Exam 2 Flashcards
The importance of the sovereign nation concept
A state sets requirements for citizenship, defines geographical boundaries’, and controls trade to the state’s laws even when beyond national borders.
Forms of governments and stability of government policies
Political Parties
Nationalism – intense feeling of national pride and unity
Trade Disputes
Types of political risks in global business
o Confiscation o Expropriation o Domestication o Violence, Terrorism, and War o Cyber terrorism and Cybercrime
Economic risks of conducting business in foreign markets
o Exchange Controls o Local-Content Laws o Import Restrictions o Tax Controls o Price Controls o Labor Problems
How can a firm lessen political vulnerability
o Joint Ventures o Expanding Investment Base o Licensing o Planned Domestication o Political bargaining (lobbying)
How and why governments encourage foreign direct investment (FDI)
Most important reason to encourage foreign investment is to accelerate the development of an economy
Sovereignty
the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members.
confiscation
seizing of a company’s assets without payment.
• Example: Fidel Castro becoming leader of Cuba
Expropriation
where the gov seizes an investment but makes some reimbursement for the assets.
domestication
occurs when a host counties gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees that mandate local ownership and greater national involvement in a companies management.
exchange controls
stem from shortages of foreign exchange held by a country
local-content laws
Countries often require a portion of any product sold within the country to have local content to contain locally made parts
• Ex: NAFTA requires 62% local content for all cars coming from member countries
import restrictions
Selective restrictions on the import of consumer products, raw materials, machines, and spare parts
tax controls
Taxes must be classified as a political risk when used as a means of controlling foreign investments. In such bases, they are raised without warning and in violation of formal agreements.
price controls
- Controls applied during inflationary periods can be used to control the cost of living
- May be used to force foreign companies to sell equity to local interests
labor problems
in many countries, labor unions have strong government support which may be used to obtain concessions.
Cybercrime
Hard to determine if cyber-attacks are launched by rogue states, terrorists, hackers, or pranksters
stability of government policies
Ideal political climate for multinational firms:
• Stable
• Friendly
Joint Ventures
Typically less susceptible to political harassment, joint ventures can be with locals or other third-country multinational companies.
Different types of legal systems
o common law o civil or code law o islamic law o communicable legal system o marxist social tenants
International dispute resolution
Two options: conciliation or arbitration
Protection of intellectual property rights
o Counterfeiting and Piracy
o Prior Use
o Registration
o International Conventions
Cyberlaw and related issues
o Cybersquatters
o Taxes
o Jurisdiction of Disputes and Validity of Contracts
Examples marketing laws in a foreign country that a U.S. firm needs to obey
o Greece, Norway, Denmark, Austria, and Sweden have banned TV advertising to kids
o In Austria, premium offers, free gifts, and coupons are banned
Common law
the basis for common law is tradition, past practices, and legal precedents set by the courts through interpretations of the statues, legal legislation, and past rulings.
code law
Based on the Uniform Commercial Code. Thought to be all-inclusive.
Islamic law
interpretation of the Koran. It encompasses religious duties and obligations, as well as the secular aspect of law regulating human acts.
Marxist-socialists tenets
Everyone is equal-subordinate to prevailing economic conditions
Conciliation
Also knows as mediation is a nonbinding agreement between parties to resolve disputes by asking a third party to mediate differences
Arbitration
Parties involved select a disinterested and informed party or parties as referees to determine the merits of the case and make a judgment.
litigation
going to court
prior use
Ownership of intellectual property rights usually goes to whoever can establish first use
cybersquatters
If a cybersquatter has registered a generic domain name that a company wants, the only recourse is the buy it.
European integration process
European Union is the benchmark
Strategies:
- Multinational groups spell opportunity to access to enlarged markets with reduced country-by-country tariff barriers and restrictions
- Regulation has been intensified via multinational market groups
Marketing mix implications of market integration such as the EU
- Single formulas for sales across Europe at one price
- The euro makes shopping easier both in person and Online: Competition fairer and tougher
- Companies reducing the number of brands they produce to focus on advertising and promotion efforts
What are the problems that the EU is facing?
o Improving the Union’s economic performance
o Deciding how to limit the political aspects of union
o Deciding about further enlargement
What are some of the provisions of NAFTA?
o Market Access o Nontariff barriers o Rules of Origin o Customs administration o Investment o Services o Intellectual property o Government procurements o standards
free trade area
(FTA) A type of regional cooperation that involves an agreement between two or more countries to reduce or eliminate customs duties and nontariff trade among partner countries while members maintain individual tariff schedules for external countries
customs union
A stage in economic cooperation that benefits from a FTA’s reduced or eliminated internal tariffs and adds a common external tariff on products imported from countries outside the union
common market
an agreement that eliminates all tariffs and other restrictions on internal trade, adopts a set of common external tariffs, and removes all restrictions on the free flow of capital and labor among member nations
political union
A fully integrated form of regional co-operation that involves a complete political and economic integration, either voluntary or enforced
European Coal and Steel Community
- Established 1952
- common market in coal, steel, & iron
- Members: Germany, Italy, France, the Netherlands, Belgium, and Luxembourg
European Common Market
- Established with the Treaty of Rome 1957
- same 6 countries as coal people
- established a customs union first
Rome Treaty
Established the European Common Market
European Union (EU)
- Council of Ministers (decision making body)
- the European Parliament (amends and adopts legislation. Extensive powers in budget issues)
- the Court of Justice (basically the European Supreme Court)
Single European Act
- remove all nontarrif barriers
- remove all physical barriers
- technical barriers
- fiscal barriers- harmonization of taxes
- government procurement
- GOAL: unified single market by 1992
U.S. – Canada FTA
AKA CFTA. United States and Canada Free Trade Area.
NAFTA
- North American Free Trade Agreement (1994)
- single market of 360 million people, $6 trillion GNP
- 2008 all tariff barriers were officially dropped
- this was to: generate income and employment gains..& enhance global competitiveness of NAFTA firms
Mercosur
- Argentina
- Brazil
- Chile
- Bolivia
- Paraguay
- Uruguay
ASEAN
- Association of South-East Asian Nations
- Brunei
- Indonesia
- Laos
- Malaysia
- Myanmar
- Philippines
- Singapore
- Thailand
- Vietnam
Define the country-of-origin effect and give examples
- Influences that the country of manufacture or assemblage have effect on a consumers positive or negative perception of a product.
- English tea, French perfume, Chinese silk, Italian leather, Jamaican rum
What are the three major components of a product? Discuss their importance to product adaptation.
o Core Benefits (platform, design features)
o Actual Product (trademark, brand name)
o Augmented Product (support service)
Discuss the factors that might speed up the adoption process.
- relative advantage
- compatibility
- complexity
- divisibility
- communicability
- homophilious groups
- pace of innovation
- norms/social values
- infrastructure
Discuss the diffusion process.
- Firm’s marketing program induces innovators & early adopters to buy & try
- Customers tell other potential customers = free word-of-mouth
- Word gets to majority
What are the unique characteristics of services?
o Intangible
o Inseparable in that its creation cannot be separated from its consumption
o Hererogeneous in that it is individually produced and unique
o Perishable in that once created it cannot be stored but must be consumed simultaneously
Provide a list of service industries that the United States has a comparative advantage.
o Tourism o Telecommunications o Transport o Entertainment o Financial Services o Information o Education o Health Care
Quality
The essential character of something, such as a good or service; defined in two dimensions: market-perceived quality and performance quality.
market perceived quality
Consumer perception of a product’s quality often has more to do with this than performance quality
green marketing
consideration and concern for the environmental consequences of product formulation, marketing, manufacturing, and packaging
innovation
- An idea perceived as new by a group of people
- When applied to a product, an innovation may be something completely new or something that is perceived as new in a given country or culture
Diffusion
The adoption or spread of products across markets by increasing numbers of consumers
product component model
A tool for characterizing how a product may be adapted to a new market by separating the product’s many dimensions into three components: support services, packaging, and core component
global brand
The worldwide use of a name, term, sign, symbol, design, or a combo to identify goods or services of a seller and to differentiate them from those of competitors
domestic market extension
Whatever we are selling at home
multidomestic market orientation
- Companies have a strong sense that foreign country markets are vastly different
- Market success requires an almost independent program for each country
global market orientation
firms that choose to protect or enhance the natural environment as they go about their business activities
trickle down theory of fashion diffusion
- Proposes that the upper class introduces new styles
- Style ideas are copied in cheaper versions by the middle and lower classes to mimic upper classes
- When the upper classes see themselves copied they move on to new styles that have not been worn by lower classes
trickle-up theory of fashion diffusion
- When styles are started in a lower class, particularly from inner-city living situation and subcultures
- Relies upon subcultural innovations
- Gap bridgers to the mass public take the idea from the streets and convey it or to validate it for the larger public
core component adaptation
adapt for local taste
• In japan: cereals have seaweed, carrot, and zucchini flavor
• Electricity requirements
• Fewer functions but more durable
o packaging component adaptation
- Labels in local/multiple language
- Size, metric systems
- Frankenfood labels
- Country of origin
support service component
- Longer/shorter warranties
- Tonnage/capacity for products
- Signs on products in local languages
Resolving legal disputes between Governments
The World Court in the Hague (Holland)
Resolving legal disputes between companies and governments
Court cases should be handled in one of the countries involved
Resolving legal disputes between companies
Court cases should be handled in one of the countries involved - better to specify in the contract
Registration
the first to register a trademark or other property rights is considered the rightful owner of IP rights (code law countries)
Piracy
the unauthorized use or reproduction of copyrighted or patented material
International conventions
- The Paris Convention for the Protection of Industrial Property
- The Inter-American Convention
- Madrid Agreement
The Paris Convention for the Protection of Industrial Property
includes the U.S. and 100 other countries (one registration protects you in these countries)
The Inter-American Convention
includes most of the Latin American nations and the U.S.
The Madrid Agreement
Includes 26 European counties
Commercial law within countries
Packaging, labeling, promotion, pricing, distribution channels
Green marketing legislation
EU: packaging requirements, recycled cars
Foreign corrupt practices act
makes it illegal for companies to pay bribes to foreign officials, candidates, or political parties
Antiboycott Law
U.S. companies are forbidden to participate in any unauthorized foreign boycott; furthermore, they are required to report any request to cooperate with a boycott
National security laws
American firms, their foreign subsidiaries, or foreign firms that are licensees of U.S. technology cannot sell products to a country in which the sale is considered by the U.S. government to affect national security
Extraterritoriality of US laws
long arm of U.S. legal jurisdiction causes anxiety for foreign heads of state (troublesome when U.S. is in conflict with host countries’ economic or political goals)
GDP
monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though it is usually calculated on an annual basis
GDP per capita
a measure of the total output of a country that takes the gross domestic product and divides it by the number of people in the country; the per capita GDP is especially useful when comparing one country to another because it shows the relative performance of the countries
Market Access
eliminates all tariffs on North American industrial products traded among Canada, Mexico, and U.S.
Rules of Origin
reduces tariffs only for goods made in North America/contain substantial North American content
Individual branding strategy
marketing policy under which each product has its own brand, different from every other product in the same product family or from the same firm
Advantages of Individual branding strategies
don’t lose customers if they switch to different brand in product family; if something goes wrong only one brand suffers
Disadvantages of Individual branding strategies
costly to advertise all separately
Family branding strategy
main brand under which several new products are introduced to take advantage of its credibility, identity, and name-recognition
Advantages of family branding strategies
don’t lose customers if they switch to different brand in product family; if something goes wrong only one brand suffers
Disadvantages of family branding strategies
if something goes wrong with one product, whole brand gets tarnished
National (manufacturer)
brand marketed throughout a national market (usually owned and promoted by large manufacturers)
Advantage of national manufacturer
product recognition; gives people choices; represent consistent quality; help promote sales within stores
Disadvantage of national manufacturer
“auction sale” effect (buyers go to store with lowest prices for same brand); lose exclusivity
Private branding strategy
brand owned not by a manufacturer or producer but by a retailer or supplier who gets its goods made by a contract manufacturer under its own label
Advantage of private branding strategy
gives you control over your product; save money in production costs; no competition for brand; brand equity is yours
Disadvantage of private branding strategy
takes time to develop; longer lead time from when you order to delivery
Product adaptation
Changing physical or psychological aspects of a product to make it culturally appropriate
Improves quality
Product positioning
market technique intended to present products in the best possible light to different target audiences
