BUS 348 Lecture Notes - Lecture 2: Disposable And Discretionary Income, Business Cycle, Traditional Chinese Characters
4 Jun 2018
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BUS 348
Lecture 2
Thrive in the Marketing Environment: The World Is Flat
• Marketing on the Global Stage
o Arguments for a single marketplace
• Greenhouse effect - the turning of our atmosphere into a kind of greenhouse as a
result of the addition of carbon dioxide and other greenhouse gases.
• Global warming - a warming of the planet that may have disastrous results.
• Take a Bow: Marketing on the Global Stage
o The global marketplace
o World trade - the flow of goods and services among different countries, the value of all the
exports and imports of the world's nations
o Individuals today participate in a global marketplace, whether they realize it or not.
Proponents of the global marketplace and free trade argue that it benefits us all, because it
allows people in developing and least developed countries to enjoy the same economic
benefits as citizens of more developed countries.
o Others warn of problems such as global warming and stress the need for international
agreements that would force industries and governments to develop and adhere to
environmental standards to protect the future of the planet.
o But critics feel that limits on trade are necessary to protect domestic industries or ensure
the safety of American consumers.
o For example, the growth in world trade in recent years has been accompanied by a glut of
unsafe products, many of which have come from China.
o Countertrade - a type of trade in which goods are paid for with other items instead of with
cash
• Barter is a common form of countertrade
o Currency of as many as 70% of all countries (including China) is not convertible, meaning
that it cannot be spent or exchanged outside the country's borders
o In other countries, because sufficient cash or credit is simply not available, trading firms
work out elaborate deals in which they trade (or barter) their products with each other or
even supply goods in return for tax breaks from the local government. This countertrade
accounts for between 20 and 25% of all world trade.
o There are six key forms that countertrade can take:
• Offset Countertrade: Commonly used in the purchase of military goods by
governments. Direct offset countertrade occurs when the supplier uses materials or
parts obtained from the importing country when manufacturing the goods (e.g.
airplanes). Indirect offset countertrade agreements force the suppliers of imported
goods to invest in some type of industrial relationship unrelated to the items being
imported.
• Counter purchase Agreements: In order to obtain an order, foreign suppliers must
first agree to buy products from the importing country. This helps the importing
country to generate exports, which in turn reduces the payment deficit that results
from importing goods from another country.
• Tolling: Sometimes manufacturers lack the financial capital to buy raw materials from
other countries suppliers. Tolling occurs when the supplier provides the manufacturer
with the raw material necessary to create goods and essentially rents out the factory
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facility to produce some type of finished good using the raw materials supplied. The
produced goods are in turn sold to the final user who pays cash back to the supplier
(not the manufacturer).
• Barter: Barter is a form of countertrade in which products change hands—not money.
For example, country A trades goods to country B, that uses the services, products,
raw materials, etc. to pay for the purchase. Barter is most common in undeveloped
countries.
• Buyback: This form of countertrade occurs when providers of equipment or capital
agree to provide their goods or services in exchange for a portion of the goods that
will be produced using the equipment.
• Switch Trading: When countries engage in bilateral trading agreements over long
periods of time, imbalances often accumulate, in that one partner may build up a
large credit surplus over the other country. Switch trading occurs when the country
with the credit surplus imports goods from a third country, and uses the credit surplus
from their trading partner to pay for the el iported goods. For eaple, Brazil
at one time had a large credit surplus with Poland. These surpluses can sometimes be
tapped by third countries so that, for example the UK exports to Brazil could be
financed from the sale of Polish goods to the UK or elsehere. (Lodo Coutertrade
Roundtable). This process is called switch trading because the documentation papers,
ad shippig destiatio are sithed hile the goods are i route, tpiall he
at sea.
• Steps in the Decision Process for Entering Global
o "Go or no go" - is it in our best interest to focus exclusively on our home market or should
we cast our net elsewhere as well?
o If the decision is "go," which global markets are most attractive? Which country or countries
offer the greatest opportunity for us?
o What market-entry strategy and thus what level of commitment is best? As we'll see, it's
pretty low risk to simply export products to overseas markets, while the commitment and
the risk is substantial if the firm decides to build and run manufacturing facilities in other
countries (though the payoff may be worth it).
o How do we develop marketing mix strategies in the foreign markets - should we standardize
what we do in other countries, or develop a unique localized marketing strategy for each
country?
• Deciding to Go Global
o Must consider market conditions and competitive advantage when making a decision
o What considerations do you think Starbucks had to consider to expand globally?
McDonalds?
o In deciding whether or not to go global, a firm must consider both market conditions in the
domestic and global markets, as well as their competitive advantage. Typically, many firms
decide to go global when domestic demand declines, particularly if demand in foreign
markets seems to be growing.
o Not all competitive advantages "travel well" when marketing products abroad while others
offer an even stronger advantage abroad than they do domestically. For example,
developing countries typically do not have the engineering expertise, highly trained workers,
or high-tech facilities associated with many tech firms based in the US. Key US exports
include food, industrial supplies, tourism, and entertainment.
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o For years, China was a huge export market for Western firms as consumers there began to
prosper and crave foreign goods. Now the Chinese are turning the tables as they carve out a
larger role in the global marketplace.
• Understand International, Regional, and Country Regulations
o Initiatives in international regulation and cooperation help trade
• General Agreement on Tariffs and Trade (GATT)
• World Trade Organization (WTO)
o Protectionism restricts trade
• Quotas, embargos, and tariffs
o Economic opportunities help to promote trade
o Even the most formidable competitive advantage does not guarantee success in foreign
markets because the local government may "stack the deck" in favor of domestic
competitors and which hinder foreign competitors from expanding into markets.
o GATT - following WWII, the UN created this international treaty for the purpose of reducing
import tax levels and trade restrictions.
o WTO - In 1984, GATT created the World Trade Organization, whose purpose is to supervise
and liberalize international trade and WTO members account for over 97% of world trade.
Its most important functions include overseeing the implementation, administration and
operation of the covered agreements, as well as providing a forum for negotiation and for
settling disputes. Unfortunately, product piracy abroad continues to be a problem, costing
American firms millions of dollars annually.
o Governments that enact a policy of protectionism set import quotas (or use embargoes -
trade prohibition with a country), or tariffs (taxes on imported goods) to restrict foreign
competition.
o Economic communities are composed of groups of countries that band together to promote
trade among themselves while facilitating trade with countries outside of the community.
From a marketing standpoint, economic communities are helpful in setting policies related
to product content, advertising, and packaging labels. The most well known economic
communities include NAFTA and the European Union. However, there are a number of
other economic communities around the world.
• Analyzing the Marketing Environment
o Understanding external environment is essential no matter what
o When entering foreign markets, knowledge of local conditions is critical.
• Helps you figure out where to go and what strategies are likely to be most effective
• The Economic Environment: Indicators of Economic Health
o Key economic indicators:
• Gross domestic product (GDP) - total dollar value of goods/services a country
produces within its borders in a year
• Gross national product (GNP) - value of all goods and services produced by a country's
citizens or organizations
• Economic infrastructure - quality of country's distribution, financial, and
communications systems
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find more resources at oneclass.com
Document Summary
Individuals today participate in a global marketplace, whether they realize it or not. This countertrade accounts for between 20 and 25% of all world trade: there are six key forms that countertrade can take, offset countertrade: commonly used in the purchase of military goods by governments. Direct offset countertrade occurs when the supplier uses materials or parts obtained from the importing country when manufacturing the goods (e. g. airplanes). This helps the importing country to generate exports, which in turn reduces the payment deficit that results from importing goods from another country: tolling: sometimes manufacturers lack the financial capital to buy raw materials from other countries suppliers. Tolling occurs when the supplier provides the manufacturer with the raw material necessary to create goods and essentially rents out the factory facility to produce some type of finished good using the raw materials supplied.
