Marketing 1 Chap 7

LO 1 What factors aid the growth of globalization?
* Technology has facilitated the growth of global markets by providing means to communicate instantaneiusly
* International organizations have helped facilitate trade, improve the quality of life for people in less- developed areas, and reduce or eliminate tariffs and quotas.
Globalization
refers to the processes by which goods, services, capital, people, information, and ideas flow across national borders.
Globalization of Production
Also known as offshoring; refers to manufactures’ procurement of goods and services from around the globe to take advantage of national differences in the cost and quality of various factors of production(e.g., labor, energy, land, capital).
Offshoring
See globalization of production
General Agreement On Tarrifs and Trade (GATT)
Organization established to lower trade barriers, such as high tariffs on imported goods and restrictions on the number and types of imported products that inhibited the free flow of goods across borders.
International Monetary Fund (IMF)
Established with the original General Agreement on Tariffs and Trade (GATT); primary purpose is to promote international monetary cooperation and facilitate the expansion and growth of international trade.
World Trade Organization (WTO)
Replaced the GATT in 1994; differs from the GATT in that the WTO is an established institution based in Geneva, Switzerland, instead of simply an agreement, represents the only international organization that deals with the global rules of trade among nations.
World Bank Group
A development bank that provides loans, policy advice, technical assistance, and knowledge-sharing services to low and middle-income countries in an attempt to reduce povery in the developing world.
LO 2 How does a firm decide to enter a global market?
* Firms must assess the general economic environment
*Firms should assess a country’s infrastructure
*Firms must determine whether a proposed country has conditions that favor business
*Firms should be cognizant of cultural and sociological differences and learn to adapt to them
Trade Deficit
Results when a country imports more goods than it exports.
Trade Surplus
When a country exports more goods than it imports.
Gross Domestic Product (GDP)
Defined as the market value of the goods and services produced by a country in a year; the most widely used standardized measure of output.
Gross National Income (GNI)
Consist of GDP plus the net income earned from investments abroad (minus any payments made to nonresidents who contribute to the domestic economy).
Purchasing Power Parity (PPP)
A theory that states that if the exchange rates of two countries are in equilibrium, a product purchased in one will cost the same in the other, expressed in the same currency.
Human Development Index (HDI)
A composite measure of three indicators of the quality of life in different countries: life expectancy at birth, educational attainment, and whether the average incomes are sufficient to meet the basic needs of life in that country.
Infrastructure
The basic facilities, services, and installations needed for a community or society to function, such as transportation and communications systems, water, powerlines, and public institutions like schools, post offices, and prisons.
Tariff
A tax levied on a good imported into a country; also called a duty.
Duty
See Tariff.
Dumping
The practice of selling a good in a forign market at a price that is lower than its domestic price or below its cost.
Quota
Designates the maximum quantity of a priduct that may be brought into a country during a specified time period.
Boycott
A group’s refusal to deal commercially with some organization to protest against its policies.
Exchange Control
Refers to the regulation of a country’s currency exchange rate
Exchange Rate
The measure of how much one currency is worth in relation to another
Counter Trade
Trade between two countries where goods are traded for other goods and not currency
Trade Agreements
Intergovernmental agreements designed to manage nad promote trade activities for specific regions
Trading Bloc
Consist of those countries that have signed a particular trade agreement
What are the key metrics that can help analyze the economic environment of a country?
* The general economic environment
* The market size and population growth rate
* Real Income
What types of government actions should we be concerned about as we evaluate a country?
* Tariffs
* Quotas
* Boycotts
* Exchange Controls
* Trade Agreements
What are five important cultural dimensions?
* Power Distance
* Uncertainty
* Avoidance
* Individualism
* Masculinity
* Time Orientation
LO 3 What ownership and partnership options do firms have for entering a new global market?
* Direct investment is the riskiest but potentially the most lucrative option.
* Joint ventures divide the risk and share knowledge.
* Strategic allances are less formal than joint ventures.
* Franchising leases a name and strategy in return for a fee.
* Exporting is the least risky method.
Exporting
Producing goods in one country and selling them in another
Global Entry Stratigies X5(from Less Risk to Higher Risk)
*Export
*Franchizing
*Stratigic Alliance
*Joint Venture
*Direct Investment
Franchising
A contractual agreement between a franchisior and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchisor (secures other benefits)
Franchisor
Franchisee
Stategic Alliance
A collaborative relationship between independent firms, through the partnering firms do not create an equity partnership; that is, they do not invest in one another
Joint Venture
Formed when a firm entering a new market pools its resources with those of a local fim to form a new company in which ownership, control, and profits are shared.
Direct Investment
When a firm maintains 100% of its plants, operation facilitied, and offices in a foreign country, often through the formation of wholly owned subsidiaries.
Which entry has the least risk and why?
Exporting – least financial risk but allows only for limited return. Often begins when a product is ordered from another country. Faces little risk because firm has no investments in people, equipment, buildings, or infrastructure.
Which entry strategy has the most risk and why?
Direct Investment – requires a firm to maintain 100% ownership of its operations in a foriegn country. Higher risk but possible higher returns.
LO 4 What are the similarities and differences between a domestic marketing strategy and a global marketing strategy?
* Whether the product or service should be altered to fit the new market must be considered.
* Whether the pricing needs to be changed in other countries needs to be assessed.
* Firms must determine the best way to get the product or service to the new customers.
* The message a firm communicates about its product or service must be considered.
What are the components of a global marketing strategy?
Determining the target markets to pursue and developing a marketing mix that will sustain a competitive advantage over time.
What are the three global strategies?
* Sell the same product or service in both the home country and the foriegn country.
* Sell a product or service similar to that sold in home country.
* Sell totally new products or services.