International Marketing Environment

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In this presentation, we will discuss International Marketing Environment, the important factors that affect the environment, various trade barriers protecting domestic industries from foreign competitions and types of commodity agreement. Also state trading, role of GATT and other international trading aspects will be discussed in details.
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International Marketing Environment

  1. 1. Chapter 2International Marketing Environment International Marketing Chapter-2 International Marketing Environment
  2. 2. Learning Objectives What are the important environment factors Commodity agreements State trading Intra-regional trade European Union Role of GATT/WTO Uruguay round and features International Marketing Chapter-2 International Marketing Environment
  3. 3. Introduction It is the differences in the marketing environment which may make the international business strategy different from the domestic one Business environment is very important determinant of business strategy International Marketing Chapter-2 International Marketing Environment
  4. 4. Economic Environment The nations of the world are broadly classified as developing countries and developed countries The developing countries fall into two categories viz. low income countries and middle income countries Economic environment of different countries are International Marketing not similar Chapter-2 International Marketing Environment
  5. 5. Social Environment The social environment encompassing the religious aspects; language; customs, traditions and beliefs, tastes and preferences, social stratification, social institution , buying and consumption habits etc. Social environment of different markets differ vastly International Marketing Chapter-2 International Marketing Environment
  6. 6. Demographic Environment Size of population, population growth rates, age composition, family size, nature of the family, income levels etc have very significant implications for business The size of the population is an important determinant of demand for many products International Marketing Chapter-2 International Marketing Environment
  7. 7. Political and GovernmentEnvironment The political environment includes the characteristics and policies of the political parties, the nature of the constitution and government system and policies Regulation of the quality, prices, packaging labeling etc. is also very common International Marketing Chapter-2 International Marketing Environment
  8. 8. International TradingEnvironment – Trade Barriers The main objective of imposing trade barriers are to protect domestic industries from foreign competition. After the second world war, there was a progressive liberalization of trade by the developed countries. International Marketing Chapter-2 International Marketing Environment
  9. 9. Tariffs Tariffs in international trade refer to the duties or takes imposed on internationally trade goods when they cross the national borders India has had one of the highest tariff walls in the world International Marketing Chapter-2 International Marketing Environment
  10. 10. Non-Tariff Barriers NTBs are new protection measures There are tow categories Licensing, quota etc. are used by developing countries Developed countries are using Voluntary Export Restrains International Marketing Chapter-2 International Marketing Environment
  11. 11. Quotas A quota on the export of a product from a country may be imposed if the government feels that exports in excess of that will affect interests of the domestic consumers The aim of import quota, obliviously, is to restrict the quantity of imports International Marketing Chapter-2 International Marketing Environment
  12. 12. Licensing Quota regulations are generally administered by means of licensing Under the import licensing system, the prospective importers are obliged to obtain a license from the licensing authorities: the possession of an import license is necessary to obtain the foreign exchange to pay for the imports International Marketing Chapter-2 International Marketing Environment
  13. 13. Voluntary Export Restraints VERs are bilateral arrangements instituted to restrain the rapid growth of exports of specific manufactured goods The exporting country voluntarily restrains the export of the specified product in order to either help the other country to reduce its trade deficit or to protect domestic industry International Marketing Chapter-2 International Marketing Environment
  14. 14. Administered Protection Administration protection encompasses a wide range of bureaucratic government actions, which have grown in absolute as well as relative importance over the last decade or more More recent VERs are in fact regarded as the outgrowth of administered protection actions International Marketing Chapter-2 International Marketing Environment
  15. 15. Customs proceduresConsular formalitiesGovernment procurementState tradingMonetary controlEnvironmental protection lawsForeign exchange regulations International Marketing Chapter-2 International Marketing Environment
  16. 16. Impact of NTBs Affects many exporting countries Apparel exports is the most affected of the developing countries because of such barriers Causes diversion of production and exports International Marketing Chapter-2 International Marketing Environment
  17. 17. NTBs and India’s Exports NTBs prevent the industry from making full use of technological potential and economies of scale for garment firms in India. The problem for NTBs for Indian exports has increased recently International Marketing Chapter-2 International Marketing Environment
  18. 18. Commodity Agreements International Commodity Agreements are inter-governmental arrangements concerning the production of , and trade in, certain primary products with a view to stabilizing their prices. In its final act, the UNCTAD-I made a comprehensive statement on the functions international commodity agreements International Marketing Chapter-2 International Marketing Environment
  19. 19. Quota Agreements International quota agreements seek to prevent a fall in commodity prices by regulating their supply Quota agreements have already been tried in case of coffee and sugar, and commodities like tea and bananas have been suggested as prospective candidates for new agreements International Marketing Chapter-2 International Marketing Environment
  20. 20. Buffer Stock Agreements International buffer stock agreements seek to stabilize commodity prices by maintaining the demand-supply balance The buffer pool method has already been tried in case of tin, cocoa, and sugar, and commodities like rubber, tea and copper has been suggested as prospective candidates for new International Marketing agreements Chapter-2 International Marketing Environment
  21. 21. Bilateral/Multilateral Contracts Bilateral contract to purchase and sell certain quantities of a commodity at agreed prices may be entered into between a major importer and exporter of the commodity. The best known example of this type of commodity agreement is the International Wheat Agreement International Marketing Chapter-2 International Marketing Environment
  22. 22. Cartels International cartels are agreements between producer located in different countries or between governments of countries to restrict competition. Examples include the Organization of Petroleum Exporting Countries (OPEC) and International Air Transport Association (IATA) International Marketing Chapter-2 International Marketing Environment
  23. 23. State Trading State trading means import and export transactions of a state owned or state controlled agency involving purchase of goods for commercial resale. Recently ,developing countries have significantly reduced the role of state trading International Marketing Chapter-2 International Marketing Environment
  24. 24. State Trading in India –Objectives To help reduce the difficulties experienced in expanding trade with centrally planned countries To help maintain quantitative regulations of imports and some equilibrium in the prices of commodities and indigenous products To provide developmental finance for organized production and boost exports of small scale sector Marketing International Chapter-2 International Marketing Environment
  25. 25. Canalisation Canalisation means established of state monopoly in foreign trade Most of the objectives of state trading mentioned earlier are also the objectives canalisation International Marketing Chapter-2 International Marketing Environment
  26. 26. Trading Blocs and GrowingIntra-Regional Trade An important trend in international trade has been the growth of intra- regional trade Regional integration schemes tend to increase intra-regional trade There is a worldwide trend towards forming new regional arrangements and to strengthen the existing ones International Marketing Chapter-2 International Marketing Environment
  27. 27. Forms of Economic Integration Free Trade Area Customs Union Common Market Economic Union Economic Integration International Marketing Chapter-2 International Marketing Environment
  28. 28. European Union EU is the most successful of the regional economic integration schemes THE EEC which originally comprised sex nations, namely, Belgium, France, Federal Republic of Germany, Italy, Luxembourg and Netherlands was brought into being on 1st January, 1958,by the Treaty of Rome, 1957 International Marketing Chapter-2 International Marketing Environment
  29. 29. The Treaty of Rome required every membercountry to Eliminate tariffs, quotas and other barrier on intra- community trade Devise a common internal tariff on imports from rest of the world All the free movement of factors of production within the community Harmonize their taxation and monetary policies and social security policies Adopt a common policy on agriculture, transport, and competition in Industry International Marketing Chapter-2 International Marketing Environment
  30. 30. The Euro Euro, the common currency of the EU, was launched by 11 members of the Union, on January 1, 1999. The Monetary policy decisions for the Euro are made by the European Central Bank(ECB), which along with National Central Banks(NCBs) of all EU members. International Marketing Chapter-2 International Marketing Environment
  31. 31. Implications of Euro for India The Euro land accounts for about one- fifth of India’s foreign trade Indian businessmen benefit, like their counterparts in other countries , form the benefits of a single currency instead of many Large opportunities are emerging in the computer software field. International Marketing Chapter-2 International Marketing Environment
  32. 32. Indo-EU Trade The EC, taken as a single unit, is India’s largest partner. The EEC accounts for more than a one- fifth of India’s total foreign trade The EC is a very potential market and India should pay sufficient attention to taking advantage of this enlarging market International Marketing Chapter-2 International Marketing Environment
  33. 33. Other Regional Groupings The European Free Trade Association(EFTA),brought into being by the Stockholm Convention , 1960 Latin American Free Trade Area-LAFTA The Australia New Zealand Closer Economic Relations Trade Agreement North American Free Trade Agreement International Marketing Chapter-2 International Marketing Environment
  34. 34. Other Regional Groupings Central American Common Market – CACM Gulf Cooperation Council Preferential Trade Area The Economic Community of Central African States- CEEAC The Association of South East Asian Nations-ASEAN International Marketing International Marketing Chapter-2 Environment
  35. 35. SAARC South Asian Association for Regional Cooperation SAARC involves seven countries namely , India, Bangladesh, Pakistan, Nepal , Bhutan, Sri Lanka and Maldives. International Marketing Chapter-2 International Marketing Environment
  36. 36. SAPTA SAARC Preferential Trading Agreement Basic Principles Overall reciprocity and mutuality of advantages Step-by-step negotiations and extension of PTA Inclusions of all types of products Special and favorable treatment to Least Development Countries International Marketing Chapter-2 International Marketing Environment
  37. 37. Indo-Lanka Free TradeAgreements India has offered to permit as much as 1000 items of zero duty from Sri Lanka and Sri Lanka will allow duty free imports of 900 items from India As India is a very large market, the FTA is likely to benefit Sri Lanka a lot an the benefits to India International Marketing Chapter-2 International Marketing Environment
  38. 38. GATT/WTO and TradeLiberalization The desire of nations to liberalize trade resulted in the establishment of the General Agreement on Tariffs and Trade As a result of Uruguay Round the GATT was transformed into a World Trade Organization (WTO) with effect from January , 1995 International Marketing Chapter-2 International Marketing Environment
  39. 39. India is one of the founder members ofthe IMF, World Bank, GATT and theWTOThe primary objective of GATT was toexpand international trade byliberalizing trade so as to bring aboutall-round economic prosperity. International Marketing Chapter-2 International Marketing Environment
  40. 40. GATT-Principles1. Non-discrimination2. Prohibition of Quantitative Restrictions3. Consultation International Marketing Chapter-2 International Marketing Environment
  41. 41. 8th Uruguay Round1. Reducing specific trade barriers and improving market access2. Strengthening GATT disciplines3. Problems of liberalization of trade in services, trade related aspects of intellectual property rights(TRIPS) and trade related investment measures(TRIMs) Marketing International Chapter-2 International Marketing Environment
  42. 42. Differences between GATT andWTOGATT WTO Ad hoc and provision Agreements are Contracting parties permanent Allowed existing domestic Has members legislation to continue Does not permit this even if it violated a GATT agreement Less powerful, dispute More powerful , dispute settlement system was settlement mechanism is slow and less efficient, it faster and more efficient, ruling could be easily very difficult to block the International Marketing blocked Chapter-2 International Marketing rulings Environment
  43. 43. Functions of WTO The WTO facilitate the implementation, administration and operation and the objectives of the Multilateral Trade Agreements Forum for negotiations among its members concerning their multilateral trade relations International Marketing Chapter-2 International Marketing Environment
  44. 44. Understanding on rules and proceduresgoverning the settlement of disputesAdministration of the ‘Trade ReviewMechanism’ International Marketing Chapter-2 International Marketing Environment
  45. 45. Salient Features of URAgreements Tariff Barriers Expansion of tariff bindings Reduction in the tariff rates Expansion of duty-free access Agricultural trade Tariffication Tariff binding Tariff cuts Reduction in subsidies and domestic support International Marketing Chapter-2 International Marketing Environment
  46. 46. General Agreement on Tradein Services-GATS Extends multilateral rules and disciplines to services is regarded as landmark achievement of the UR The GATS defines services as the supply of services International Marketing Chapter-2 International Marketing Environment
  47. 47. Coverage of GATS Cross-border supply Commercial presence Consumption abroad Movement of personnel International Marketing Chapter-2 International Marketing Environment
  48. 48. Trade Related InvestmentMeasures(TRIMS) TRIMS refers to certain conditions or restrictions imposed by a government in respect of foreign investment in the country. Local content requirement Trade balancing requirement Trade and foreign exchange requirements Domestic sales requirements International Marketing Chapter-2 International Marketing Environment
  49. 49. Trade Related Aspects of IntellectualProperty Rights(TRIPS) Intellectual Property Rights may be defined as “ information with a commercial value” IPRs may be legally protected by patents, copy rights, industrial designs, geographical indications, and trade marks. International Marketing Chapter-2 International Marketing Environment
  50. 50. Coverage of TRIPS Copyright and related rights Trade mark Geographical indications Industrial designs Patents Layout designs Undisclosed information International Marketing Chapter-2 International Marketing Environment
  51. 51. Indian Patent Law and URAgreement There are significant differences between the UR agreement on patents and the Indian Patent Act, 1970 Under the Indian act, patentability of inventions relating to substances intended for use as food, drug or medicines, or substance produced by chemical processes is limited to the methods or processes of manufacture only. While as per UR requires both product and process patents International Marketing Chapter-2 International Marketing Environment
  52. 52. Anti-dumping Measures A product is regarded as dumped when its export price is less that the normal price in the exporting country or its cost of production plus a reasonable amount for administrative , selling and any other costs and for profits Anti-dumping measure can be employed only if dumped imports are shown to cause serious damage to the domestic industry in the importing country International Marketing Chapter-2 International Marketing Environment
  53. 53. Safeguard Actions Members may take safeguard actions, i.e. import restrictions to protect a domestic industry from the negative effect of an un unforeseen import surge, if a domestic industry is threatened with serious injury Safeguard measures would not be applicable to developing countries where their share in the member countrys imports of the product concerned is relatively small International Marketing Chapter-2 International Marketing Environment
  54. 54. Implementation Issues The developing countries are virtually deceived in several cases as the UR Agreement have not been implemented in letter and spirit by the developed countries . They have resorted to covert measures to deny the developing countries the legitimate benefits of the proposed International Marketing liberalizations. International Marketing Chapter-2 Environment
  55. 55. Doha Declaration The Doha Declaration –comprising of a main Declaration on TRIPS, Public Health and a decision on implementation of related issues and concerns-launches the future work program me of the WTO and includes elaboration and timetables for the current negotiations in agriculture and services in aChapter-2 Internationalother issues range of Marketing International Marketing Environment
  56. 56. United Nations Conference onTrade and Development To promote international trade To formulate principles of and policies on international trade and related problems of economic development To negotiate multinational trade agreements To make proposals for putting its principles and International Marketing effect. policies into Chapter-2 International Marketing Environment
  57. 57. United Nations IndustrialDevelopment Organization-UNIDO Direct technical assistance to industries and in-plant training programmes whereby groups of technicians and engineers from developing countries facing a common industrial problem are brought together to consider, how industry in the more advanced countries avoid or solves similar problems International Marketing Chapter-2 International Marketing Environment
  58. 58. International Trade Centre ITC can advise developing countries on their overall approach to marketing communications , as well as on individual information and publicity activities ITC in brief assistances in marketing areas to member countries International Marketing Chapter-2 International Marketing Environment
  59. 59. International LegalEnvironment The legal systems that exist in different countries can be classified into three categories, viz, common law, civil law and theocratic law International Marketing Chapter-2 International Marketing Environment
  60. 60. Settlement of Disputes Disputes are not uncommon in international trade. Disputes of certain nature are settled by the WTO or in accordance WTO principles In other cases there are two avenues Judicial dispute settlement Extra-judicial dispute settlement International Marketing Chapter-2 International Marketing Environment
  61. 61. Laws of Foreign Countries Regulations related products Packing and labeling regulations Regulation of price Regulation of promotion Regulation of trade practices International Marketing Chapter-2 International Marketing Environment
  62. 62. Summary The environmental factors which affect international business involved economic , social, demographic, political , government and technological environments Trade barriers , blocks and agreements plays vital role in international trade International Marketing Chapter-2 International Marketing Environment
  63. 63. “Like” us on Facebook:  p // /http://www.facebook.com/welearnindia “Follow” us on Twitter:http://twitter.com/WeLearnIndiahttp://twitter com/WeLearnIndiaWatch informative videos on Youtube: http://www.youtube.com/WelingkarDLP
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