1. foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Global Marketing 20

2. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Objectives 1.Discuss some of the fundamental concepts that underlie international business. 2.Identify aspects of marketing strategy that are important in the global marketplace. 3.Outline the environment for international business. 4.Explain how the marketing mix may be affected by competition in a global environment. 5.Outline various approaches to global marketing that are taken by companies. 6.Discuss the various modes of entry into international markets. 7.Discuss the different types of trade agreements. 8.Discuss NAFTA. 20 Global Marketing 20-1

3. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Balance of Trade and Payments Balance of Trade The relationship between a country’s exports and its imports. Balance of Payments The flow of money into or out of a country. 20 Global Marketing 20-2

4. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Exchange Rate The rate at which a nation’s currency can be exchanged for other currencies or gold. 20 Global Marketing 20-3

5. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Devaluation Situation in which a nation reduces the value of its currency in relation to gold or some other currency. 20 Global Marketing 20-4

6. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Revaluation Situation in which a country adjusts the value of its currency upward. 20 Global Marketing 20-5

7. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Absolute Advantage A nation has an absolute advantage in the marketing of a product if it is the sole producer or can produce a product for less than anyone else. 20 Global Marketing 20-6

8. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Comparative Advantage A nation has a comparative advantage if it can produce a given product more efficiently per unit of output than it can produce other products. 20 Global Marketing 20-7

9. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Company Approaches to Global Marketing (1 of 2) Ethnocentric Company –Firm that assumes that its way of doing business in its home market is the proper way to operate, and tries to replicate this in foreign markets. Polycentric Company –Firm that assumes that every country is different and that a specific marketing approach should be developed for each separate country. 20 Global Marketing 20-8a

10. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Company Approaches to Global Marketing (2 of 2) Regiocentric Company –Firm that recognizes that countries with similar cultures and economic conditions can be served with a similar marketing mix. Geocentric Company –Firm that develops a marketing mix that meets the needs of target consumers in all markets. 20 Global Marketing 20-8b

11. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Modes of International Activity Indirect Exporting and Importing Direct Exporting and Importing Licensing Joint Venture Foreign Production and Marketing Multinational Enterprise 20 Global Marketing 20-9

12. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Indirect International Trade Exporting and/or importing only through other domestic companies that trade internationally. 20 Global Marketing 20-10

13. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Direct International Trade Exporting directly to markets and/or importing directly from suppliers in other countries. 20 Global Marketing 20-11

14. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Licensing Granting authority to produce and sell a product developed in one country in another. 20 Global Marketing 20-12

15. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Joint Venture A partnership of firms from different countries, often to set up a local business in a country that is foreign to one of the partners. 20 Global Marketing 20-13

16. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Direct Investment The ownership and management of production and/or marketing facilities in a foreign country. 20 Global Marketing 20-14

17. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Multinational Corporation (MNC) A corporation that produces and markets goods and services in several countries. 20 Global Marketing 20-15

18. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Culture An integrated system of learned behaviour patterns that are distinguishing characteristics of the members of any given society. 20 Global Marketing 20-16

19. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Local Content Laws Laws specifying the portion of a product that must come from domestic sources. 20 Global Marketing 20-17

20. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Cartel The monopolistic organization of a group of firms. 20 Global Marketing 20-18

21. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Friendship, Commerce and Navigation (FCN) Treaties Treaties that address many aspects of commercial relations with other countries; such treaties constitute international law. 20 Global Marketing 20-19

22. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. World Trade Organization (WTO) The international body that deals with the rules of trade between nations. 20 Global Marketing 20-20

23. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Principles of the Trading System Without discrimination Freer Predictable More competitive More beneficial for less developed countries 20 Global Marketing 20-21

24. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Integration of World Markets (1 of 2) Free Trade Area –Areas established by agreement among two or more nations within which participants agree to free trade of goods and services among themselves. Customs Union –Agreement among two or more nations that establishes a free trade area, plus a uniform tariff with nonmember nations. 20 Global Marketing 20-22a

25. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Integration of World Markets (2 of 2) Common Market –A customs union that also allows factors of production such as labour, capital, and technology to flow freely among members. Economic Union –A common market that also requires members to harmonize monetary policies, taxation, and government spending. In addition, a common currency is used by members. 20 Global Marketing 20-22b

26. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. North American Free Trade Agreement (NAFTA) The agreement establishing a free trade area among Canada, the United States, and Mexico that followed the FTA. 20 Global Marketing 20-23

27. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Free Trade Agreement (FTA) The agreement establishing a free trade area between Canada and the United States that preceded NAFTA. 20 Global Marketing 20-24

28. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Trade Restrictions Tariff –A tax levied against products imported from abroad. Import Quota –A limit set on the amount of products that may be imported in a certain category. Embargo –A complete ban on importing a particular product. 20 Global Marketing 20-25

29. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Tariff A tax levied against products imported from abroad. 20 Global Marketing 20-26

30. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Import Quota A limit set on the amount of products that may be imported in a certain category. 20 Global Marketing 20-27

31. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Embargo A complete ban on importing a particular product. 20 Global Marketing 20-28

32. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Exchange Control Requirement that firms gaining foreign exchange by exporting must sell their foreign exchange to the central bank or agency, and importers must buy foreign exchange from the same organization. 20 Global Marketing 20-29

33. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Dumping Practice of selling products at significantly lower prices in a foreign market than in a nation’s own domestic market. 20 Global Marketing 20-30

34. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Import Quota A limit set on the amount of products that may be imported in a certain category. 20 Global Marketing 20-31