The Global Marketplace.ppt

TheGlobalMarketplace ROADMAP PreviewingtheConcepts Discusshowtheinternationaltradesystem economic political legal andculturalenvironmentsaffectacompany sinternationalmarketingdecisions Describethreekeyapproachestoenteringinternationalmarkets Explainhowcompaniesadapttheirmarketingmixesforinternationalmarkets Identifythethreemajorformsofinternationalmarketingorganization GlobalPerspectiveWal Mart Tide andThree SnakeWine Chinaandemergingmarketswillaccountfor75 oftheworld stotalgrowthnextdecadeandbeyondNewpatternsofconsumerbehaviorareemergingCountriesprosperPeopleareexposedtonewideasandbehaviorpatternsviaglobalcommunicationnetworksOldstereotypes traditions andhabitsarecastasideortemperedApatternofeconomicgrowthandglobaltradewillextendwellintothe21stcenturyThreemultinationalmarketregionsEurope Asia andAmerica GlobalMarketinginthe21stCentury Theworldisshrinkingrapidlywiththeadventoffastercommunication transportation andfinancialflows Internationaltradeisboomingandaccountsfor25 ofUSGDP Globalcompetitionisintensifying Higherriskswithglobalization U S Globalization ManyU S companieshavemadetheworldtheirmarket MajorInternationalMarketingDecisions LookingattheGlobalMarketingEnvironment TheInternationalTradeSystem Restrictions tariffs quotas embargos exchangecontrols andnon tarifftradebarriers TheWorldTradeOrganizationandGATT HelpsTrade reducestariffsandotherinternationaltradebarriers RegionalFreeTradeZones Groupsofnationsorganizedtoworktowardcommongoalsintheregulationofinternationaltrade GeneralAgreementonTariffsandTrade AfterworldwarIIUSleadscampaignforpostwartraderegimebasedupon Classic economic liberalprincipleofcomparativeadvantage Ineffect TariffswouldbeloweredEachcountrytospecialiseinproductionofthosegoodsitproducedbest tradingwithothercountriesasappropriate Intheoryallcountrieswouldbebetteroffasaresult GeneralAgreementonTariffsandTrade EarlierTradeTreatiesAllearliertreatieswerebasedonbilateralbasiswithlittleornoattentiontorelationshipswithothercountries Theytendedtoraisebarriersratherthanextendmarketandrestoreworldtrade GeneralAgreementonTariffsandTrade TheoriginalagreementreducedtariffsandcreatedanagencytoserveasawatchdogoverworldtradeOfferaforumfornegotiatingtradeandrelatedissuesThepanelsthatsettledisputesareonlyadvisoryandhavenoenforcementpowers GeneralAgreementonTariffsandTrade InconsequenceUSeffectivelydominatedGATT Forexample TheeighttraderoundsthatconstitutedGATTforexample weretypicallyinitiatedbygrantsofnegotiatingauthorityfromtheUScongresstotheUSPresident GeneralAgreementonTariffsandTrade Thebasicelementsoftheagreement1 Tradeconductedonnon discriminatorybasis2 Protectiontodomesticindustriesthroughcustomstariffandnotthroughcommercialmeasureslikeimportquotas3 Consultationsastheprimarymethodtosolvetradeissues GeneralAgreementonTariffsandTrade GATTembodies1stworldrules assumptionsforeconomicprosperity StandardisedproductionVastscaleofproductionEndlessexpansionofmarketsAllthesecombinetocreatetheengineforglobaleconomicgrowth GeneralAgreementonTariffsandTrade GATTbasedonfournorms Most FavouredNationReciprocityExemptionsDevelopmentNorm GeneralAgreementonTariffsandTrade Most FavouredNationAllmembersagreetoextendunconditionalMFNstatustooneanother nocountryreceivespreferentialtreatmentnotaccordedtoallotherMFNcountries AnybenefitsacquiredbyonecountryareautomaticallyextendedtoallMFNpartnersOnlyexceptionstothisrulearecustomsunions e g EU NAFTA GeneralAgreementonTariffsandTrade ReciprocityAnycountrythatbenefitsfromanother stariffreductionshouldreciprocatetoanequivalentextent Intheorythen fairandequitabletariffreductionsbyallcountriesareensured GeneralAgreementonTariffsandTrade ExemptionsRegardedasacceptableif temporaryimposedforshort termbalance of paymentsreasonscountryexperiencingseveremarketdisruptionsduetoincreasedimports GeneralAgreementonTariffsandTrade DevelopmentNormadded from1965onwards allowing 1 Unilateral unreciprocatedtariffreductionsbydevelopedcountriesonimportsfromdevelopingcountries2 Exportsubsidiesbydevelopingcountries GeneralAgreementonTariffsandTrade GATTuntilthe1980sfocused verysuccessfully onreducingmanufacturingtariffs From1948 1993Reductioninofficialtariffsonmanufacturingfrom40 to5 Globaltradeincreasesbyfactoroffour mainlybenefiting1stworld by1990s20 oftheworld spopulationdoes80 ofinternationaltrade GeneralAgreementonTariff Trade GATTobjectivesweretoreducebarrierstotradeinbeliefthatfreertradewouldraiselivingstandardsinallparticipatingcountries Since1947 whenGATTwassigned therehavebeensevenroundsoftradenegotiationswiththeaveragetariffinindustrialisednationsfallingfrom40 in1947tobelow5 in1995whenGATTwasreplacedbytheWTO WTOhas135membercountrieswithChina smembershipbringingitto136 Another30arewaitingtojoin Itcontinuestoseekareductionintradebarriersandalsoseekstoresolve ruleon tradedisputes GeneralAgreementonTariff Trade TheTokyoRound1974TariffcutsNewinternationalrulesforsubsidiesandcountervailingmeasuresAntidumpingGovernmentprocurementTechnicalbarrierstotrade standards Importlicencing GATT FromGenevatoUrurguay DespiteArticle4 GATTfocusedonmanufacturinguntil1980s By1990s however servicessectoroutstripsvalueofmanufacturing 70 of1stworldGDP50 of3rdworldGDP GATT FromGenevatoUrurguay Howeverde industrialisationinthe1960sand1970shaslefttheUSthemostindebtednationintheworldThefastgrowthoflabour intensivemanufacturingindustriesinthedevelopingworldisdisplacingthejobsofworkersintheadvancedeconomies De industrialisationinthe1960sand1970sintheUS Forfourdecades employmentinU S manufacturingasashareofthelabourforcehasfallenfurtherandfasterthaninotherindustrialcountries Inthemid 1960s manufacturingoutputwas27 ofGNPandmanufacturing sshareoftotalemploymentwas24 By2003 thesenumbershadfallen toabout13 8 and10 5 respectively UruguayRound Hence September1986PuntadelEsteDeclarationplacedTradeinServices TIS atcentreofGATTdebates DrivenbyUSpressure inturninfluencedbyAmericanExpress CitibankandIBMlobbyists TISincluded film TVandbroadcastadvertisingproductionanddistribution SuccessofUruguayround One thirdreductionintariffin10vitalindustrialsectorsReductionof50to100 cutsinelectronicitemsandscientificequipmentHarmonizationoftariffinthechemicalindustryat5 5to0 WhatistheGATS TheGeneralAgreementonTradeinServices GATS wasnegotiatedundertheUruguayRoundintheContextofsingleundertaking Itlaysdownrulesanddisciplinescoveringmultilateralinternationaltradeinservices TheAgreementcameintoeffectin1995andispartandparceloftheWTOagreements WhatistheGATS EliminatebarriersthatdiscriminateagainstforeignanddenythemmarketaccessNegotiationstoliberalisetelecommunicationsandfinancialservices WhatisaService ServicecoversawiderangeofeconomicactivitiesandWTOsecretariathascategorizedthisintotwelvesectorswhichareinturnaresubdivided155sub sectors Thetwelvesectorsincludethefollowing Business includingprofessionalandcomputer servicesCommunicationservices WhatisaServicecont ConstructionalandengineeringservicesDistributionservicesEducationservicesEnvironmentalservicesFinancial insuranceandbanking servicesHealthservicesTourismandtravelservicesRecreational culturalandsportingservicesTransportservicesOthersservicesnotincludedelsewhere DifferenceBetweenServicesandGoods Goodsaretangibleandvisiblewhileservicearemainlyintangibleandinvisible Theeconomiststatedthat anythingsoldintradethatcouldnotbedroppedonyourfoot isaservice Therearealsodifferencesinmodesinwhichthetransactionsarecarriedout Internationaltradeingoodsinvolvephysicalmovementofgoodsfromonecountrytoanotherformostinternationalservicetransactions thetimeandplaceofconsumptioncannotbeseparated ModesofServicesTrade Servicesaretradedinternationallythroughoneoracombinationofthefollowingmodes Mode1 Cross bordersupply Similartothetraditionalnotionof imports forgoodstrade Occurswhenaservicecrossesanationalbordere g thepurchaseofinsuranceorcomputersoftwarebyaconsumerfromaproducerlocatedabroad Mode2 Consumptionabroad Servicessuppliedintheterritoryofonecountrytotheconsumersofanothere g tourism educationorhealthservices ModesofServicesTradeCont Mode3 Commercialpresence Servicessuppliedthroughaforeign ownedcompanye g establishingabranchorasubsidiarycompany Mode4 Temporarymovementofnaturalpersonstoanothercountry inordertoprovidetheservicethere ProtectionintheServicesectors Anotherdifferencebetweenserviceandgoodsistheprotectionisgivenbygovernmenttodomesticindustries GATSrulesrequirethatgoodsbeprotectedbytariffs Asservicesarenormallyintangibleprotectioncannotbeprovidedthroughbordermeasures ServicesarenormallyprotectedthroughdomesticregulationsonFDI andparticipationofforeignsupplierstodomesticindustries TradeRelatedInvestmentMeasures TRIMS IndonesiaprohibitsforeignfirmsfromopeningtheirownwholesaleorretaildistributionchannelsBrazilrequiresforeignownedmanufacturerstobuymostoftheircomponentsfromhighcostlocalsuppliers AimsoftheTradeRelatedInvestmentMeasures TRIMS Desiringtopromotetheexpansionandprogressiveliberalisaitonofworldtradeandtofacilitateinvestment whileensuringcompetitionTakeintoaccounttrade developmentandfinancialneedsofdevelopingcountries particularlyleastdevelopedcountriesRecognisingcertaininvestmentmeasurescancausetrade restrictiveanddistortingeffects TradeRelatedInternationalPropertyRights TRIPS Higherstandardsofprotectionforafullrangeofintellectualpropertyrightslikethoseofpatents copyrights tradesecrets trademarks industrialdesigns TradeRelatedInternationalPropertyRights TRIPS ObjectivesToreducedistortionsandimpedimentstointernationaltradeandtakeintoaccounttheneedtopromotecompetentaswellasadequateprotectionofIPRsToensurethatmeasuresandprocedurestoenforceIPRsdonotthemselvesbecomebarrierstolegitimatetradeToreducetensionsbyreachingstrengthenedcommitmenttoresolvedisputesontrade relatedIPissuesthroughmultilateralprocedures WorldTradeOrganization Rounds WorldTradeOrganization EstablishedJan1 1995Members 149Mostrecent SaudiArabiaDecember2005Including China asof2001 Notincluding Russia Iran Iraq N KoreaVietnaminprocessofbeingadmittedHeadquarters Geneva Switzerland alsohomeofILO WIPO andothers WorldTradeOrganization WTOisaninstitutionthati providesapanelofexpertstohearandruleontradedisputesii issuesbindingdecisions WorldTradeOrganisation TheMissionoftheWTORaisestandardsoflivingEnsurefullemploymentGrowingvolumeofrealincomeandeffectivedemandthroughtradeSeekingtoprotectandpreservetheenvironmentSecurefordevelopingcountries especiallyLDC s ashareinthegrowthofinternationaltradethatiscommensuratewiththeneedsoftheirdevelopment Functions AdministeringandimplementingthemultilateralandplurilateraltradeagreementsForumformultilateraltradenegotiationsDisputesettlementOverseeingnationaltradepolicyCooperationwithIMFandWorldBank WTO BasicPrinciples 1 Tradewithoutdiscrimination 2 Predictableandgrowingaccesstomarket 3 Undistorted faircompetition 4 Transparency WTOandTradeDisputes TradedisputescomeunderthejurisdictionoftheWTO Countriesinviolationmustremovethecauseoftheviolationorpaycompensation Ifoffendingpartyfailstocomply WTOrulingcansanctionspecifiedretaliation MorethanhalfofthedisputesbroughttotheWTOinvolvetheUSAandEurope GATT WTOPrinciples NonDiscrimination thebenefitsofanybilateralagreementsmustextendtoallmembers becomemultilateral ProgressiveReductioninTariffandNon tariffBarriers TheWorldTradeOrganization WTO GATT DurationofGATTroundsandnumberofcountriesinvolved InitialResistancefromEU theUS EUmembercountrieswerenotsureiftheEU sfoundingtreatygivestheEuropeanCommissionthesolerighttonegotiateforitsmembersinallareasTheUSchallengedduetoitsconcernforalossofsovereigntyoveritstradelawstoWTO SuccessoftheWTO ThenumberofmembercountriesisontheriseSuccessfullynegotiatednopeningmarketsintelecommunicationsandITequipmentHasbeenactiveinsettlingdisputesOverseestheimplementationsofagreementsreachedinpreviousrounds StrikingthespiritofGATT WTO CountriesrequiringstringentsafetyandqualitystandardsforimportsinordertoprotectdomesticindustriesIncreasinguseofanti dumpingdutiesOtherimportcurtailingmeasurestorestrictimports TheInternationalMonetaryFund IMF IMFwascreatedtoassistnationsinbecomingandremainingeconomicallyviableItassistscountriesthatseekcapitalforeconomicdevelopmentandrestructuringIMFloanscomewithstipulationsthatborrowingcountriesslashspendingandimposecontrolstocurbinflationIthelpsmaintainstabilityintheworldfinancialmarkets ObjectivesoftheIMFinclude stabilizationofforeignexchangeratesestablishconvertiblecurrenciestofacilitateinternationaltradelendmoneytomembersinfinancialtrouble InternationalMonetaryFund IMF Objectives AssistnationstobecomeandremaineconomicallyviableHelpmaintainstabilityinthefinancialmarketforeconomicdevelopmentandrestructuringProvideforeigncurrenciesandothersourcesofworldliquiditytosupportgrowthofinternationaltradeStabilisationprogrammesprovidesupportforeconomiesin crisis InternationalMonetaryFund IMF Functionstooverseethefixedexchangeratearrangementsbetweencountries thushelpingnationalgovernmentsmanagetheirexchangeratesandallowingthesegovernmentstoprioritizeeconomicgrowthandtoprovideshort termcapitaltoaidbalance of payments InternationalMonetaryFund IMF Countrieswithbalanceoftradedeficits LowforeignexchangereservestomeetthedeficitandlikelytohavelowGDPpercapita meaningthatborrowingisdifficult Likelytohaveapoorcreditrating ItisforthistypeofliquidityproblemthattheIMFwassetup IMFhasapoolofforeigncurrenciesthatcanbeusedto finance temporarybalanceofpaymentsdeficits SpecialDrawingRight SDR SpecialDrawingRight SDR Itisabasketofthefourmajorcurrenciesoftheworld ItisareserveassetcreatedbytheInternationalMonetaryFund IMF Asof2002 thevalueofoneSDRwas US 0 5770 426euros21JapaneseyenBritish 0 0984 FloatingExchangeRate Pureorcleanfloat thegovernmentallowsthemarkettodeterminetheexchangerate Theexchangerateisallowedtogotoitsequilibrium drivenbyprivatesupplyanddemand atalltimes Officialinterventionistheactofthemonetaryauthorityofacountryenteringtheforeignexchangemarketwiththeintentionofaffectingsupplyanddemand andthusaffectingtheequilibriumvalueoftheexchangerate drivingtheratetoadifferentvaluethatwouldoccurbyprivatesupplyanddemand FloatingExchangeRate Amanagedordirtyfloatisanapproachinwhichthegovernmentgenerallyallowstheexchangeratestofloat butperiodicallychoosestointervenetoinfluencethemarketrate Mostgovernmentsadoptingafloatingexchangeratesystemdointerveneandattempttomanagetheirratestosomeextent Oftensuchintervention thesedays isintendedtostabilizethecurrency reducingvolatilityordampeningshort runerraticmovementsintheexchangerate Thusthey leanagainstthewind FixedExchangeRates Underafixedexchangerateregime thegovernmentsetstheexchangerateitwants Someflexibilityisallowedwithinanarrowtradingrange calledaband Theofficial chosenfixedrateiscalledtheparvalueorcentralvalue IMF Varyingconditionsonborrowing Atthe hardend ofthespectrumareIMFStabilisationProgrammes Themainelementstothesearesome orall ofthefollowing Fiscalcontraction reductioninbudgetdeficitviareducedpublicspendingorincreasedtax Monetarycontraction restrictionsoncredittopublicsectorandincreasesininterestrates Devaluationoftheexchangerate oftenapre conditionofastabilisationprogramme Liberalisationoftheeconomy supplysidepolicies privatisation Incomespolicies restrictionsonwages transferpaymentsandreductionofsubsidies WorldBankGroup WBG ThefunctionsoftheWBGinclude ThegoalofWBGistoreducepovertyandimprovelivingstandardsbypromotingsustainablegrowthandinvestmentinpeople lendingmoneytocountriestofinancedevelopmentprojectsineducation health andinfrastructure providingassistanceforprojectstothepoorestdevelopingcountries lendingdirectlytotheprivatesectorindevelopingcountrieswithlong termloans equityinvestments andotherfinancialassistance provideinvestorswithinvestmentguaranteesagainst noncommercialrisk sodevelopingcountrieswillattractFDI andprovideconciliationandarbitrationofdisputesbetweengovernmentsandforeigninvestors WorldBankGroup Fivepurposes AssistdevelopmentandreconstructionTopromotelongtermbalancedinternationaltradeTolendforprojectdevelopmentPromoteprivateinvestment WorldBankGroup FiveInstitutions TheWorldBankGroupactuallyconsistsoffiveinstitutions1 TheInternationalBankforReconstructionandDevelopment IBRD establishedin1945 whichprovidesdebtfinancingonthebasisofsovereignguarantees 2 TheInternationalFinanceCorporation IFC establishedin1956 whichprovidesvariousformsoffinancingwithoutsovereignguarantees primarilytotheprivatesector WorldBankGroup 3 TheInternationalDevelopmentAssociation IDA establishedin1960 whichprovidesconcessionalfinancing 4 TheMultilateralInvestmentGuaranteeAgency MIGA establishedin1988 whichprovidesinsuranceagainstcertaintypesofrisk includingpoliticalrisk primarilytotheprivatesector 5 TheInternationalCentreforSettlementofInvestmentDisputes ICSID establishedin1966 whichworkswithgovernmentstoreduceinvestmentrisk ProtestsAgainstGlobalInstitutions In1999 anti capitalistprotestors complainedagainsttheWTO andIMF overtheunintendedconsequencesofglobalizationthatinclude environmentalconcernsworkerexploitationanddomesticjoblossesculturalextinctionhigheroilprices anddiminishedsovereigntyofnations EuropeanIntegration AprominentgoaloftheEUsinceitscreationbytheMaastrichtTreatyin1992isestablishingandmaintainingasinglemarket Thisseekstoguaranteethefourbasicfreedoms whicharerelatedtoensurethefreemovementofgoods services capitalandpeoplearoundtheEU sinternalmarket EuropeanIntegration IntegrationoftheEuropeanstateswasnotaneasytaskconsideringtheheterogeneityofthevariousnationsintermsoflanguage culture nationalinterests politicaldifferencesandrestrictionsdesignedtoprotectindividualnationalinterests EuropeanUnion EU Economic PoliticalIntegration expansion deepeningandbroadeningintegrationEuropeanCoalandSteelCommunity 1951sixcountries Belgium France Germany Italy Luxembourg theNetherlands EuropeanEconomicCommunity EEC 1957negativeintegration absenceofrestrictionsonmovementofworkers goods servicesDenmark IrelandandUKadmitted 1972 EuropeanUnion EU Economic PoliticalIntegration EuropeanUnion 1993positiveintegration activelyfosteringintegrationMaastrichtTreaty 1992AmsterdamTreaty 1997 27CurrentMembersoftheEuropeanUnion AustriaBelgiumBulgariaCyprusCzechRepu