Part II Flashcards
Which 3 political and legal environments are there?
- the home country environment
- the host country environment
- the general environment
How do you define the home country’s environment?
the environment of the country the company originates from
What aim do promotional activities promoted by governmental organization have?
Direct government attempts to make a country’s products more competitive in the world market
Which internal barriers do government export promotion programs and programs for global marketing activities deal with? (3)
- lack of motivation
- lack of adequate information
- operational/resource-based limitations
How is the home country’s government involved with financial activities?
Through the membership of international financial organizations such as IMF and the World Bank, the national government can assume its role as an international banker
How is the home country’s government involved with information services?
For smaller firms that cannot do own research or hire outside researchers national government is the major source of basic marketing information
Which national government activities stimulate export? (4)
- Trade development offices
- Government-sponsored trade fairs and exhibitions
- Sponsoring trade missions of business people who go abroad for the puprose of making sales
- Operating permanent trade centers in foreign market ares
How do non-governmental organizations play a role in the promotion of global marketing? (6)
- Industry and trade associations, national, regional and sectoral industry associations
- Chambers of commerce
- Other organizations concerned with trade promotion
- Export service organization
- Banks
- Transport and trading companies
What is state trading?
Many former communist countries are now allowing some private trading activities, either through joint ventures or as a result of pivatization of state-owned enterprises
What is the host country environment?
the environment of the country the business wants to expand to
What are the three major types of political risks for the host country environment?
- Ownership risk
- Operating risk
- Transfer risk
What does ownership risk expose?
property and life
What does operating risk refer to?
the interference with the ongoing operations of a firm
When is transfer risk mainly encountered?
when companies want to transfer capital between countries
What are import restrictions?
selective restrictions on the important materials, machines, and parts
What are local-content laws?
countries require a portion of a product sold to have local content
What are exchange controls?
shortage of foreign exchange /controls to conserve the supply
What is market control?
controls to prevent foreign companies from competing in certain markets
What is price control?
price control over products that command considerable public interest
What are tax controls used for?
used as a means of controlling foreign investments
What are labor restrictions?
When labor unions persuade the government to pass laws that support labor for nationals
What can be the effect of a change of government on businesses?
This new government may not continue the agreement of previous deals
What is domestication?
Continual restrictions placed on foreign firms gradually over time
What are trade barriers?
Trade laws (often tariffs) that favor local firms and discriminate against foreign ones
What are the two main reasons that countries levy tariffs?
- To protect domestic producers
* To generate revenue
What are tariffs?
A tool used by governments to protect local companies from outside competition.
What are non-tariff barriers?
non-monetary barriers to foreign products
What are the 3 most common forms of tariffs?
- specific
- ad valorem
- discriminatory
What are specific tariffs?
Charges imposed on a particular product by weight or volume, this is charged in local currency
What are ad valorem tariffs?
straight percentage of the value of the goods is charged
What are discriminatory tariffs?
tariffs charged against goods coming from a particular country
What are quotas?
A restriction on the amount (units or weight) of a good that can enter or leave a country during a certain period of time
What is an embargo?
A complete ban on trade on one or more products with a particular country
What is an administrative delay?
Regulatory controls or bureaucratic rules designed to impair the rapid flow of imports into a country
Why do countries impose import quotas? (2)
- to protect domestic producers, having them maintain market share
- force foreign countries to compete against each other for the limited amount of imports
Why do countries impose export quotas? (2)
- maintain adequate supplies of products in the home country
- limit supply on world markets
What are local-content requirements?
a law stipulating that a specified amount of a good or service be supplied by producers in the domestic market
What are the three steps of political risk analysis?
- Issues of relevance to the firm
- Potential political events
- Probable impacts and responses
What do you do in step 1 of the political risk analysis? (issues of relevance to the firm) (2)
- Determine critical economic/business issues relevant to the firm
- Assess the relative importance of these issues
What do you do in step 2 of the political risk analysis? (potential political events) (4)
- Determine the relevant political events
- Determine their probability of occurring
- Determine the cause and effect relationships
- Determine the government’s ability and willingness to respond
What do you do in step 3 of the political risk analysis? (probable impacts and responses) (3)
- Determine the initial impact of probable scenarios
- Determine possible responses to initial impacts
- Determine initial and ultimate political risk
What are the stakeholders of a company? (4)
- Government
- Customers
- Employees
- Local community
What are the three types of economic development?
Primary
Secondary
Tertiary
What is the Primary economic activity?
Activities concerned with agriculture and extractive processes
What are the secondary economic activities?
Manufacturing activities
What are the tertiary economic activities?
Activities based upon services
What is devaluation?
International lowering of the value of a currency by the nation’s government, increase the price of imports
What is revaluation?
International rising of the value of a currency by the nation’s government, reduce the price of imports
What is the law of one price?
Stipulates that an identical product must have an identical price in all countries
What does GNP stand for?
Gross National Product
What is the GNP?
The value of all goods and services produced by the domestic country over a one year period including the income generated by the country’s international activities
GNP per capita formula
GNP / population of country
What does GDP stand for?
Gross domestic product
What is the GDP?
The value of all goods and services produced by the domestic economy over a one-year period
What does LDC stand for?
Less Developed Country
What is are the characteristics of an LDC? (7)
- Low GDP per capita
- Limited amount of manufacturing activity
- Poor infrastructure
- Slow moving bureaucratic public sector
- Heavily reliant on one product
- Often have one trading partner
- Reliance on agricultural crop or mining
What does NIC stand for?
Newly Industrialized Countries
What are the characteristics of a NIC? (3)
- Countries with an emerging industrial base
- A country that is capable of exporting
- Infrastructure shows considerable development
What are the characteristics of advanced industrialized countries? (4)
- Considerable GDP per capita
- Wide industrial base
- Development in the service sector
- Investment in infrastructure
What is a free trade area?
All trade barriers among member countries of this area are removed here
What is a customs union?
Free trade area but with a common trade policy to non-members
What is a common market?
Customers union but factors of production are mobile among member states.
What is an Economic Union?
Common Market, but with the integration of economic policies. Member states harmonize monetary policies, taxation, and government spending. A common currency is used by member states.
Which countries are BRIC countries?
Brazil, Russia, India, China (and South Africa)
What do you know about the BRIC countries? (3)
- These countries have emerging markets and future growth is expected
- These countries form 44% of the world’s population and 25% of the GDP
- China is the country that is leading
BRIC countries will face a challenge from? (3)
- Slow-growing global economy
- Reversal of investor risk appetite moving their capital from BRICs to safe countries
- A loss of confidence in the BRICs
What is culture?
the learned ways in which society understands, decides, and communicates
What are the 3 characteristics of culture
- It is learned
- It is interrelated
- It is shared
What are the 4 different layers of culture
- National Culture
- Industry culture
- Company culture
- Individual behavior
What is the national culture?
Gives an overall framework of cultural concepts and legislation for business activities of a country
What is industry culture?
The culture within an industry. Every business is conducted within a certain competitive framework and within a specific industry. It is related to the culture of business behavior and ethics of industry across borders.
What is company culture?
The culture within a company. A total organization often contains subcultures of various functions.
Two potential determinants for a firm’s choice of a foreign market.
- Environmental characteristics
* Firm characteristics
What are examples of environmental characteristics? (3)
- International industry structure
- Degree of internationalization of the market
- Host country’s market potential, competition, psychic/geographic distance, market similarity
What are examples of firm characteristics? (5)
- Degree of internationalization and overseas experience
- Amount of resources
- Type of nature of the business
- internationalization goals
- Existing networks of relationships
The international market can be defined in two ways, which two ways?
- the international market as a country or group of countries
- the international market as a group of customers with nearly the same characteristics
What are the 4 international market segmentation steps?
- Selection of the relevant segmentation criteria
- Development of appropriate segments
- Screening of segments to narrow down list
- Microsegmentation, develop segments in each qualified country
What are the 4 criteria for effective segmentation?
- Measurability
- Accessibility
- Substantiality/ profitability
- Actionability
What does the criteria for effective segmentation measurability encapture?
the degree to which the size and purchasing power of resulting segments can be measured
What does the criteria for effective segmentation accessibility encapture?
the degree to which the resulting segments can be effectively reached and served
What does the criteria for effective segmentation substantiality/ profitability encapture?
the degree to which segments are sufficiently large and/or profitable
What does the criteria for effective segmentation actionability encapture?
the degree to which the organization has sufficient resources to formulate effective marketing programs and ‘make things happen’
What is a preliminary screening?
markets/countries are screened primarily according to external screening criteria
What is a fine-grained screening?
the firm’s competitive power in the different markets can be taken into account
What does country responsiveness mean?
‘Income elasticity’ of a specific product and industry consumer-related expenditures in a country. It reflects the tendency of consumers to spend, in a specific product or category, in response to a rise in their income.
What does Knock-out criteria mean?
these are criteria that are used to exclude countries in advance as potential future markets
What does BERI stand for?
Business Environment Risk Index
What is BERI?
a tool used in the coarse-grained, macro-oriented screening of international markets
What are countries divided into in the fine-grained screening?
A B C countries
What are the characteristics of A countries?
Primary markets, key markets which offer the best opportunities for long-term strategic development. Companies may want to establish a permanent presence
What are the characteristics of B countries?
Secondary markets, where opportunities are identified but the political or economical risk is perceived as being too high to make long-term commitments
What are the characteristics of C countries?
Tertiary markets, are perceived as high risk and so the allocation of resources will be minimal. Objectives are short-term and no real commitment of companies
What can cluster analysis be used for?
used to identify meaningful cross-national segments
When is the transnational approach used?
when a company is trying to achieve a consistent and controlled marketing strategy across all its markets
What does the micro-segmentation process decide?
which products or services the company wishes to become active in the individual countries
What is the waterfall approach?
Here firms firstly enter a single key market to build up experience and after that start to enter other markets. This method may be preferred when a firm lacks experience
What is the shower approach?
Used when companies prefer a rapid entry method. Many markets are entered at once this comes with high financial risk and many resources will be needed. This is mostly done with products that have technical advances or are innovative and economies of scale can be created this way.
What does concentration mean?
Focussed on a smaller amount of customer groups/ countries
What does diversification mean?
Focussed on a bigger amount of customer groups/ countries
At which levels can the global corporate portfolio be analyzed? (4)
- Product categories by regions
- Product categories by countries
- Regions by brands
- Countries by brands
