lecture 4 - deciding which markets to enter Flashcards
what varibles within which company conducts business globally need to take into account
most uncontrollable variables
- isolating and priotising the most important variables
- reducing the risks of failure
- an ability to interpret the environmental factors and take appropraite actions is key to success
analysis of international market environment
- reduction of risk
- aid to decision making
- market risk assessment
- choice of market and marketing mix
- priotises variables
factors within global marketing environment
- phyiscal environment - outershell - no control
- the macro environment - business have little control
- the immediate environment - customers and suppliers
- organisation
immediate environment; typical key stakeholders of a company
- stakeholder; any constituent body having in/direct interest in and impact on an organisation
- suppliers; providers of goods and services used by a company to add value
- distributors; logistical and institutional providers of transport, warehousing and other services
- partners; providers of different service eg financial, research
- communities; associted with the company, interest groups and govt (less controllable)
models of macro marketing environmental analysis
PEST - politcal,eco,social,tech
SLEPT - social,legal,eco,political,tech
global political environment
analysis of the effects of political globalisation
any inter/national political factors that may affect organisations business operations;
1. HOME country political environment
2. HOST country political environment
+ general international political and regulatory environment
home country
political environment
main influences
- export promotion and facilitation - to increase motivation for costly and risky international actitvites eg govt subsidies, chamber of commerce support, 2020 export drive
- financial support - eg export credit insurance this is valuable- you have to take thatrisk eg if sending goods abroad then waiting for money to come in - use letter of credit eg
- information provision services - govt as the main sources of basic marketing info about other countries great.gov.uk(dept. of trade)
- state trading - former communist countries eg cuba, china
host country
politcal environement
marketers have to work within the politcal framework of the host country
- attitude towards the role of govt
- political stability and risk
- actions of the host country
understanding of the role of govt
participatory (supreme political authority) or regulatory (facilitating) role
- dependant of economic development and political and economic system
- transition from participartory to regulatory role is supported through structural adjustments programmes of the world bank
- road to economic prosperity (eu accession)
politico - economic system
- the west is used to open democratic govt with input from/ to business
- other systems eg centrally planned/ authoritarian have less opportunity for input
economic freedom; washingtton DC heritage foundation
- ranking of economic freedom among countries ; free, mostly free, moderately free, mostly unfree, repressed
- variables considered include;
- trade policy
- taxation policy
- capitial flow and foriegn investment
- banking policy
- wage and price controls
- property rights
- black market
- high correlation between degree of economic freedom and extent to which a nations economy is market orientated
political stability and risk
- personal risk- Habis Corpus - life and liberty, business executives are murdered or imprisioned some in syria. managing this risk is your first duty
- ownership risk - property, both personal and corporate, can be confiscated, this risk significantly reduces the viability of a project
- operating risk - political activites that interfere with business eg arbitrary laws consider public affairs as a skill
- transfer risk - transferring profit/ capital - this generally will be managed by your treeasury team within financa at head office
3 step process for assessing the political risk
- determine relevant issues
- determine political events (chances of occurrence)
- determine impacts and responses
an example BERI - business environment risk index
what is our moral compass
social license
- license metaphorical concept
- indicates companies cant operate sustainability without the support of society
- that lisence depends on trust, this is what makes people buy our products, apply for our vacancies, invest in our shares or accept our presense in their communities
- use maslow needs - operate in the country because the real people approve of you
in order to understand political risk, managers use relevant reeports and publications
- some examples of political risk
- civil war- politically-motivatd violence and social unrest
- transparanceey (societal conflict involving demonstrations and strikes eg g20/ capitalism
- corruption, nepotism- missue of public power for private benefit, transparency international - corruption perceptions index
- crime eg intellctual property therf
when poltical risk high country find it difficult
when perceived politcal risk is high a country will have difficulties attracting FDI
what do companies do to protect against political risk
companies can buy insurance to protect against poltical risk - the us international development fiance corporattion
potential actions of the host country
- price controls - controlling cost of living eg food petrol
- tax control - taxing of FDIs as a source of funds in developing countries
- labour restrictions - eg insisting on representation in boards of directors
- govt (party) change - suspension of agreements, negotiations
- nationalisation - seizure of foriegn property (domestication-gradual version)
aims of trade barriers
- protect domestic producers-achieving price advantage
- to generate rev for govt - typcial for developing countires
types of trade barriers
tarrifs
- specific - product related eg duties on dairy products based on weight of lactic matter
- ad valoreem - %of value (the import price) eg eu car tariff of 10% is addedd to the import price third countires eg japan
- discriminatory - country related eg 22% tax prevent cheaper chinese and american truck models from entering the marketplace
types of trade barriers
non tariff barriers
- quotas - resticting amount of export/import of goods
- embargo - banning trade of product with a particular country due to political reasons eg russia - EU
- administrative delays - eg by requiring license that take long time to obtain
- local content requirments - specified amount supplied by domestic producers eg 45% in the eu
international political environment
- political relationships of two or more countries (bi/multi-lateral agreements)
- international company becomes involved in these relationships, regardless its idea to stay neutral
international political environment
influential factors
- memberships in regional blocks -legal system eg EU phytosanitary law
- membership in international organisations eg WTO, NATO
- international agreements eg about trasnportation, communication, patents
the EU single market
- eu is a customs union- member states removed customs barriers between themselves and introduced common customs policy towards other countries
- the Maastricht treaty prohibts quotas and ‘measures having equivalent effect’ on intra-eu trade
- customs duties; member states cant charge dutoes on goods crossing a border, both goods produced within the EU and those produced outside - once a good has been imported into eu for thrid party country and the appropriate customs duty paid it be considered to be in fre circulation between member states
- on its accession to EEC 1973 the uk negiotated quotas on new zeland butter and lamb - to help its traditional supplier
an aspect of political globalisation
international legal environment
legal environment
- local domestic law- influences eexports/ import, advertising
- international law - on copyrights, patent, trademarks, bribery, trade secrets
- differences in conflict resolution, dispute settlement - UNCITRAL (un conference on international law)
- EU tends to create common legal system by harmonising local laws
- new challenges ICT; data protection, intellectual property rights
- local domestic law; legal systems of the world
civil vs common law
civil law
- pre-eminence of written law
- laws moree encompassing and precise
- judges play a far more important role and juries play less
- continental european countires and their former colonies + indonesia, russia, china, vietnam
common law
- pre-eminence of social norms ie customary practice; what society considers right and acceptable
- lawyers research previous similar case decisions in order to argue their own cases
- law passed frequently in the courtroom, where a citizens jury determines the outcome
- UK, USA, canada less quebec and other states previously part of the british empire
example of civil vs common law on trademark protection
- civil law; first to register owns the trademark
- common law; first who had used the trademark
business practices and legal systems
businesees face a myriad of legal issues everyday;
- many countries have higher taxes on cars with large engines or with high emission; diesel tax
- in countires tthat follow islamic law its illegal to charge interest; in indonesia visa and mastercard receive collateral assets such as jewellery to sell instead of charging interest
- in many countires eg eu members and candidates untruthful, confusing and misleading advertising is banned
examples of influences of different domestic laws on tobacco industry
- smoking bans in public places in uk and most of eu
- china ; state owned manufacturer enjoys a virtual monopoly - state tobacco monpoly administration and china national tobacco corportation - responsible for tobacco regulation and manufacturing
- regulations related to cigarette packaging
international law; international intellctual property example
- software piracy problems; 37% of software installed on personal computers is unlicensed (business software alliance 2018)
- 70k jobs a year are lost in us due to music piracy
- annual global rev losses from digital piracy 40-97.1bill in movie industry
- illegal downloading of copyrighted materials takes up 24% of the global bandwidth
intellectual property can be protected by
- patents
- copyrights
- trademarks
- trade secrets
patent protection
- legal monopoly on the tech or process for usually 15-21 years
patent protection
two contrasting principles
- first - to -invent; light bulb invnted by thomas edison 1870
- first -to-file ; light bulb invented by joseph swan 1878
patent protection
marketing implications
- use companies must ensure that their inventions are protected abroad through formal patent applications
- foreign companies operating in the US must be extremely careful in introducing any technologies that have been invented in US
copyright protection
- protection of orginal intellectual works
- the exculsive right of owner to reproduce, distribtue, perform or display their work
- lasts for 50years in eu and japan compared with 95years in US
- can be brought and sold
- computer programmes are also considered a literacy work and are protected by copyright
trademarks
- symbol that identifies the source of a product and service
- use of confusingle similar mark is banned by law
- in the us regstration is not mandatory but highly recommended
- in most other countries trademark registration is mandatory
trade secrets
- protection is sought without registration
- it can still be protected in the courts if the company can prove it took all precautions to protect the idea
- eg - coke recipe
-paypal vs google 2011
legislation in eu
- harmonization of the legal systems of member states
- example of regulations that affect doing business in the eu;
- eu directive 2006/114/EC (12/12/2006) concering misleading and comparative advertising ; against deceptive info and misleading comparisons
- eu consumer rights directive; increase price transparency and provide greater rights to consumers over return, refund etc
additonal aspect of political globalisation
influence of pressure groups
