International Marketing Ppt Vivek Kumar

Amity Business School

Definition of Globalization

• Globalization means integrating the economy of the country with the world economy. Under this process- goods, services, capital, labor and resources move freely from one nation to another, further implying one single market in a global village.

Further, the thrust of globalization has been to increase the domestic and external competition through extensive application of market mechanism and facilitating forging of dynamic relationships with the foreign investors and suppliers of technology.


Contd..

• Role of globalization and its effect in the business environment.


DEFINITION OF INTERNATIONAL BUSINESS

• International business is the activity of engaging in business operations across national boundaries/borders.

• International business is the field of study that concerns itself with the development, strategy and management of multinational enterprises in the global context of complex and dynamic business environments.

Actually the complete gamut of the whole context and interest in international business lies in multinational enterprises, culture and communications-as also the special skills that are required to operate in global business environment.


DEFINITION OF MULTINATIONAL ENTERPRISES

• A corporation that has production operations in more than one country, (e.g.:- Toyota having manufacturing facility in India as also other parts of the world.) for various reasons such as- securing supplies of raw materials, utilizing cheap labor sources, servicing local markets and bypassing protectionist barriers.

• Important critical comment on multinationals and its gravity in the light of marketing products in the ‘Third World’ market.


DEFINITION OF FOREIGN INVESTMENT

• Investment in the domestic economy by foreign individuals or companies is called foreign investment in generic terms.

• Foreign investment takes the form of:-– Direct investment in productive enterprises– Investment in financial instrument such as portfolio of

shares.• Important critical comment on foreign investment in

the light of ‘societal marketing concept’ under the principles of marketing management concepts.

• Foreign investment is increasingly important in the economy of the modern business world-explanation as to how?


FOREIGN DIRECT INVESTMENT(FDI)

• The acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent co-operation.

Amity Business SchoolContinued..

Major Concerns while Entering Foreign Market:

1. Unstable Government, if any.2. Foreign Exchange problems.3. Foreign government entry requirements/

entry barriers. 4. Trade / Tariff barriers.5. Corruption in the respective country

government, if any.


6. Technological pirating.

(Explanation: A company locating its plant abroad worries about foreign managers learning how to make its product and breaking away to compete openly or clandestinely- for example in the diverse area such as machinery, electronics, chemicals, pharmaceuticals etc.)

7. High cost of product manufacturing and communication adaptation.

Amity Business SchoolInternational trade contd..

In continuation:The Fundamental basis of International Trade:

It lies on the fact that different countries of the world are endowed by nature with different elements of productive powers. Factor endowments are unevenly distributed among the countries of the world. For example- West Bengal in India for the production of Jute, Arab countries for oil resources etc.


In continuation:Is International Trade Inevitable?

International trade is inevitable when there are marked differences in the countries regarding materials, natural resources, natural vegetation, climate, soil etc.


In Continuation:Other Factors affecting International Trade:1. Stage of economic development2. Accumulation of capital by a nation3. Foreign investments by a nation4. Technological progress5. Trade6. Finance regulations7. Political affiliations- etc.

Amity Business SchoolInternational Trade Theories

The Theories are:

A. Theory of ‘Mercantilism

B. Theory of Absolute advantage (of Adam Smith)

C. Theory of Comparative advantage/ comparative cost (of David Ricardo)

D. Modern theory of international trade or Factor Endowment theory

E. Theory of International Product life-cycle

F. Theory of Competitive Advantage


A. Theory of Mercantilism:

-- An economic doctrine that flourished in the 17th and 18th centuries.-- It sought to maximize national wealth- in the form of nation’s bullion

reserves - especially in gold.-- To this end tariff’s were applied to imports in the hope of creating a

‘balance of trade’ surplus, and adding to bullion reserves.-- Exports were viewed favorably so long as they brought in gold for the

country. GIST: Nations should accumulate financial wealth in the form of gold by

encouraging exports and discouraging imports.


B. Theory of Absolute Advantage:-- Forwarded by the great classical

economist, Adam Smith.-- Repudiated the mercantile notions of

international trade.-- Advocated the theory of Free Trade.-- Advocated that the real wealth of a nation

is measured by the level of improvement in the quality of living of a nation’s people.


Gist of the Absolute advantage theory:

If one country has an absolute advantage over another in one line of production and the other country has an absolute advantage over the first country in another line of production, then both countries would gain by trading.

NB: A country’s advantage can be:- A. Natural AdvantageB. Acquired Advantage


C. Theory of Comparative Advantage-- Forwarded by David Ricardo./-- Extension of the theory of Absolute advantage-- Also known as the theory of comparative cost.-- The theory forwards that- a country tends to

specialize in the production of those commodities in which it possesses a comparative advantage by virtue of its climate, natural resources, skill of its people, capital equipment etc.


Gist of the comparative advantage theory

Any two countries can very well gain by trading even if one of the countries is having an absolute advantage in both the goods over another, provided the extent of absolute advantage is different in the two commodities in question.


D. Modern theory of International Trade

-- Also called Factor Endowment Theory or factor proportions theory.

-- Forwarded by Heckscher and Bertil Ohlin.

-- The immediate cause of International trade is the difference in commodity prices, which in turn is due to the differences in factor prices.

-- Thus goods are purchased from outside because it is cheaper to buy them outside.


Gist of the Modern theory of International trade:

A nation will export that commodity whose production requires intensive use of the nation’s abundant and cheap factors, and import the commodity whose production requires intensive use of the nation’s scarce and expensive factors.


F. Theory of Competitive Advantage:

-- Forwarded by ‘Michael Porter’

-- Concentrates on a firm’s home country environment as the main source of competencies and innovations.

-- Forwarded the famous ‘Diamond Model’

Amity Business SchoolContinued…

Income and purchasing power parity

-- The chief role of the income from consumerism/ consumer buying behavior.

-- Explanation of the concept


Balance of Payments :-- Balance of Payment or BOP, is a

comprehensive record of economic transactions of the residents of a country with the rest of the world during a given period of time.

-- The system generally adopted for recording transactions is the ‘Double Entry Book- Keeping System’


Importance of BOP:

Every nation carrying out economic transactions with foreign countries prepare its BOP accounts periodically :

-- To know/taking stock of its assets and liabilities.

-- To know its receipts from and payment obligations to the rest of the world.


Main Purpose of BOP:

The main purpose of BOP is to present an account of all receipts and payments on account of goods exported, services rendered, and capital received by residents of a country – and goods imported, services received and capitals transferred by the residents of the country.


Division of BOP :-- Into two categories:

A. CURRENT ACCOUNT

B. CAPITAL ACCOUNT


CURRENT ACCOUNT : (what is recorded)- Imports- Exports- Expenses on travel- Transportation- Insurance- Investment incomeNB: All these are related to current

transactions


CAPITAL ACCOUNT: (What is recorded)

- Borrowing and lending of capital - Repayment of capital- Sale and purchase of securities and other assets

to and from foreigners – individuals and governments

NB: Export of commodities to foreign countries adds to the foreign receipts, while imports adds to the payments, that a resident have to make to the foreigners.


IF, EXPORT > IMPORT it is favorable balance of trade

IF, IMPORT> EXPORT it is unfavorable balance of trade.

Balance of Trade : The difference between the value of commodity exports and imports is known as the Balance of Trade.


TRADE PATTERNS :

• Merchandise trade. i.e. trade in commodities- a visible trade

• Services trade, i.e. intangible items for example human resources skills etc, is an invisible trade.


DEGREE OF ECONOMIC COOPERATION: (Four degrees)

a. FTA,(Free Trade Association) meaning to remove all internal barriers to trade among the member nations

b. Customs Union, meaning establishing a common external barriers.

c. Common Market, meaning eliminating the barriers to the flow of factors of production such as labor and capital within the market.

d. Economic Union, meaning fulfilling the all the chief characteristics of an economic union.


Chief Characteristics of an ECONOMIC UNION1. Unified central bank.2. Common policies on agriculture.3. Social services and welfare.4. Transport services requirement.5. Regional development.6. Taxation policy.7. Single currency8. Construction and building infrastructure.9. Political unity requirements.


Importance of Stages of Economic Development :-- For a global marketer or a multinational company, when

interested to enter a new foreign market, the stage in which that targeted region/country is matters most- in designing a marketing plan and strategy.

-- The stage of economic development of a particular country is directly related to the stage of market development in that country.

-- The reference is towards the Income and the purchasing power parity, context – revolving round the international marketing opportunities.


International Trade Alliances :-- GATT and WTO-- IBRD (The World Bank) and IMF-- EU (The European Union)-- NAFTA -- SAFTA-- G8-- G10 and GAB i.e. General Agreement to

Borrow-- OPEC


The Autonomous and Accommodating items in Balance of Payment :

--The autonomous items include all visible or invisible items such as exports, imports, remittances, reparations etc which enter the balance of payments regardless of its position or with motives quite other than to put balance of payments into positive balance. …..Continued…. next slide.


They are in both current and capital accounts.

NB:-- Accommodating items are meant to offset balance of payments deficit or surplus. They include movement of monetary gold from the central bank or sale of foreign currency or increase in foreign liabilities to meet import bill or taking foreign loan to finance deficit etc. Continued…………..


-- Accommodating movements may be made by private or public authorities and may be automatic, unplanned or unforeseen. However, they take place only when other items in the Balance of Payments are such as to leave a gap to be filled.

Amity Business SchoolSDR and Its Importance

SDR Defined :-- --Special Drawing Right’s or SDR’s were created

as a new and additional form of international reserves/liquidity in 1970, under the International Monetary Fund.

-- Countries receive SDR’s as per their share in reserve assets, and have an automatic right to draw them from the IMF- over and above other drawing facilities.

Continued…..


-- A deficit country uses SDR’s for settling deficit by exchanging SDR’s for whatever currency it requires.

-- Other countries accept SDR’s as gold or convertible currencies. Its value is based on the values of a ‘Standard Basket’ of five major currencies.

Amity Business SchoolSDR Continued..

Basket Value of SDR—A group of five currencies namely – US

Dollar, Deutsche Mark, Japanese Yen, French Franc and Pound Sterling- included proportionally on the basis of Country’s size of exports of goods and services during the previous five years. It is used by IMF to determine the vale of SDR’s.


GATT- General Agreement on Tariff’s and Trade

-- A trade treaty that operated from 1948 until 1995, when it was replaced by World Trade Organization (WTO).

-- GATT was technically an agreement, rather than an organization, among various countries called contracting parties.

-- Secretariat at Geneva.------- Continued…


Objectives of GATT:A. Establishing Standards for the non-

discriminatory commercial policies of the contracting parties.

B. Settling trade disputes and encouraging mutual consultation between nations.

C. Discouraging non-tariff barriers and sponsoring tariff reductions.

D. Meeting the above through a series of multilateral negotiations and rounds.

Amity Business SchoolTHE WTO

-- Set up in 1995, following the conclusion of the long-running URUGUAY round of trade negotiations and talk.

-- A body of organizing framework for the smooth application of free trade rules among the interested member nations.

--


Primary functions of WTO:-- A. Administering WTO agreements.B. Act as a forum for trade negotiations.C. Handling trade disputes between member

nations.D. Monitoring the national trade policies of its

members.E. Providing technical assistance and training for

developing member countries.F. To act in coordination with other international

organizations.


Of Particular Importance-- WTO

--- As far as the dispute settlement process of WTO is concerned , countries may complain to the WTO about the behavior of another member, and a disputes panel will then adjudicate. A country that does not abide by the findings of the panel can be subject to countermeasures.


IMPORTANT It should never be forgotten that

companies/firms/corporations/business enterprises are not allowed to make complaints to the WTO. They must persuade a government to do so, for it falls under the world trade laws of WTO, to be accepted by one and all, and the international economic protocol so desires, to be respected in toto. NB: WTO is also charged with advancing the agenda of free-trade with new trade rounds.


IBRD-International Bank for reconstruction and Development

-- A specialized agency of the United Nations, known as the World Bank, with headquarters in Washington DC, its function is to finance development in member countries by making loans to governments or under government guarantee.

-- Set up in 1944 under Bretton Woods agreement to facilitate reconstruction after world war II.

-- All members of World Bank should belong to the IMF.


IMF- The International Monetary Fund

-- Established in 1945, to promote international monetary harmony, monitor exchange rates and monetary policies and to provide credit for countries experiencing problems in terms of deficits in their ‘balance of payments’.

-- The members of IMF have a quota, known as the SDR or the special drawing rights.

-- IMF is funded through quotas paid by members.


GAB and G-10Refers to ‘General Agreement to Borrow’ . Members of GAB are:1. Belgium2. Canada3. France4. Germany5. Italy6. Japan7. The Netherlands8. Sweden9. Switzerland10. The United Kingdom and the US

Amity Business SchoolSAARC

SAARC: ---- South Asian Association for Regional

Cooperation. The first South Asian summit held in Dhaka, Bangladesh in December 1985, culminated in the formation of the South Asian Association for Regional Co-operation.

-- Members of SAARC are: India, Bangladesh, Pakistan,Sri Lanka, Bhutan, Nepal and Maldives.


-- The charter of SAARC provides for annual meetings of the Heads of State and of Governments, and a six monthly meeting of a Council, of Ministers, which is the organizations highest policy making body.

-- A permanent secretariat of the state has been set up at Kathmandu in Nepal.

-- The chairmanship of the organization remains with the country which had hosted the last summit and is transferred to the new host at the time of the next summit.

Amity Business SchoolThe EEC

EEC or the European Economic Community :

--Created under separate treaties signed on March 25, 1957– it became effective from January 1, 1958.

-- EEC is currently a bloc of 15 west European industrial nations, which through a network of agreements are seeking to pool their economies, while retaining their separate national identities. …. Continued….


-- The ultimate goal is a complete customs union, with free flow of goods, service and labor- among all members.

-- Members of EEC currently are- Belgium, France, Germany, Italy,

Luxembourg, Netherlands, Denmark, Ireland, United Kingdom, Greece, Portugal

-- Headquarters of EEC is located in Brussels, Belgium.

Amity Business SchoolASEAN

ASEAN Association of South East Asian Nations : The ASEAN was formed on August 8, 1967 by Indonesia, Thailand, the Philippines, Malaysia and Singapore- to promote active collaboration and mutual assistance in matters of common interest in the economic, social, cultural, technical, scientific and development fields.

-- Currently under ASEAN, there are 10 members.

Amity Business SchoolOPEC

OPEC Organization of Petroleum Exporting Countries :

--OPEC was formed on November14, 1960, to control production and pricing of crude oil. It has been successful in determining world oil prices and in advancing member’s interest in trade and development dealings with industrialized oil consuming nations. …. Continued..


-- Membership of OPEC is open to any country having a substantial net exports of crude petroleum, which has fundamentally similar interests to those of member countries.

-- Members are– Algeria, Indonesia, Iran, Kuwait, Libya, Nigeria, Iraq, Qatar, Saudi Arabia, United Arab Emirates (UAE), Venezuela.

-- Headquarters located at Vienna, Austria.

Amity Business SchoolOAPEC

OAPEC- Organization of Arab Petroleum Exporting Countries

-- The OAPEC was established in 1968, to safeguard the interests of its members and encourage co-operation in economic activity within the petroleum industry. Its members are --- Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria and the UAE.

-- Headquarters at Kuwait.

Amity Business SchoolGroup of Eight/G-8

G-8- Group of Eight originally consisted of the seven wealthiest nations of the world- The USA, UK, Japan, Germany, France, Italy and Canada. However with the admission of Russia at G-7 summit at (DENVER – June 21, 1997) the group was renamed as G-8 in May, 1998.

-- The heads of governments of G-8 countries meet annually at different venues to discuss economic matters and world problems.

Amity Business SchoolNAFTA

NAFTA- North American Free Trade Agreement :

-- A trade agreement between US, Canada and Mexico. The objectives of NAFTA is to promote economic growth and expand trade and investment among member nations.

-- To meet economic challenges in the decades to come.

-- Gradual elimination of trade barriers.

-- Protection of the Intellectual Property Rights.


Social and Cultural Environment:--Culture has a major influence, in international

marketing/ global business environment. -- In global marketing scenario the concept of

consumer buying behavior has a definite role to play.

-- Society and culture affects the consumers decision making process

-- Trend conscious consumers, dictates global marketing of products and services.


Examples of affects of culture in global marketing: (The American Culture)

-- Eating breakfast or sand-witch while moving in a train.

-- Drinking coffee in public places etc.NB: Marketing industrial or consumer goods in

targeted foreign markets is looked from the angle of the stage of economic development - the targeted county is in.

Reference is here to Stage 1 to Stage 4, where the targeted market falls.


Direct Export:

As foreign sales grow, an organization often begins to make a limited commitment, frequently documenting itself/ deciding to handle their own exports.

International Marketing Ppt Vivek Kumar

Documents

purchasing

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south asian

special drawing

important

international

production

foreign investment