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  • 1. THE INTERNATIONAL TRADING ENVIRONMENT ch2/ Session 2
  • 2. GLOBAL TRADE FLOWS ch2/
  • 3. PERCENTAGE OF THE TOTAL OF WORLD EXPORTS IN MERCHANDISE (2007) ch2/ Country Germany United States China Japan France Netherlands Britain Italy Canada Belgium Percentage % 9.3 8.7 7.3 3.4 4.4 3.9 3.7 3.5 3.4 3.9 Source: WTO.org
  • 4. % Changes On Previous Year: CONSUMER PRICES AND REAL GDP/GNP 2007 ch2/ Country Argentina Australia Belgium Brazil Canada China Czech Rep France Germany Hong Kong India Italy Japan Malaysia % inflation rate 9.8 2.8 1.8 3.7 2.0 2.1 3.3 1.4 1.4 2.5 6.1 1.9 0.4 3.4 % growth rate 6.3 2.9 2.1 3.3 2.4 10.4 4.8 2.0 1.6 5.0 9.2 1.2 1.9 5.2 Source: The Economist (2007) Country Mexico Netherlands Poland Russia Singapore South Africa South Korea Spain Taiwan Thailand Turkey UK USA Venezuela EU % inflation rate 3.8 1.7 2.5 9.2 1.0 5.6 2.3 2.7 1.5 3.6 8.6 2.2 2.2 17.0 2.0 % growth rate 3.2 2.3 4.7 6.5 5.0 4.2 4.2 3.0 3.9 4.3 4.0 2.4 2.2 5.5 2.0
  • 5. Trade Balance in Merchandise Trade 2007 ch2/ Source: World Bank: World Development Indicators (2007) US $ Billion Argentina Australia Brazil China Germany Hong Kong Japan Mexico Malaysia +12.4 -9.4 +46.1 +177.5 +203.0 -17.9 +79.6 -5.8 +28.6 Netherlands Poland Russia Spain Taiwan Turkey UK USA EU +39.4 -4.1 +140.8 -112.8 +21.3 -53.2 -152.2 -837.2 -15.7
  • 6. COMPARATIVE ADVANTAGE
    • Achieving Comparative Advantage
      • sustained period of investment
      • lower labour cost
      • proximity to raw materials
      • subsidies to help native industries
      • building expertise in certain key areas
    • Building National Advantage (Porter, 1990)
      • factor conditions
      • demand conditions
      • related and supporting industries
      • firm strategy, structure and rivalry
    ch2/ Source: Porter (1990) The Competitive Advantage of Nations
  • 7. Market Entry Barriers ch2/
  • 8. WORLD TRADING INSTITUTIONS
    • Initiatives from the Bretton Woods Agreement, 1944
      • World Bank (IBRD)
        • Currently 150 member countries
        • Provides financial and technical help for the development of poorer countries
      • International Monetary Fund (IMF)
        • Provides short-term international liquidity to countries with Balance of Payments difficulties
      • World Trade Organisation (WTO)
        • Evolved from GATT (treaty)
    ch2/
  • 9. WORLD TRADE ORGANISATION
    • The WTO promotes trade by:
      • Working to reduce tariffs
      • Prohibiting import/export bans and quotas
      • Eliminating trade discrimination
      • Eliminating non tariff barriers
    ch2/
  • 10. Trade liberalization ‘rounds’ Latest two
    • The Doha Round
      • Commenced 2001
      • Called the ‘development round’
        • +75% of WTO members are developing countries
        • LDC's face greater barriers than DC's
        • Key problem areas - textiles & agriculture
          • Accounting for 70% of LDC exports
      • Ave.tariff on textiles are <20% against <3% on industrialised goods
      • In EU & US agricultural subsidies = $1 billion per day
        • 6x annual amount spent by them on aid
    • The Uruguay Round
      • 107 participants
      • Most complex ever attempted
        • 15 sectors
        • US$1 trillion of trade
    ch2/
  • 11. MAIN TYPES OF TRADE ASSOCIATIONS ch2/ Type Economic co-operation Bi-lateral or multi-lateral trade treaty Sectoral free trade agreement Trade preference agreement Free trade area (or agreement) Customs union Common market Economic union Political Common external tariff No No No No No Yes Yes Yes Yes Free movement of capital and people No No No No No Possibly Yes Yes Yes Example Canada - EC framework agreement, APEC The Peru, Chile accord The multi-fibre agreement South African Development Cone (SADC) ASEAN NAFTA Mercosur Economic Community of West African States European Single Market European Monetary Union Would resemble federal states (e.g. US, Canada, Germany)
  • 12. REGIONAL TRADING AREAS OF THE WORLD ch2/
  • 13. MAJOR CHANGES IN THE SINGLE EUROPEAN MARKET
    • Removal of tariff barriers
    • Removal of technical barriers
    • Public procurement
    • Free movement of labour and workers’ rights
    • Opening up of professions
    • Financial services
    • Transport, haulage and coastal carriage
    • Company law
    • Fiscal barriers
    • The environment
    ch2/
  • 14. European Monetary Union STRATEGIC IMPLICATIONS
    • Price and wage transparency
    • Consumers can shop for ‘best deals’
    • Exploitation of regional price differences
    • Pressure on margins
    ch2/
  • 15. TRADE AREAS
    • NAFTA: free trade area
      • US, Canada, Mexico
      • World’s richest single market
    • Mercosur: customs union
      • Brazil, Paraguay, Uruguay and Argentina
    • APEC: forum of 21 countries bordering the Pacific
    • ASEAN: free trade area (to complete ‘AFTA’ by 2015?)
      • Thailand, Indonesia, Singapore, Brunei, Malaysia & Philippines, Vietnam, Myanmar, Cambodia and Laos
    ch2/
  • 16. SOCIAL AND CULTURAL CONSIDERATIONS ch3/ Session 3
  • 17. CULTURE DEFINED in an international marketing context
    • The sum total of learned beliefs, values and customs that serve to direct customer behaviour in a particular country market
    ch3/
  • 18. COMPONENTS OF CULTURE #1 ch3/ Beliefs : A large number of mental and verbal processes which reflect our knowledge and assessment of products and services
  • 19. COMPONENTS OF CULTURE #2 ch3/ Values: The indicators consumers use to serve as guides for what is appropriate behaviour, they tend to be relatively enduring and stable over time and widely accepted by members of a particular market
  • 20. CULTURAL VALUES AND THEIR RELEVANCE TO CONSUMER BEHAVIOUR ch3/ Value Achievement & success Efficiency & practicality Progress Material comfort Individualism External conformity Youthfulness Features Success flows from hard work Admiration of things that solve problems People can improve themselves The ‘good life’ Being oneself Uniformity of observable behaviour State of mind that stresses being young at heart Relevance to behaviour Justification for acquisition of goods Stimulates purchase of well functioning products Ready acceptance of ‘new’/‘improved’ products Fosters acceptance of convenience/ luxury products Stimulates acceptance of customised or unique products Stimulates interest in products used by others Stimulates acceptance of products that promote youthfulness Source: Schiffman, L.G. & Kanuk, L. L. (2000)
  • 21. COMPONENTS OF CULTURE #3 ch3/ Customs: Overt modes of behaviour that constitute culturally approved or acceptable ways of behaving in specific situations. Customs are evident at major events in ones life eg birth, marriage, death and at key events in the year e.g. Christmas, Easter, Ramadan, etc.
  • 22. Layers of Culture Hofstede (2003)
    • A national level
      • according to one’s country which determines our basic cultural assumptions.
    • A regional/ethnic/religious/linguistic affiliation level
      • determining basic cultural beliefs.
    • A gender level
      • according to whether a person was born as a girl or as a boy.
    • A generation level
      • which separates grandparents, parents and children.
    • A social class level
      • associated with educational opportunities, a person’s occupation or profession.
    ch3/
  • 23. A CULTURAL FRAMEWORK ch3/
  • 24. THE MAIN SILENT LANGUAGES IN OVERSEAS BUSINESS #1 ch3/ Source: Hall & Hall (1987) Silent Language Implications For Marketing & Business
    • - Appointment scheduling
    • - The importance of being ‘on time’
    • The importance of deadlines
    • - Sizes of offices
    • Conversational differences between people
    • - The relevance of material possessions
    • - The interest in the latest technology
    Time Space Things
  • 25. THE MAIN SILENT LANGUAGES IN OVERSEAS BUSINESS #2 ch3/ Silent Language Implications For Marketing & Business - The significance of trusted friends as social insurance in times of stress and emergency - Rules of negotiations based on laws, moral practices or informal customs Friendship Agreements
  • 26. CULTURAL INFLUENCES ON BUYER BEHAVIOUR ch3/ Adapted from Jeannete & Hennessey; 2004
  • 27. ASSUMPTIONS TO BE QUESTIONED BY INTERNATIONAL MARKETING MANAGERS
    • Maslow’s Hierarchy of Needs is consistent across cultures
    • The buying process in all countries is an individualistic activity
    • Social institutions and local conventions are similar across cultures
    • The consumer buying process is consistent across cultures
      • consumer involvement
      • perceived risk
      • cognitive style
    ch3/
  • 28. ELIMINATING SELF–REFERENCE CRITERIA
    • Define in terms of home country cultural traits, habits and norms
    • Define in terms of foreign cultural traits, habits and norms
    • Isolate and analyse SRC influences and see how if effects the problem
    • Redefine the problem without the SRC influence
    ch3/
  • 29. THE CONTEXTUAL CONTINUUM OF DIFFERING CULTURES ch3/ Source: Usiner et al (2005) ) Swiss Germans Scandinavians North Americans English Italians/Spanish Latin Americans Arabs Japanese Low Context High Implicit Explicit Messages French
  • 30. HOFSTEDE’S CRITERIA (2001)
    • Individualism
      • Affects the way people live together
    • Power distance
      • Dealing with human inequality
    • Uncertainty avoidance
      • Managing future uncertainty
    • Masculinity
      • Male / female stereotyping
    • Confucian dynamism
      • Universalistic or particularistic
    ch3/
  • 31. POWER DISTANCE/INDIVIDUALISM DIMENSIONS ACROSS CULTURES ch3/ Source: Hofstede (2003)
  • 32. COMMUNICATION TYPOLOGIES
    • Direct vs Indirect
      • Degree of explicitness of verbal messages
    • Elaborate vs Succinct
      • Quantity of talk people feel comfy with
    • Personal vs Contextual
      • The role of speaker and relationships
    • Instrumental vs Affective
      • The orientation of the speaker
    ch3/ Gudykunst et al; 2005
  • 33. LINEAR MODEL OF THE NEGOTIATION PROCESS ch3/ Non-task discussion Task-related exchange of information Persuasion Concession and agreement
  • 34. MINIMISING CULTURAL IMPACT IN NEGOTIATIONS
    • Adaptation
      • Demonstrate awareness of cultural differences
    • Interpreters
      • Influence meaning
    • Cultural Blocks
      • Not everything translates
    • Stereotype
      • Important to avoid
    • Inter-cultural preparation
    ch3/ Source: Usiner and Lee (2005)