Strategies for Reaching the Global Markets by nfh20076


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Four trends have significantly affected world trade:
              Decline in economic protectionism by individual countries
              Formal economic integration and free trade among nations
              Global competition among global countries for global
              Development of a networked global marketplace

I Decline of Economic Protectionism

Protectionism - the practice of shielding one or more industries within a
country’s economy from foreign competition, usually through the use of
tariffs or quotas.

Protectionism can limit the outsourcing of jobs, discourage economic
dependency on other countries, protect a nation’s political security,
encourage the development of domestic industries.

Tariffs and Quotas discourage world trade

Tariff - is a tax on goods or services entering a country. Because tariff’s
raise the price of imported goods, they give a price advantage to domestic
goods competing in the same market.

Quota - a restriction placed on the amount of a product allowed to enter or
leave a country. Import quotas seek to guarantee domestic industries access
to a certain percentage of their domestic market.

II Formal economic integration and free trade among
WTO or World Trade Organization was formed in 1995. There are
currently 149 member nations which account for 90 percent of world trade.
The WTO sets rules governing trade between members through panels of
experts who decide on trade disputes and they issue binding decisions.
A number of countries with similar economic goals have formed
transnational trade groups or signed trade agreements.

             European Union - 25 member countries, common currency
              is called the euro, market currently has 500 million
              consumers - removal of tariffs, greater uniformity in product
              and packaging standards, fewer restrictions on
              transportation, advertising and promotion
             North American Free Trade Agreement (NAFTA)
              NAFTA lifted many trade barriers between Canada, Mexico
              and the U.S. Current marketplace has more than 435 million
             Asian Free Trade Agreements
              Efforts to liberalize trade in East Asia are growing with
              some reductions in tariffs, but these trade agreements are
              less formal than the EU and NAFTA.

III Global Competition for Global Consumers

Global competition - exists when firms originate, produce, and market their
products and services worldwide.

Global Companies market with two different approaches.

             Global Marketing Strategy. One view is that there are
              more cultural similarities with universal consumer needs so
              products are marketed the same way in different countries.
              Global Brand - marketed under the same name in multiple
             Multidomestic marketing strategy - view the world as
              Consisting of unique parts and they create different
              products, brand names, advertising, etc for each country.

Global Consumers - customers living in many different countries that have
similar needs. Such as a global middle class, a youth market and an elite

IV Emergence of a networked Global Marketplace
Internet based technology
              enables the exchange of goods, services and information
                 from companies anywhere at anytime
              companies manage multiple country and language websites
                 that customize content and communicate with consumers in
                 their native tongue.


Global companies conduct continuous environment scans. Three of the
scans: cultural, economic and regulatory are different than in a domestic

Cultural Diversity - a cross cultural analysis is done to study the
similarities and differences among consumers. A society’s values and
customs must be completely understood.

The Foreign Corrupt Practices Act (1977) makes it a crime to U.S.
corporations to bribe an official of a foreign government or political party to
obtain or retain business in a foreign country.

Language - global marketers must know the language of the countries in
which they market. Currently English, French and Spanish are the principal
languages used in global diplomacy.

Economic Considerations
           Economic Infrastructure - transportation, financial,
             Distribution systems are critical to determining if you are
             going to market.
           Consumer Income and Purchasing Power - must consider
             What the household income is among a country’s consumers
             and how the income is distributed.
           Currency exchange rate - the price of one country’s currency
             Expressed in terms of another country’s currency.
             Fluctuations in exchange rates among the world’s currencies
             can affect everyone.
Regulatory/Political - political stability - billions of dollars have been lost as
a result of internal political strife, terrorism, and war. Political stability is
affected by a government’s ideas about foreign companies and trade.

                Exporting
                Licensing
                Joint Venture
                Direct Investment

I Exporting - is producing goods in one country and selling
them in another country. A company makes the least
number of changes in it’s product, and organization
     Indirect exporting - when a company sells its
domestically produced goods in a foreign country through
an intermediary.
     Direct exporting - a firm sells its domestically
produced goods in a foreign country without

II Licensing - a company offers the right to a trademark,
patent, trade secret, or other similarly valued items in return
for a royalty or fee.
      Advantages - low risk, chance to enter foreign market
at virtually no cost
      Disadvantages - licensor gives up control of product
and reduces potential profits, if licensee is poor choice can
harm the brand, can create a future competitor.
      A variation is Franchising - a company contracts with
an individual to set up an operation to provide products or
services under the company’s established name.
III Joint Venture - when a foreign company and a local firm
invest together to create a local business. The two
companies share ownership, control and profits.
      Advantages - one firm may not have the financial
resources to enter a foreign market alone.
      Disadvantages - The two companies may disagree

IV Direct Investment - a domestic firm invests in and owns
a foreign subsidiary or division.
     Advantages - cost savings, better understanding of
local market conditions and fewer local restrictions.
     Disadvantages - financial risks

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