNC or even a foreign government. Each partner holds share in the subsidiary and shares the

 profits in proportion to its ownership share.

The advantage of a JV for MNC is that it can spread its investment across locations, and thereby

minimize its risks.

The liberalization of policy towards the foreign investment by Indian firms along with the new

economic environment seems to have given joint venture a boost. At the beginning of 1995

although there were 177 JVs in operation, there were 347 under implementation. Not only the

number of JVs is increasing but also the number of countries and industries in the map of Indian

JVs is expanding. Companies like Ranbaxy, Dr. Reddy‘s Lab, Lupin etc. have taken the JV route

to mark their presence in the overseas market.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 20/50

20

Chapter 3

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 21/50

21

A. STRATEGIC ALLIANCE: 

A Strategic International Alliance (SIA) is a business relationship established by two or more

companies to cooperate out of mutual need and to share risk in achieving a common objective.

It is an agreement between companies that is of strategic importance to one or both companies‘

competitive viability. Strategy refers to the means to fulfill company‘s objectives. In everyday

 business, the term ‗strategic alliance‘ is generally used to describe a wide variety of 

collaborations, irrespective of strategic importance. In a strategic alliance, a firm could establish

relationships with organization that have the potential to add values. Bench marking, re-

engineering, outsourcing, merger and acquisition are examples of strategic alliance.

On the basis of structure, strategic alliances can be classified into equity based and non- equity

 based.

 Non-equity based alliances such as licensing agreements, marketing agreements, technology

transfer agreements etc. are found to be more dynamic, constructive and strategic. The scope of 

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 22/50

22

strategic alliance ranges from Research and Development to distribution.

B. LICENSING AND FRANCHISING: 

A means of establishing a foothold in foreign markets without large capital outlays is licensing.

It is a favorite strategy for small and medium sized companies. International licensing helps a

firm from one country (licensor) to permit another firm in a foreign country (licensee) to use its

intellectual property such as patents, trademarks, copyrights, technology, technical know-how,

marketing skill etc. in return for royal payments. Royal payments or license fee is regulated in

most of the countries.

The advantages of licensing are most apparent when: capital is scarce, import restrictions forbid

other means of entry, a country is sensitive to foreign ownership, or it is necessary to protect

trademarks and patents against cancellation of nonuse.

An important risk of licensing is that the licensor may give birth to his own competitor i.e. the

licensee can become a competitor after the expiry of the licensing agreement. The only anti-dote

that is available to the licensor to pre-empt any potential or actual competition is continuous

innovation. Only innovation will provide sustainable competitive advantage.

Franchising is a form of licensing in which a parent company (franchiser) grants another 

company (franchisee) the right to do business in a specific manner. Franchising can assume

various forms such as selling the franchiser‘s products, using the name of the franchiser,

 production and marketing techniques etc. Important forms of franchising are:

1. Manufacturer- retailer systems e.g. automobile dealership

2. Manufacturer- wholesaler system e.g. soft drink companies

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 23/50

23

3. Service firm- retailer systems e.g. lodging and fast food outlets.

Potentially, the franchise system provides an effective blending of skill centralization and

operational decentralization, and has become increasingly important form of international

marketing.

C. Political & Social Environment 

The various issues that needs to be considered by an international business organization while

studying the political environment of a country.

The International Marketing activities take place within the political environment of national

 political institutions such as the government, political executive, legislative and the judiciary.

Any company doing business overseas should Carefully study the political environment of he

country it intends to operate and analyze issues such as the attitude of the political party in power 

toward

(a) Sovereignty,

(b) Political Risk,

(c) Taxes,

(d) Threat of Equity dilution and

(e) Expropriation.

a. Sovereignty:

The sovereign political power of a country in a command economy may determine every aspect

of economic life of the people. In contrast, in a market economy, the government may only play

the role of a facilitator and a regulator. However, after the fall of the Soviet Union, the command

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 24/50

24

economics around the world have progressed towards a market oriented system. Eastern

European countries, countries in Central America, and most importantly, India and China have

also adopted the free market system. With globalization and economic integration, political

sovereignty of individual nation states is on the wane. However, erosion of political sovereignty

is not without a quid pro quo. There are definite economic advantages in forging a regional

economic union as exemplified in cases such as the European Union, NAFT A, ASEAN and

others.

b. Political Risk: 

There is always a political risk involved in making investments both within and without the

country. The element of risk and its severity is relatively high in foreign countries. More

objectively, the extent of political risk depends upon the political stability of the host country. An

unstable country is fraught with investment risks. A country needs to be stable both internally

and externally. Frequent changes in the government and attendant changes in the economic

 policy of the government will increase the element of uncertainty and adversely effect upon a

company's ability to operate effectively in a foreign country. Investments in highly destabilized

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 25/50

25

countries like Afghanistan and Iraq may be very attractive economically speaking but the

 political risks involved are overwhelming. Political instability is therefore a great .deterrent to

foreign investment. In order to justify investment in a foreign country, risk assessment should be

undertaken on a regular basis and investments should be made only when opportunities to make

 profits are much greater than the risks involved.

c. Taxes: 

A company which is geographically diversified needs to take care of the tax laws of the countries

in which it operates. Companies, generally minimizes their tax liability by shifting the location of 

their income. One method of reducing tax liability is called earnings stripping. Foreign

companies reduce earnings by' making loans to their affiliates in a country rather than making

direct foreign investment. The subsidiary company which takes the loan can deduct the interest it

 pays on such loans and reduce its tax burden. There is an absence of international laws to govern

the levy of taxes on companies that are into international business. In order to provide fair 

treatment, governments in many countries have negotiated bilateral tax treaties to provide tax

credits for taxes paid abroad. Generally foreign' companies are taxed by the host country up to

the level imposed in the home country.

D. International Social & Cultural Environment 

Illustrate the impact of social and cultural environment on the marketing of industrial products.

The social and cultural environment encompassing the religious aspects; language; customs;

traditions and beliefs; tastes and preferences; social stratification; social institutions; buying and

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 26/50

26

consumption habits etc are all very important factors for business. What is liked by people of one

culture may not be liked by those of some other culture. One of the most important reasons for 

the failure of a number of companies in foreign markets is their failure to understand the cultural

environment of these markets and to suitably formulate their business strategies.

Many companies modify their products and/or promotion strategies to suit the tastes and

 preferences or other characteristics of the population of the different countries. Significant

differences in the tastes and preferences may exist even within the same country, particularly

when the country is very vast, populous and multi-cultural like India.

For a business to be successful, its strategy should be the one that is appropriate in the socio-

cultural environment. The marketing mix will have to be so designed as best to suit the

environmental characteristics of the market. In Thailand, Helene Curtis switched to black 

shampoo because Thai women felt that it made their hair look glossier.

Even when people of different cultures use the same basic product, the mode of consumption,

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 27/50

27

conditions of use, purpose of use or the perceptions of the product attributes may vary so much

so that the product attributes, method of presentation, positioning, or method of promoting the

 product may have to be varied to suit the characteristics of different markets.

The differences in language sometime pose a serious problem, even necessitating a change in the

 brand name. For instance, Chevrolet‘s brand name Nova in Spanish means ―it doesn‘t go‖. In

some languages, Pepsi-Cola‘s slogan ―come alive‖ translates as ―come out of the grave‖. 

The values and beliefs associated with colour vary significantly between different cultures.

White indicates death and mourning in China and Korea; but in some countries, it expresses

happiness and is the colour of the bridal dress. Boeing an United States based aero-space

manufacturer has felt the impact of an unwritten ―buy national policy‖ in Europe. As a result, the

market share of Airbus for commercial planes which is a consortium of European countries grew

to 50 percent. The market share of Boeing in Europe declined resulting in a loss. Boeing

attempted joint venture with Russian, Ukrainian and Norwegian partners and hired a designer to

decorate a facility to watch the launch of the Sea Launch rocket. The designer decorated the

facility in black which is considered as bad luck colour in Russia. The Russians were furious to

see black colour. Boeing repainted the facility with a shade of blue to avoid a cultural blunder.

While dealing with the social environment, we must also consider the social environment of the

 business which encompasses its social responsibility and the alertness or vigilance of the

consumers and of society at large. Marketing people are at interface between company and

society. In this position, they have the responsibility not merely for designing a competitive

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 28/50

28

marketing strategy, but for sensitizing business to the social as well as the product, demand of 

the society.

Self-reference criterion: - A person understands or perception of market needs is determined by

his or her own cultural experience. James Lee – developed a systematic framework to reduce

 perceptual blockage and distortion. This framework is known as the self-reference criterion

(SRC) – which addresses the problem of unconscious reference to one‘s own cultural values. In

order to reduce cultural myopia or short sightedness, James Lee proposed a four-step framework 

which is as below:

(1) Define the problem or goal in terms of home-country cultural traits, habit and norms.

(2) Define the problem or goal in terms of host culture, traits, habits and norms. Make no

value judgments.

(3) Isolate the self-references criterion influence and examine it carefully to see how it

complicates the problems and

(4) Redefine the problem without the self-references criterion influence and solve for the

host-country market situation.

An important skill that an international marketer needs to possess is that of unbiased perception.

The framework of self-references criterion brings out this important skill to be learnt by

international marketers. The use of SRC and the tendency towards ethnocentrism is widespread

and it can become a strong negative form in international business. The international marketer 

must check this tendency to avoid misunderstanding and failure. In order to avoid SRC, a person

needs to forget assumptions based on earlier experience and success and be prepared to acquire

new understanding and knowledge about human behaviour and motivation.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 29/50

29

Communication and Negotiation: -Language is the medium through which any given culture is

expressed and the subtleties of a culture can best be expressed only through a language that is

home to a given culture. Cultural transliterations are only approximations and hence a

compromise on the meaning and essence of a certain context. The international marketer with a

hold over multiple languages has an edge over those who do not. Whenever, languages and

cultures change, communication challenges comes to the fore. For instance, ‗yes‘ and ‗no‘ are

used differently in Japanese than in western languages. In English, the answer ‗yes‘ or ‗no‘ to a

question is based on whether the answer is affirmative or negative. In Japanese, the answer ‗yes‘

or ‗no‘ may indicate whether or not the answer affirms or negates the question. For instance, in

Japanese the question, ―Don‘t you like meat!‖ would be answered ―yes‖. If the answer is

negative, as in, ―Yes, I don‘t like meat.‖ The word ―Wakarimashita‖ means both ―I understand‖

and ―I agree‖. In order to avoid misunderstandings, foreigners must learn to distinguish which

interpretation is correct in terms of the entire context of conversation. The challenges of non-

verbal communication are more formidable.

Environmental Sensitivity: -Environmental sensitivity is the extent to which products must be

adapted to the culture-specific needs of different needs of different national markets.

Environmental sensitivity can be measured by viewing product on an environmental sensitivity

continuum. At one end of the continuum are environmentally insensitive products that do not

require significant adaptation to the environments of local markets in the world. At the other end

of the continuum are products that are highly sensitive to different environmental factors. A firm

with environmental insensitive products will spend less time determining the specific conditions

of local markets as the product in question is universal in nature. In case of environmentally

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 30/50

30

sensitive products, managers need to address country-specific economic, regulations,

technological, social and cultural environmental conditions.

The sensitivity of products can be represented on a two dimensional scare wherein the horizontal

axis shows environmental sensitivity and the vertical axis shows the extent of need for product

adaptation. Products showing low levels of environmental sensitivity such as technical products

 belong to the lower left of the figure. As we move to the right or the horizontal axis, the

environmental sensitivity increases along with the need for adaptation. Computers have low

levels of environmental sensitivity but variations in country voltage requirements require some

adaptation. At the top right of the figures we have products with high environmental sensitivity.

For example, food is highly sensitive to climate and culture.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 31/50

31

Chapter 4 

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 32/50

32

A.  World Trade Organization

The World Trade Organization (WTO) is an organization that intends to supervise

and liberalize international trade. The organization officially commenced on January 1,

1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and

Trade (GATT), which commenced in 1948.[5]The organization deals with regulation of 

trade between participating countries; it provides a framework for negotiating and

formalizing trade agreements, and a dispute resolution process aimed at enforcing

 participants' adherence to WTO agreements, which are signed by representatives of 

member governments[6]:fol.9-10 and ratified by their parliaments.[7] Most of the issues that

the WTO focuses on derive from previous trade negotiations, especially from

the Uruguay Round (1986 – 1994).

The organization is attempting to complete negotiations on the Doha Development

Round, which was launched in 2001 with an explicit focus on addressing the needs of 

developing countries. As of June 2012, the future of the Doha Round remains uncertain:

the work programme lists 21 subjects in which the original deadline of 1 January 2005

was missed, and the round is still incomplete.[8] The conflict between free trade on

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 33/50

33

industrial goods and services but retention of protectionism on farm subsidies to domestic

agricultural sector (requested by developed countries) and the substantiationof the

international liberalization of fair trade on agricultural products (requested by developing

countries) remain the major obstacles. These points of contention have hindered any

 progress to launch new WTO negotiations beyond the Doha Development Round. As a

result of this impasse, there has been an increasing number of bilateral free trade

agreements signed.[9] As of July 2012, there are various negotiation groups in the WTO

system for the current agricultural trade negotiation which is in the condition of 

stalemate.

[10]

WTO's current Director-General is Pascal Lamy, who leads a staff of over 600 people in

Geneva, Switzerland.

B.  History

The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was

established after World War II in the wake of other new multilateral institutions

dedicated to international economic cooperation  —  notably the Bretton Woods

institutions known as the World Bank and the International Monetary Fund. A

comparable international institution for trade, named the International Trade

Organization was successfully negotiated. The ITO was to be a United Nations

specialized agency and would address not only trade barriers but other issues indirectly

related to trade, including employment, investment, restrictive business practices, and

commodity agreements. But the ITO treaty was not approved by the U.S. and a few other 

signatories and never went into effect.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 34/50

34

In the absence of an international organization for trade, the GATT would over the years

"transform itself" into a de facto international organization.

C.  GATT rounds of negotiations

General Agreement on Tariffs and Trade

The GATT was the only multilateral instrument governing international trade from 1946

until the WTO was established on January 1, 1995. Despite attempts in the mid 1950s

and 1960s to create some form of institutional mechanism for international trade, the

GATT continued to operate for almost half a century as a semi-institutionalized

multilateral treaty regime on a provisional basis.

D.  From Geneva to Tokyo 

Seven rounds of negotiations occurred under GATT. The first real GATT trade rounds

concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties

 brought about a GATT anti-dumping Agreement and a section on development. The

Tokyo Round during the seventies was the first major attempt to tackle trade barriers that

do not take the form of tariffs, and to improve the system, adopting a series of agreements

on non-tariff barriers, which in some cases interpreted existing GATT rules, and in others

 broke entirely new ground. Because these plurilateral agreements were not accepted by

the full GATT membership, they were often informally called "codes". Several of these

codes were amended in the Uruguay Round, and turned into multilateral commitments

accepted by all WTO members. Only four remained plurilateral (those on government

 procurement, bovine meat, civil aircraft and dairy products), but in 1997 WTO members

agreed to terminate the bovine meat and dairy agreements, leaving only two.[16] 

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 35/50

35

E.  Uruguay Round

Well before GATT's 40th anniversary, its members concluded that the GATT system was

straining to adapt to a new globalizing world economy.[20][21] In response to the problems

identified in the 1982 Ministerial Declaration (structural deficiencies, spill-over impacts

of certain countries' policies on world trade GATT could not manage etc.), the eighth

GATT round  —  known as the Uruguay Round  —  was launched in September 1986,

in Punta del Este, Uruguay.[20] 

It was the biggest negotiating mandate on trade ever agreed: the talks were going to

extend the trading system into several new areas, notably trade in services and intellectual

 property, and to reform trade in the sensitive sectors of agriculture and textiles; all the

original GATT articles were up for review.[21] The Final Act concluding the Uruguay

Round and officially establishing the WTO regime was signed April 15, 1994, during the

ministerial meeting at Marrakesh, Morocco, and hence is known as the Marrakesh

Agreement. 

The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a result

of the Uruguay Round negotiations (a distinction is made between GATT 1994, the

updated parts of GATT, and GATT 1947, the original agreement which is still the heart

of GATT 1994). GATT 1994 is not however the only legally binding agreement included

via the Final Act at Marrakesh; a long list of about 60 agreements, annexes, decisions and

understandings was adopted. The agreements fall into a structure with six main parts:

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 36/50

36

  The Agreement Establishing the WTO

  Goods and investment —  the Multilateral Agreements on Trade in Goods

including the GATT 1994 and the Trade Related Investment Measures (TRIMS)

  Services — the General Agreement on Trade in Services

  Intellectual property —  the Agreement on Trade-Related Aspects of 

Intellectual Property Rights (TRIPS)

  Dispute settlement (DSU)

  Reviews of governments' trade policies (TPRM)

In terms of the WTO's principle relating to tariff "ceiling-binding" (No. 3), the Uruguay

Round has been successful in increasing binding commitments by both developed and

developing countries, as may be seen in the percentages of tariffs bound before and after 

the 1986-1994 talks.

F.  Ministerial conferences

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 37/50

37

The topmost decision-making body of the WTO is the Ministerial Conference, which

usually meets every two years. It brings together all members of the WTO, all of which

are countries or customs unions. The Ministerial Conference can take decisions on all

matters under any of the multilateral trade agreements. The inaugural ministerial

conference was held in Singapore in 1996. Disagreements between largely developed and

developing economies emerged during this conference over four issues initiated by this

conference, which led to them being collectively referred to as the "Singapore issues".

The second ministerial conference was held in Geneva in Switzerland. The third

conference in Seattle, Washington ended in failure, with massive demonstrations and

 police and National Guard crowd control efforts drawing worldwide attention. The fourth

ministerial conference was held in Doha in the Persian Gulf nation of Qatar. The Doha

Development Round was launched at the conference. The conference also approved the

 joining of China, which became the 143rd member to join. The fifth ministerial

conference was held in Cancún, Mexico, aiming at forging agreement on the Doha round.

An alliance of 22 southern states, the G20 developing nations (led by India,

China, Brazil, ASEAN led by the Philippines), resisted demands from the North for 

agreements on the so-called "Singapore issues" and called for an end to agricultural

subsidies within the EU and the US. The talks broke down without progress.

The sixth WTO ministerial conference was held in Hong Kong from 13 – 18 December 

2005. It was considered vital if the four-year-old Doha Development Round negotiations

were to move forward sufficiently to conclude the round in 2006. In this meeting,

countries agreed to phase out all their agricultural export subsidies by the end of 2013,

and terminate any cotton export subsidies by the end of 2006. Further concessions to

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 38/50

38

developing countries included an agreement to introduce duty free, tariff free access for 

goods from the Least Developed Countries, following the Everything but Arms initiative

of the European Union — but with up to 3% of tariff lines exempted. Other major issues

were left for further negotiation to be completed by the end of 2010. The WTO General

Council, on 26 May 2009, agreed to hold a seventh WTO ministerial conference session

in Geneva from 30 November-3 December 2009. A statement by chairman Amb. Mario

Matus acknowledged that the prime purpose was to remedy a breach of protocol

requiring two-yearly "regular" meetings, which had lapsed with the Doha Round failure

in 2005, and that the "scaled-down" meeting would not be a negotiating session, but

"emphasis will be on transparency and open discussion rather than on small group

 processes and informal negotiating structures". The general theme for discussion was

"The WTO, the Multilateral Trading System and the Current Global Economic

Environment"

G.  Doha Round (The Doha Agenda) 

The WTO launched the current round of negotiations, the Doha Development Round, at

the fourth ministerial conference in Doha, Qatar in November 2001. This was to be an

ambitious effort to make globalization more inclusive and help the world's poor,

 particularly by slashing barriers and subsidies in farming. The initial agenda comprised

 both further trade liberalization and new rule-making, underpinned by commitments to

strengthen substantial assistance to developing countries.

The negotiations have been highly contentious. Disagreements still continue over several

key areas including agriculture subsidies, which emerged as critical in July

2006. According to a European Union statement, "The 2008 Ministerial meeting broke

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 39/50

39

down over a disagreement between exporters of agricultural bulk commodities and

countries with large numbers of subsistence farmers on the precise terms of a 'special

safeguard measure' to protect farmers from surges in imports." The position of 

the European Commission is that "The successful conclusion of the Doha negotiations

would confirm the central role of multilateral liberalisation and rule-making. It would

confirm the WTO as a powerful shield against protectionist backsliding." An impasse

remains and As of June 2012, agreement has not been reached, despite intense

negotiations at several ministerial conferences and at other sessions.

Functions

Among the various functions of the WTO, these are regarded by analysts as the most

important:

  It oversees the implementation, administration and operation of the covered

agreements.

  It provides a forum for negotiations and for settling disputes.

Additionally, it is the WTO's duty to review and propagate the national trade policies,

and to ensure the coherence and transparency of trade policies through surveillance in

global economic policy-making. Another priority of the WTO is the assistance

of developing, least-developed and low-income countries in transition to adjust to WTO

rules and disciplines through technical cooperation and training.

The WTO is also a center of economic research and analysis: regular assessments of the

global trade picture in its annual publications and research reports on specific topics are

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 40/50

40

 produced by the organization. Finally, the WTO cooperates closely with the two other 

components of the Bretton Woods system, the IMF and the World Bank.

H. Principles of the trading system

The WTO establishes a framework for trade policies; it does not define or specify

outcomes. That is, it is concerned with setting the rules of the trade policy games. Five

 principles are of particular importance in understanding both the pre-1994 GATT and the

WTO:

1.  Non-discrimination. It has two major components: the most favoured

nation (MFN) rule, and the national treatment policy. Both are embedded in the main

WTO rules on goods, services, and intellectual property, but their precise scope and

nature differ across these areas. The MFN rule requires that a WTO member must apply

the same conditions on all trade with other WTO members, i.e. a WTO member has to

grant the most favorable conditions under which it allows trade in a certain product type

to all other WTO members. "Grant someone a special favour and you have to do the same

for all other WTO members." National treatment means that imported goods should be

treated no less favorably than domestically produced goods (at least after the foreign

goods have entered the market) and was introduced to tackle non-tariff barriers to

trade (e.g. technical standards, security standards et al. discriminating against imported

goods).

2.  Reciprocity. It reflects both a desire to limit the scope of  free-riding that may

arise because of the MFN rule, and a desire to obtain better access to foreign markets. A

related point is that for a nation to negotiate, it is necessary that the gain from doing so be

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 41/50

41

greater than the gain available from unilateral liberalization; reciprocal concessions

intend to ensure that such gains will materialise.

3.  Binding and enforceable commitments. The tariff commitments made by WTO

members in a multilateral trade negotiation and on accession are enumerated in a

schedule (list) of concessions. These schedules establish "ceiling bindings": a country can

change its bindings, but only after negotiating with its trading partners, which could mean

compensating them for loss of trade. If satisfaction is not obtained, the complaining

country may invoke the WTO dispute settlement procedures.

4.  Transparency. The WTO members are required to publish their trade

regulations, to maintain institutions allowing for the review of administrative decisions

affecting trade, to respond to requests for information by other members, and to notify

changes in trade policies to the WTO. These internal transparency requirements are

supplemented and facilitated by periodic country-specific reports (trade policy reviews)

through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to

improve predictability and stability, discouraging the use of quotas and other measures

used to set limits on quantities of imports.

5.  Safety valves. In specific circumstances, governments are able to restrict trade. 

The WTO‘s agreements permit members to take measures to protect not only the

environment but also public health, animal health and plant health.

There are three types of provision in this direction:

  articles allowing for the use of trade measures to attain non-economic objectives;

  articles aimed at ensuring "fair competition"; members must not use

environmental protection measures as a means of disguising protectionist policies.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 42/50

42

   provisions permitting intervention in trade for economic reasons.

Exceptions to the MFN principle also allow for preferential treatment of developing

countries, regional free trade areas andcustoms unions. 

I. Organizational structure

The General Council has the following subsidiary bodies which oversee committees in

different areas:

Council for Trade in Goods

There are 11 committees under the jurisdiction of the Goods Council each with a specific

task. All members of the WTO participate in the committees. The Textiles Monitoring

Body is separate from the other committees but still under the jurisdiction of Goods

Council. The body has its own chairman and only 10 members. The body also has several

groups relating to textiles.

Council for Trade-Related Aspects of Intellectual Property Rights

Information on intellectual property in the WTO, news and official records of the

activities of the TRIPS Council, and details of the WTO's work with other international

organizations in the field.

Council for Trade in Services

The Council for Trade in Services operates under the guidance of the General Council

and is responsible for overseeing the functioning of the General Agreement on Trade in

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 43/50

43

Services (GATS). It is open to all WTO members, and can create subsidiary bodies as

required.

J. Trade Negotiations Committee

The Trade Negotiations Committee (TNC) is the committee that deals with the current

trade talks round. The chair is WTO's director-general. As of June 2012 the committee

was tasked with the Doha Development Round. 

The Service Council has three subsidiary bodies: financial services, domestic regulations,

GATS rules and specific commitments. The General council has several different

committees, working groups, and working parties. There are committees on the

following: Trade and Environment; Trade and Development (Subcommittee on Least-

Developed Countries); Regional Trade Agreements; Balance of Payments Restrictions;

and Budget, Finance and Administration. There are working parties on the following:

Accession. There are working groups on the following: Trade, debt and finance; and

Trade and technology transfer.

Decision-making

The WTO describes itself as "a rules-based, member-driven organization — all decisions

are made by the member governments and the rules are the outcome of negotiations

among members". The WTO Agreement foresees votes where consensus cannot be

reached, but the practice of consensus dominates the process of decision-making.

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 44/50

44

Richard Harold Steinberg (2002) argues that although the WTO's consensus governance

model provides law-based initial bargaining, trading rounds close through power-based

 bargaining favouring Europe and the U.S., and may not lead to Pareto improvement. 

Dispute settlement

Main article: Dispute settlement in the WTO

In 1994, the WTO members agreed on the Understanding on Rules and Procedures

Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in

Marrakesh in 1994. Dispute settlement is regarded by the WTO as the central pillar of the

multilateral trading system, and as a "unique contribution to the stability of the global

economy". WTO members have agreed that, if they believe fellow-members are violating

trade rules, they will use the multilateral system of settling disputes instead of taking

action unilaterally.

The operation of the WTO dispute settlement process involves the DSB panels, the

Appellate Body, the WTO Secretariat, arbitrators, independent experts and several

specialized institutions. Bodies involved in the dispute settlement process, World Trade

Organization.

Accession and membership

Main article: World Trade Organization accession and membership

The process of becoming a WTO member is unique to each applicant country, and the

terms of accession are dependent upon the country's stage of economic development and

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 45/50

45

current trade regime.[54] The process takes about five years, on average, but it can last

more if the country is less than fully committed to the process or if political issues

interfere. The shortest accession negotiation was that of the Kyrgyz Republic, while the

longest was that of Russia, which, having first applied to join GATT in 1993, was

approved for membership in December 2011 and became a WTO member on August 22,

2012.[55] The second longest was that of Vanuatu, whose Working Party on the Accession

of Vanuatu was established on 11 July 1995. After a final meeting of the Working Party

in October 2001, Vanuatu requested more time to consider its accession terms. In 2008, it

indicated its interest to resume and conclude its WTO accession. The Working Party on

the Accession of Vanuatu was reconvened informally on 4 April 2011 to discuss

Vanuatu‘s future WTO membership. The re-convened Working Party completed its

mandate on 2 May 2011. The General Council formally approved the Accession Package

of Vanuatu on 26 October 2011. On 24 August 2012, the WTO welcomed Vanuatu as its

157th member. An offer of accession is only given once consensus is reached among

interested parties.

Accession process 

A country wishing to accede to the WTO submits an application to the General Council,

and has to describe all aspects of its trade and economic policies that have a bearing on

WTO agreements. The application is submitted to the WTO in a memorandum which is

examined by a working party open to all interested WTO Members.

After all necessary background information has been acquired, the working party focuses

on issues of discrepancy between the WTO rules and the applicant's international and

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 46/50

46

domestic trade policies and laws. The working party determines the terms and conditions

of entry into the WTO for the applicant nation, and may consider transitional periods to

allow countries some leeway in complying with the WTO rules.

The final phase of accession involves bilateral negotiations between the applicant nation

and other working party members regarding the concessions and commitments on tariff 

levels and market access for goods and services. The new member's commitments are to

apply equally to all WTO members under normal non-discrimination rules, even though

they are negotiated bilaterally.

When the bilateral talks conclude, the working party sends to the general council or 

ministerial conference an accession package, which includes a summary of all the

working party meetings, the Protocol of Accession (a draft membership treaty), and lists

("schedules") of the member-to-be's commitments. Once the general council or 

ministerial conference approves of the terms of accession, the applicant's parliament must

ratify the Protocol of Accession before it can become a member.

Members and observers

The WTO has 157 members and 27 observer governments. In addition to states, the

European Union is a member. WTO members do not have to be full sovereign nation-

members. Instead, they must be a customs territory with full autonomy in the conduct of 

their external commercial relations. Thus Hong Kong (as "Hong Kong, China" since

1997) became a GATT contracting party, and theRepublic of China (Taiwan) acceded to

the WTO in 2002 as "Separate Customs Territory

of Taiwan, Penghu, Kinmen and Matsu"  (Chinese Taipei) despite its disputed

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 47/50

47

status.[61] The WTO Secretariat omits the official titles (such as Counselor, First

Secretary, Second Secretary and Third Secretary) of the members of Chinese Taipei's

Permanent Mission to the WTO, except for the titles of the Permanent Representative and

the Deputy Permanent Representative.

Iran is the biggest economy outside the WTO. With the exception of the Holy See, 

observers must start accession negotiations within five years of becoming observers. A

number of international intergovernmental organizations have also been granted observer 

status to WTO bodies. 14 states and two territories so far have no official interaction with

the WTO.

Agreements

Uruguay Round

The WTO oversees about 60 different agreements which have the status of international

legal texts. Member countries must sign and ratify all WTO agreements on accession. A

discussion of some of the most important agreements follows. The Agreement on

Agriculture came into effect with the establishment of the WTO at the beginning of 1995.

The AoA has three central concepts, or "pillars": domestic support, market

access and export subsidies. The General Agreement on Trade in Services was created to

extend the multilateral trading system to service sector, in the same way as the General

Agreement on Tariffs and Trade (GATT) provided such a system for merchandise trade.

The agreement entered into force in January 1995. The Agreement on Trade-Related

Aspects of Intellectual Property Rights sets down minimum standards for many forms

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 48/50

48

of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round

of the General Agreement on Tariffs and Trade (GATT) in 1994.

The Agreement on the Application of Sanitary and Phytosanitary Measures — also known

as the SPS Agreement — was negotiated during the Uruguay Round of GATT, and

entered into force with the establishment of the WTO at the beginning of 1995. Under the

SPS agreement, the WTO sets constraints on members' policies relating to food safety

(bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant

health (imported pests and diseases). The Agreement on Technical Barriers to Trade is an

international treaty of the World Trade Organization. It was negotiated during

the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into

force with the establishment of the WTO at the end of 1994. The object ensures that

technical negotiations and standards, as well as testing and certification procedures, do

not create unnecessary obstacles to trade".[66] The Agreement on Customs Valuation, 

formally known as the Agreement on Implementation of Article VII of GATT, prescribes

methods of customs valuation that Members are to follow. Chiefly, it adopts the

"transaction value" approach.

Directors-General

The Directors-General of the WTO have been:

  Pascal Lamy, 2005 –  

  Supachai Panitchpakdi, 2002 – 2005

  Mike Moore, 1999 – 2002

  Renato Ruggiero, 1995 – 1999

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 49/50

49

  Peter Sutherland, 1995

The Directors-General of the precursor organization, GATT, were:

  Peter Sutherland, 1993 – 1995

  Arthur Dunkel, 1980 – 1993

  Olivier Long, 1968 – 1980

  Eric Wyndham White, 1948 – 1968

7/27/2019 Defination of International Marketing

http://slidepdf.com/reader/full/defination-of-international-marketing 50/50

REFERENCES

http://wikipedia.org/wto// 

http://scribid.com/wto/types// 

http://managementparadise.com/international/3338772662/00ikk/file 

http://wto.org// 

http://google.com/internationalmarketing/files/3339447iee/333774hfr//