MBA 270 Flashcards
1
Q
What were the goals of GATT and its successor WTO?
What led to the birth of GATT and WTO?
How did regional agreements affect global trade barriers?
A
i) Both GATT and its successor WTO aimed at reducing global trade barriers among 164 members, which is a difficult task.
(ii) Regional agreements between groups of countries aimed to reduce trade barriers much quicker than the global organizations.
GATT was established in 1947 under U.S. leadership.
WTO was established via the Uruguay Round Agreement reached in 1993 and became effective in 1995.
Subsequent regional trading blocs were created due to the regional agreements mentioned above.
2
Q
Levels of Economic Integration
A
(i) free trade area, (ii) customs union, (iii) common market, (iv) economic union, (v) political union
3
Q
-The Economic Case
-The Political Case
-Impediments to Integration
A
-Greater world production and services without trade restrictions
-Increased incentives for political co-ops region’s political weight globally
-Difficult path due to (i) painful cost adjustments, and (ii) national sovereignty
4
Q
The Case Against Regional Integration
(Trade diversion as opposed to Trade creation)
A
- Lower-cost external suppliers replaced by higher-cost ones in the free trade area
-Tariff setting = key role
-GATT and WTO do not cover some nontariff’s
5
Q
Evolution of European Union (EU)
A
(i) devastation of wester Europe post WW2, and (ii) EU as key global player
6
Q
Political Structure of the EU
A
Rather complex and evolving (i) EU Commission, (ii) Council of EU, (iii) EU Parliament,
and (iv) Court of Justice
7
Q
The Single EU Act
A
Born out of frustration among member states -Act: ONE market Dec 31, 1992 Still a GOAL!
- removal of frontier controls
- mutual recognition to product standards
- public procurement to nonnational
suppliers
- lift barriers in retail banking & insurance
- removal of all forex
- abolish restrictions on cabotage/truck
8
Q
The Establishment of the $EU
A
Maastricht Treaty in 2/1992 Common $EU by 1/1999 – used by 19 of 28 states
9
Q
Enlargement of the EU
A
Focused on the eastern EU blocs since end of communism in 1980’s by 1990’s @ 13
10
Q
British Exit from the EU
A
Voted out of EU on 6/23/2016
- Since, still negotiating within the UK and among EU…
-Why has it been DIFFICULT for UK’s exit out of EU? Most DIFFICULT for the UK to remain in EU – Why?
11
Q
The North America Free Trade Agreement
A
NAFTA among US-Canada-Mexico in 1/1989 Goal: no tariffs!
o NAFTA has been dissolved by the U.S. in early 2017 replaced with the USMCA in 2020
12
Q
The Andean Community
A
Pact signed in 1969 by Bolivia, Chile, Ecuador, Columbia, and Peru Collapsed in 1980
13
Q
Mercosur
A
Free trade pact between Brazil and Argentina in 1988 modest tariffs & quotas reductions
increased 80% trades by 1980 1990 expansion of pact with Paraguay and Uruguay 2006 expansion with
Venezuela
14
Q
Central American
A
Not much progress among (i) Central America Common Market, (ii) Central America Free Trade
Agreement (CAFTA), (iii) Caribbean countries under Caribbean Community (CARICOM), (iv) Caribbean Single
Market & Economy (CSME)
15
Q
Association of Southeast Asian Nations
A
Formed in 1967 with goals of (i) free trade, and (ii) co-ops among all
16
Q
Regional Trade Blocs in Africa
A
slow progress;
Currently with 19 trade blocs
o Members join other trade blocs
17
Q
Other Trade Agreements:
A
-Strong political opposition in the U.S.
-Trans Pacific Partnership (TPP) –> U.S. withdrew in 2017 —>Changed to CPTPP
o Transatlantic Trade and Investment Partnership (TTIP)
18
Q
The Functions of the Foreign Exchange Market
A
- Enables the conversion of the currency of one country into the currency of another
- Provides some insurance against foreign exchange risk:
(i) Spot exchange rates - rate determined by supply and demand
(ii) Forward exchange rates - rate agreed upon exchange in the future
(iii) Currency swaps - agreed rate exchange to purchase and agreed rate to sale at two different dates
19
Q
The Nature of the Foreign Exchange Market
A
The foreign exchange market is a global network of banks, brokers, and foreign exchange dealers connected by
electronic communications systems
o Most pegged to the US Dollar
o 24/7 open market
o Exchange rates need to be quoted the same to avoid arbitrage
20
Q
Prices and Exchange Rates
A
(i) The Law of One Price (ii) Purchasing Power Parity (iii) Money Supply and Price
inflation (iv) Empirical Tests of PPP Theory
21
Q
Interest Rates and Exchange Rates
A
: The International Fisher Effect:
i = r + l nominal interest rate = real interest rate + inflation rate
(S1 – S2) / S2 × 100 = i$ – i¥ respective i’s in 2 countries & spot exchange rates @ beginning & end of periods
22
Q
Investor Psychology and Bandwagon Effects (IP and BE)
A
Hard to predict, but IP and BE play an important role in
determining short-run exchange rate movements
23
Q
Summary of Exchange Rate Theories
A
(i) Good predictors of long-run changes in exchange rates - relative
monetary growth, relative inflation rates, and nominal interest rates; (ii) short-term changes - psychological
factors, investor expectations, and bandwagon effect.
24
Q
The Efficient Market School
A
forward exchange rates do the best possible job of forecasting future spot
exchange rates and investing in forecasting services would be a waste of money.
25
The Inefficient Market School
forward exchange rate market is inefficient and as such investing in forecasting
services can beat the market.
26
Approaches to Forecasting
(i) fundamental analysis - economic theory to build forecasts; (ii) technical analysis -
past data to predict the future.
27
Currency Convertible
-Freely convertible: both residents and non-residents can purchase unlimited amounts of foreign
currency with the domestic currency
-Externally convertible: only non-residents can convert their holdings of domestic into a foreign currency
-Nonconvertible: both residents and non-residents are prohibited from converting their holdings of
domestic currency into a foreign currency
28
Pegged exchange rate
fixed relative to reference currency
29
managed float system
market forces +
gov/bank interventions = currency’s value
30
Fixed exchange rate
fixed at agreed-on rate
31
The Gold Standard
● Mechanics:
● Strength
● The Period Between the World Wars 1918–1939
The Gold Standard: Pegging currencies to gold and guaranteeing convertibility
● Mechanics: Calculate exchange rate from gold par value (amount of currency=1 gold ounce)
● Strength: Good mechanism for achieving balance-of-trade equilibrium by all countries
● The Period Between the World Wars 1918–1939: Inflation from printing money during war led to competitive
devaluations = uncertain gold par values & depleted gold reserves. Ended in 1939.
32
Bretton Woods System
● IMF’s Role:(1) Discipline via fixed exchange rate; (2) Flexibility via loans = less devaluation & inflation.
● World Bank’s Role: Low interest, IBRD loans and IDA loans to underdeveloped nations
33
The Collapse of the Fixed Exchange Rate System
Dollar was a reference point. U.S. inflation & balance-of-payments
deficit = dollar devalued. Switched to floating system.
34
The Floating Exchange Rate Regime
● The Jamaica Agreement: (1) Floating rates deemed acceptable; (2) Gold abandoned as a reserve asset; (3) Total
IMF quotas are increased to $41b at the time. (Now @ $767b & 188 countries)
35
The Floating Exchange Rate Regime
Exchange Rates Since 1973: Exchange rates much more volatile than they were in 1945-1973 due to major
shocks to the world monetary system, including oil crisis of 1971 and 1979, drop of the $US in 1985, and the
global financial crisis of 2008-2010
36
The Case for Floating Exchange Rates
1) Monetary Policy Autonomy: countries can decide how to manage $
supply; (2) Trade Balance Adjustments: adjusting trade balance easier; (3) Crisis Recovery: exchange adjustments
allow countries to ↑ exports to help recover from a crisis
37
The Case for Fixed Exchange Rates:
(1) Monetary Discipline: prevents countries from expanding $ supply &
creating inflation; (2) Speculation: floating ER does not account for how speculation affects inflation; (3)
Uncertainty: can cause changes in inflation; (4) Trade Balance Adjustment/Economic Recovery: trade balances do
not always impact inflation & $ valu
38
Pegged Exchange Rates
1) Peg value to another major currency; (2) Popular with smaller countries, Ex Belize;
(3) Implications and difficulty including maintaining inflation.
39
Currency Boards
(1) Means of controlling a country’s currency; (2) Cannot create true fixed exchange but
some features of fixed exchange rate regime, Ex. Honk Kong; (3) Foreign currency reserve backed printed
monies; (4) Implications of currency boards and failed attempts, Ex. Argentina
40
Financial Crises in the Post–Bretton Woods Era
(1) IMF’s original function to provide money for borrowers,
short-term, to maintain exchange rate; (2) Developed countries no longer borrow from IMF; (3) 1997 rescue
package issue of $110 billion; (4) Differences between a currency crisis, banking crisis, foreign debt crisis (5)
Common cause: high relative price inflation rates, domestic borrowing, gov’t deficit, and asset inflation.
41
Evaluating the IMF’s Policy Prescription Arguments
. (1) Inappropriate policies: IMF traditionally represents
one-size-fits-all approach instead of specialized. IMF argues it works; (2) Moral Hazard: IMF rescues increasing
due to countries relying on being saved. IMF argues that no bank would test that, failure could cause an economic
collapse; (3) Lack of accountability: IMF has become too powerful with lack of structure and accountability
42
Value Creation
More value customers place on a firm’s products, higher the price firm can charge
Value is measured by difference between costs of production and value consumers perceived in its products
V-P = Consumer Surplus / Unit P-C = Profit / Unit Sold V-C = Value Created / Unit
43
Strategic Positioning
To maximize profitability, firm must:
(1) Pick position on efficiency frontier that is viable in the sense that there is enough demand to support that choice
(2) Configure its internal operations so that they support that position
(3) Make sure firm has the right organization structure in place to execute its strategy
44
Operations : The Firm as a Value Chain. activities
(1) Primary activities: Have to do with the design, creation, and delivery of the product; it’s marketing, and its support and after-sale service
(2) Support activities: Provides input that allow primary activities to occur
(3) Organization: Implementation of its strategy
(4) Strategic Fit: Operation must be configured to support the firm’s strategy
45
Expanding the Market: Leveraging Products and Competencies:
Core competence are skills within the firm that competitors cannot easily
match or imitate. Bedrock of a firm’s competitive advantage
46
Location Economies:
Locating a value creation activity can lower the costs of value creation and help the firm achieve a low-cost position and/or
enable a firm to differentiate its product offering from those competitors
47
Experience Effects/Experience curve
Experience curve refers to systematic reduction in production costs that have been observed to occur over the life of a
product. Another part of the experience effect is the learning effect which refers to cost savings that come from learning by doing
48
Leveraging Subsidiary Skills:
Leveraging the skills created within subsidiaries and applying them to other operations within the firm’s global
network may create value
49
Profitability and Profit Growth Summary:
Profitability is the ratio/rate of return concept where profit growth is the percent increase in net profits
over time (YoY or QoQ
50
Pressures for Cost Reductions:
Responding to pressures for cost reduction requires a firm to try to lower the costs of value creation. Pressure for
cost reduction can be particularly intense in industries producing commodity type products where meaningful differentiation on non-price factors is
difficult and price is the main competitive weapon. This tends to be the case for products that serve universal needs
51
Pressures for Local Responsiveness:
Pressure for local responsiveness arise from national or regional differences in consumer tastes and
preferences, infrastructure, accepted business practices and distribution channels and from host government demands. Responding to pressure to
be locally responsive requires a firm to differentiate its products and marketing strategy from country to country or region to region to accommodate
these factors - all of which tends to raise the firm’s cost structure
52
Global Standardization Strategy
Focuses on increasing profitability profit growth by reaping the cost reductions that come from
economies of scale, learning effects, and location economics. Their strategic goal is to pursue a low-cost strategy on a global scale. The
production, marketing and R&D activities of firms pursuing a global standardization strategy are concentrated in a few favorable locations
53
Localization Strategy
Focuses on increasing profitability by customizing firm’s goods or services so that they match tastes and
preferences in different national or regional markets. Localization is most appropriate when there are substantial differences across nations or
regions in consumer tastes and preferences and where cost pressure are not too intense. Customizing the product offering to local demands
increases the value of that product in local market.
54
Transnational Strategy:
Focuses on achieving low costs through location economies, economies of scale, and learning effects. At the
same time, it focuses on differentiation of product offerings across different geographic markets to compensate for local differences and fosters a
multi-directional flow of skills between different subsidiaries. Being responsive to local demand raises costs without removing the constraint of
remaining cost competitive making it a complicated strategy to implement
55
International Strategy
Focuses on taking products that are first produced for the domestic market and selling them internationally with
only minimal local customization. This is an effective strategy when there pressure of local responsiveness is low
56
The Evolution of Strategy
When competition is fierce, international and localization strategies are less effective. Companies may need to shift to
alternative strategies such as transnational or global standardization strategies to remain competitive
57
The Advantages of Strategic Alliance
Cooperative agreements with potential or actual competitors to pool informational resources and gain
mutual benefit. Allows firms to share risk and develop new industry approaches and technology that will benefit both companies and the industry
overall
58
The Disadvantages of Strategic Alliances:
Possibility to expose trade secrets, or have an unequal benefit from the alliance
59
Making Alliances Work
Select partners carefully using as much information as possible, obtained legally, such as publicly available information,
information from informed third parties and face to face meetings with senior management. Before the alliance is finalized, having contractual
safeguards that provide for all potential situations that could arise from the alliance. After the alliance is formed, having an agreed on management
system to ensure that the alliance is still having equal benefit to both companies.
60
Three basic entry decisiosn
which foreign markets, timing of entry, scale of entry and strategic commitments.
61
Scale of Entry and Strategic Commitments: To achieve scales of economy requires greater risk in the form of strategic commitments
1. “Large” scale entry involves major strategic commitment of resources to yield many benefits. However, many risks are involved.
2. “Small” scale entry is less risky and is an advantage to a firm looking to build slowly while they become more familiar with the market
62
6 kind of entry modes.
exporting, turnkey, licensing, franchising, joint ventures, wholly owned subsidiaries.
63
exporting
Shipping products abroad is how most manufacturing start.
Advantages: Avoids substantial strategic commitments to build manufacturing and helps to avoid pioneering costs.
64
turnkey projects
a contract to build the facilities desired and staff the enterprise before handing over the fully operational, new business.
Advantages: Provides know-how to reduce pioneering costs and provide high returns on an asset.
Disadvantages: Low, long term return on effort and may inadvertently create a competitor
65
licensing
Grants the right to use an intangible asset (patent, formula, copyright) for a fee.
Advantages: Low strategic commitment required since licensee bears risks and may allow participation in a market otherwise illegal to FDI.
It can also allow an organization to develop an idea without having to risk the capital to do so.
Disadvantages: Knowledge can be stolen, resources from one market can’t be used to support another and the firm cannot realize
experience curves associated with production
66
franchising
A form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business.
Advantages: Franchising relieves many of costs and risks that a firm would experience by opening a foreign market on its own. A firm can
build a profitable operation as quickly as possible.
Disadvantages: Franchising may inhibit the firm's ability to take profits out of one country to support competitive attacks in another.
Franchising may result in a firm being less concerned about quality and thus result in loss of sales and even reputation.
67
joint ventures
Establishing a firm that is jointly owned by two or more independent firms. Ex: Fuji Xerox is a joint venture of Xerox and Fuji Photo.
Advantages: Access to local partner’s knowledge; shared development costs / risks; politically acceptable; typically no ownership restrictions.
Disadvantages: Lack of control over technology; inability to engage in global strategic coordination; inability to realize location and experience
economies
68
wholly owned subsidaries
A subsidiary in which the firm owns 100 percent of the stock.
Advantages: Protection of technology, ability to engage in global strategic coordination, ability to realize location and experience economies.
Disadvantages: High costs and risks, need for more human and nonhuman resources and interaction / integration with local employees
69
selecintg an entry mode :
tech-know how
If a firm’s competitive advantage is based on proprietary technological know-how, licensing and joint-venture
arrangements show be avoided to minimize risk of losing control over that technolog
70
selecintg an entry mode :
management-know how
If the competitive advantage of a firm in based on management know-how (e.g., McDonald’s, Starbucks) then the
firm should favor a combination of franchising and master subsidiaries to control the franchises within a particular region
71
Pressures for Cost Reductions and Entry Mode
The greater the pressures for cost reductions, the more likely a firm will want to pursue some
combination of exporting and wholly owned subsidiaries. By manufacturing in locations with optimal cost conditions and then exporting to the rest of
the world, a firm may be able to realize substantial location and experience curve economics. They then may want to export the finished product to
marketing subsidiaries that are in various countries where cost conditions are not as favorable.
72
greenfield venture or acquisitoin
Greenfield Venture or Acquisition? A firm can established a wholly owned subsidiary in a country by building a subsidiary from the ground up, the
Greenfield strategy, or by acquiring an enterprise in the target market.
Pros and Cons of Acquisitions:
Advantage: Quick to execute, can help in preempting competition, and less risky than Greenfield Ventures.
Disadvantage: Expensive - firms have to often overpay, less control of new operation and cultural differences may clash.
Pros and Cons of Greenfield Ventures:
Advantage: More control - gives the firm much greater ability to build the kind of subsidiary company that it wants.
Disadvantage: Slower to to establish and more risky. A degree of uncertainty is associated with future revenue and profit.
Which Choice? Depends on circumstances confronting the firm. If seeking to enter a market where there is high competition and other well-
established firms, then it may pay to enter via acquisition. If firm entering a market with low competition, then a Greenfield Venture may be the only
mode. Also, if competitive advantage of firm is organizational competencies and culture, then it may be preferable to enter via Greenfield.
73
The Promise and Pitfalls of Exporting
Promises: (i) Large revenue opportunities are available in foreign markets. (ii) International market is larger than a
firm's domestic market thus will increase revenue (iii) Enables a firm to achieve economies of scale
b. Pitfalls: (i) Many medium/small firms are reactive with international opportunities (ii) Complexity involved in exporting
can be intimidating (iii) Many firms lack financing, planning and foreign market knowledge
74
International Comparisons-improving export perfomrance
(i) Germany has trade associations, government agencies, and commercial banks gathering export
opportunity information for small firms. (ii) Japanese Ministry of International Trade and Industry (MITI) helps firms find export
opportunities. (iii) US does not provide this information thus, their firms are at an information-disadvantage
75
Information sources-improving export perfomrance
Department of Commerce and US Export Assistance Centers (USEAC) (ii) US and Foreign
Commercial Service and the International Trade Administration (ITA) (iii) Small Business Development Centers (SBDC)
(iv) Export Legal Assistance Network (ELAN) (v) Centers for International Business Education and Research (CIBERs)
76
service providers
Freight Forwarders, Export Management Companies (EMC) (Acts as an export marketing department
for client firms), Export Trading Companies, Export Packaging Companies, Customs Brokers, Confirming Houses, Export
Agents and Merchants, Piggyback Marketing, and Economic Processing Zones
77
export strategy
) Hire EMC (ii) Focus on one market or handful of markets (iii) Enter a foreign market on a small scale
(iv) Retain the option of local production
78
export and import financing
a. Lack of Trust: Buyer doesn’t want to pay before receipt of product and Seller doesn’t want to ship until receipt of
payment; thus, resolution is a mutually trusted third party intermediary.
b. Letter of Credit (L/C): Indicates that the bank will make payments under specific circumstances.
c. Draft: An order written by an exporter telling an importer what and when to pay.
d. Bill of Lading: A document issued to an exporter by a common carrier transporting merchandise.
e. A Typical International Trade Transaction:
79
typical international trade transaction
A Typical International Trade Transaction: (i) Importer orders goods (ii) Exporter agrees to fill order (iii) Importer
arranges for letter of credit (iv) Importer’s Bank sends letter of credit to Exporter’s Bank (v) Exporter’s Bank informs
Exporter of letter of credit (vi) Goods shipped from exporter (vii) Exporter presents draft to bank (viii) Exporter’s Bank
presents draft to Importer’s Bank (ix) Importer’s Bank returns accepted draft (x) Exporter’s Bank tells Exporter that it has
accepted bank draft payable in 90 days (xi) Exporter sells draft to Exporter’s Bank (xii) Importer’s Bank tells Importer
documents arrive (xiii) Importer pays Importer’s Bank (xiv) Exporter’s Bank presents matured draft and gets payment from
Importer’s Bank
80
export-import bank
Agency of the US government whose mission is to provide aid in financing
and facilitate exports and imports
81
export credit insurance
sometimes neeeded when supplier cant get letter of credit from purchase.
82
countertrade
a. Countertrade: The trade of goods and services for other goods and services
b. The Popularity of Countertrade: Began in the 1960’s and spikes during times of financial crisis
c. Types of Countertrade:
i. Barter: the direct exchange of goods or services between two parties without a cash transaction
ii. Counterpurchase: a reciprocal buying agreement
iii. Offset: an agreement to purchase goods and services with a specified percentage of proceeds from an original sale in
that country from any firm in the country
iv. Switch Trading: the use of a specialized third-party trading house in a countertrade arrangement
v. Buyback: an agreement to accept a percentage of a plant’s output as payment for contract to build a plant
d. Pros of Countertrade: (i) Gives mechanism for a way to finance an export deal when nothing else is available
(ii) Willingness to countertrade or counterpurchase can give a competitive edge to the selling firm
e. Cons of Countertrade: (i) Products received are not as good as cash (ii) Poor quality products might be received
(iii) Additional overhead, management, org structure to handle merchandise from countertrade deals
83
Two value creation activites
1. production .
2. supply chain management
84
where to produce
Total Quality Management (TQM) - the need to improve the quality of a company’s products and services.
Six Sigma - statistically based methodology for improving product quality
ISO 9000 - certification process the requires certain quality standards be met
Country Factors: Political, economic systems, and culture.
Technology Factors: Technology flexibility or technological constraints.
Production Factors: (i) Product features (ii) locating production facilities (iii) strategic roles for production facilities.
The Hidden Costs of Foreign Locations: High employee turnover, shoddy workmanship, poor
product quality, low productivity
85
reasons to make
If item or part is critical to the success of a product.
- Requires specialized design or production skills
86
reasons to buy
Cost of producing and whether it be done cheaper than supplier.
- Production capacity and opportunity cost incurred
87
global logistics
Global distribution center, global inventory management, packaging, transportation,
reverse logistics
88
global purchasing
Five strategic levels; (1) domestic purchasing activities only (2) international
purchasing only as needed (3) international purchasing as part of strategy (4) sophisticated global
purchasing (5) integrated global purchasing
89
role of just in time inventory
Inventory logistics system designed to deliver parts to a production
process as they are needed, not before
90
role of information technology
Web- and cloud-based information systems enable firms to track
and locate component parts accurately within supply chain.
91
coordination in global supply chains
Shared decision making opportunities and operational
collaboration of key global supply chain activities.
92
Globalization of Markets & Brands
(i) Levitt’s argument and Mc Donald’s (ii) People in different nations with conflicting view points
are participating in a shared “global” conversation drawing on shared symbols including global brands (iii) globalization is spreading
because certain products simply exist everywhere
93
Market Segmentation
(i) Market segmentation- identifying groups whose consumer needs, wants, and purchasing behavior differ
from other (ii) intermarket segment- spans multiple countries, transcending national borders
x intermarket segments will become more and more common with increased globalization among youngers consumers (40
and under)
x Marketing to Black Brazil example
94
Product Attributes
Products sold well when their attributes match consumer needs and when their prices are appropriate
x BMW sells well to people with high needs for luxury and quality
x Same product can’t be sold worldwide as consumer needs mostly vary from country to country depending on culture and level
of economic development
95
Product Attributes
-Cultural Differences← (i) Impact of tradition- tradition is important in foodstuffs and beverages (ii) tastes and preferences
are becoming more cosmopolitan
-Economic Development← (i) consumer behavior is influenced by the level of economic development of a country (ii) firms in
highly developed nations tend to build a lot of extra performance attributes into their products (iii) consumers in developed
countries are willing to pay more for products that have additional features and attributes customized to their tasted and
preferences
-Product & Technical Standards← (i) differences in technical standards constrain the globalization of markets (ii) different
technical standards for television signal frequency & emergency in the 1950s that require television and video equipment to
be customized to prevailing standards
96
4 differences between distributions system worldwide.
1. retail concentration.
2.channel length
3.channel exclusivity
4. channel quality.
97
barriers to intetrnal communication
-Culture Barriers- a message that means one thing in one country may mean something
quite different in another
- Source Effects- when the receiver of the message evaluates the message on the basis of status or image of the sender
- Noise Levels- reduce the probability of effective communication and its number of other messages
competing for a potential customer’s attention
98
Push v Pull Strategies
(i) push- emphasizes personal selling rather than mass media advertising in the promotional mix
(ii) pull- depends more on mass advertising to communicate the marketing message to potential customers
Global Advertising ←(i) Philip Morris’ promotion of Marlboro cigarettes, for example
99
Price Discrimination←
involves charging whatever $ the market will bear and help a company maximize its profits (i) price
elasticity of demand – i.e., (ii) elastic (iii) inelastic
100
Strategic Pricing
← predatory pricing, multipoint pricing, and experience curve pricing
101
Regulatory Influences on Prices
firm’s freedom to set its own prices is constrained by anti-dumping regulations and
competition policy
102
configuring the market mix
(i) global branding of Marvel’s Movies (ii) financial services
103
International Market Research
systematic collection, recording, analysis, and interpretation of data to provide knowledge
104
Product Development
The Location of R&D- rate of new product development is higher in countries where (i) more money is spent on basic R&D
(ii) underlying demand is strong (iii) consumers are affluent (iv) competition is intense
Integrating R&D, Marketing, & Production- new product development has a high failure rate
Cross-Functional Teams - establish cross functional product development teams composed of reps from R&D, Marketing &
Production
Building Global R&D Capabilities - build close links between its R&D centers and its various country operations.
