The Dynamic Environment of International Trade Week 3 McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Trade Barriers* Barriers to trade are one of the major issues confronting international marketers They can be tariff or non-tariff barriers Countries continue to use non-tariff barriers for a variety of reasons Tariff barriers have reduced considerably in recent
years 2-2 Protectionism* The reality of trade is this is a world of tariffs, quotas, and nontariff barriers and nontariff barriers designed to protect a countrys markets from foreign investment Although the World Trade Organization has been effective to some extent in reducing tariffs, countries still resort to measures of protectionism Countries use legal barriers, exchange barriers, and psychological barriers to restrict the entry of unwanted goods
2-3 Arguments for Protectionism maintain employment and reduce unemployment increase of business size, and retaliation and bargaining protection of the home market need to keep money at home
encouragement of capital accumulation 2-4 Arguments for Protectionism maintenance of the standard of living and real wages conservation of natural resources protection of an infant industry industrialization of a low-wage nation
national defense 2-5 The Impact of Tariff (Tax) Barriers Tariff Barriers tend to increase: Inflationary pressures Special interests privileges Government control and political considerations in economic matters The number of tariffs they beget via reciprocity 2-6
The Impact of Tariff (Tax) Barriers Tariff Barriers tend to weaken: Balance-of-payments positions Supply-and-demand patterns International relations (they can start trade wars) Tariff Barriers tend to restrict: Manufacturer supply sources Choices available to consumers Competition 2-7 Six Types of Non-Tariff Barriers
(1) Specific Limitations on Trade: Quotas Import Licensing requirements Proportion restrictions of foreign to domestic goods (local content requirements) Minimum import price limits Embargoes (2) Customs and Administrative Entry Procedures:
Valuation systems Antidumping practices Tariff classifications Documentation requirements Fees 2-8 Six Types of Non-Tariff Barriers (3) Standards: Standard disparities Intergovernmental acceptances of testing methods and standards Packaging, labeling, and marking (4) Government Participation in Trade:
Government procurement policies Export subsidies Countervailing duties Domestic assistance programs 2-9 Six Types of Non-Tariff Barriers (5) Charges on imports:
2-10 Three Types of Monetary Barriers* Blocked currency: Blockage is accomplished by refusing to allow importers to exchange its national currency for the sellers currency. Differential exchange rates: It encourages the importation of goods the government deems desirable and discourages importation of goods the government does not want by adjusting the exchange rate. The exchange rate for importation of a desirable product is favorable and viceversa Government approval: In countries where there is a severe shortage of foreign exchange, an exchange permit to import foreign goods is required from the government
2-11 Protests Against Global Institutions 2-12 Nationalism Nationalism refers to feelings of national pride and unity Feelings of nationalism are manifested by: Disaster (e.g. 9/11) War Recession Call to buy our countrys products only, e.g., Buy
American Restrictions on imports, restrictive tariffs, and other barriers to trade 6-13 Trade Disputes: Examples Undervalued Chinese currency (ongoing problem) Ban on beef imports into Japan
Chinese subsidies in apparent violation of WTO rules Farm subsidies in developed countries AIRBUSBoeing battle over subsidies 6-14 Political Risks of Global Business Confiscation Expropriation Domestication 6-15 Confiscation the most severe political risk, is the seizing of a companys
assets without payment Expropriation is where the government seizes an investment, but some reimbursement for the assets is made; often the expropriated investment is nationalized to become a government run entity Domestication occurs when the government mandates local ownership and greater national involvement in a foreign companys management 6-16 Economic Risks
International firms face a variety of economic risks Governments can impose restraints on business activity to: Protect national security Protect an infant industry To conserve scarce foreign exchange Raise revenue Retaliate against unfair trade practices
Labor Problems 6-18 International Marketing and Law No single, uniform international commercial law governing foreign business transactions exists International marketers must comply with the laws of each country within which it
operate 7-19 Commercial Law within Countries: Marketing Laws When doing business in more than one country, a firm must comply with different marketing laws All countries have laws regulating marketing activities in promotion, product development, labeling, pricing, and distribution channels In Austria, premium offers, free gifts, or coupons are considered as cash discounts and are prohibited Premium offers in Finland are allowed as long as the word free is not used
French law permits sales only twice a year, in January and August 7-20 Foreign Countries 'Antitrust Laws The European Community, Japan, and many other countries have begun to actively enforce their antitrust laws patterned after those in the United States Antimonopoly, price discrimination, supply restrictions, and full-line forcing are areas which lead to less competition and higher prices for consumers 7-21
Export Restrictions National Security Laws Determining Export Regulations Electronic services: ELAIN, STELA, ERIC and SNAP 7-22 Market Barriers Provide an advantage to the companies within the market in their dealings with other countries of the market group Companies willing to invest in production facilities in multinational markets may benefit from protectionist
measures Exporters to these markets are in a considerably weaker position Meeting product and other standards within each multinational marketing region like the EU is a challenge 10-23 Physical or Mandatory Requirements & Adaptation Products may have to change in a number of ways to meet the physical or mandatory requirements of a new market, ranging from simple package changes to total redesign of the physical core product Product homologation is used to describe the
changes mandated by local product and service standards 13-24 Physical or Mandatory Requirements & Adaptation Legal, economic, political, technological requirements of the local marketplace often dictate product adaptation Changes may also have to be made to accommodate climatic differences The less economically developed a market is, the greater degree of change a product may need for acceptance 13-25
Green Marketing and Product Development Green marketing is a term used to identify concern with the environmental consequences of a variety of marketing activities Two critical issues that affect product development are: the control of the packaging component of solid waste and consumer demand for environmentally friendly products 13-26 Products and Culture A product is more than a physical item: It is a bundle of
satisfactions (or utilities) that the buyer receives 1. Facets of products include its form, taste, color, odor, and texture; its functions, the package, the label, the warranty, after sales service, the prestige enjoyed by the brand and the manufacturers reputation 2. The adoption of some products by consumers can be affected by how the product concept conforms with norms, values, and behavior patterns 3. Many facets of products are influenced by culture
4. When analyzing a product for a second market, the extent of adaptation required depends on cultural differences in product use and perception between the market the product was originally developed for and the new market. 13-27
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