Download - Chapter 6 The political and economic
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Svend Hollensen
GLOBAL MARKETING5th Edition
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Chapter 6 The political and economic
environment
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Slide 6.2
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Learning objectives (1)
Discuss how the political/legal environment
will affect the attractiveness of a potential
foreign market
Distinguish between political factors in the
home country environment and the host
country environment
Explain the steps in a political risk-analysis
procedure
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Slide 6.3
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Learning objectives (2)
Distinguish between tariff barriers and
non-tariff barriers
Describe the major trading blocs
Explore why the structure of consumption
is different from country to country
Explain how managers can influence local
politics
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Slide 6.4
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Learning objectives (3)
Define regional economic integration and
identify different levels of integration
Discuss the benefits and drawbacks
associated with regional economic
integration
Evaluate consequences of the EMU and
the euro on European business
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Slide 6.5
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Aspects of the political/
legal environment
Home country environment
Host country environment
General international environment
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Slide 6.6
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Figure 6.1 Barriers in the political /legal environment
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Slide 6.7
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
The home country environment
Promotional activities (sponsored by
governmental organizations)
Financial activities
Information services
Export-facilitating activities
Promotion by private organizations
State trading
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Slide 6.8
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Kinds of information
typically available
Economic, social, political
data on individual
countries
Summary and detailed
information on aggregate
global market transactions
Individual reports on
foreign firms
Specific export
opportunities
Lists of potential
overseas buyers,
distributors and agents
for various products in
different countries
Information on relevant
government regulations
Foreign credit information
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Slide 6.9
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Major types of political risk in
the host country environment
Ownership
risk
Operating
risk
Transfer
risk
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Slide 6.10
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Effects of political risk
Import restrictions
Local-content laws
Exchange controls
Market control
Price controls
Tax controls
Labour restrictions
Change of
government party
Nationalization
Domestication
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Slide 6.11
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
What is this?
What term is used to describe the
takeover of foreign companies by the
host government?
Nationalization
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Slide 6.12
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
What is this?
What term is used to describe trade
laws that favour local firms and
discriminate against foreign ones?
Trade barriers
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Slide 6.13
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Categories of trade barriers
Tariff barriers:
• Specific
• Ad valorem
• Discriminatory
Non-tariff barriers:
• Quotas
• Embargoes
• Administrative
delays
• Local-content
requirements
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Slide 6.14
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
What is this?
_____ are tools used by governments to
protect local companies from outside
competition. They are direct taxes and
charges imposed on imports.
Tariffs
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Slide 6.15
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Why do countries
levy tariffs?
To protect domestic producers
To generate revenue
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Slide 6.16
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Figure 6.2 Three-step process of political risk analysis
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Slide 6.17
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Relationship building
Build relationships with government
Build relationships with customers
Build relationships with employees
Build relationships with local community
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Slide 6.18
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
How does the threat
of terrorism affect business?
Short and long-term decline of customer
demand
Unpredictable shifts in the supply chain
Government policies and laws
Macroeconomic effects such as falling
stock market values
Deteriorating relations among countries
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Slide 6.19
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Types of economic activity
Primary Secondary Tertiary
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Slide 6.20
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
What is this?
The _____ states that an identical
product must have an identical price in
all countries when price is expressed in
a common-denominator currency.
Law of one price
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Slide 6.21
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Classifying
countries by income
Less developed countries (LDCs)
Newly industrialized countries (NICs)
Advanced industrialized countries
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Slide 6.23
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
What is this?
What term refers to the value of all
goods and services produced by the
domestic economy over a one-year
period, including income generated by
the company’s international activities?
Gross national product (GNP)
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Slide 6.24
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Figure 6.3 Forms of economic integration in regional marketsSource: from Czinkota/Ronkainen. Global Marketing, 1E. © 1996 South-Western, a part of Cengage Learning, Inc. Reproduced by permission. www.cengage.com/permissions
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Slide 6.25
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Benefits of
regional integration
Trade creation
Greater consensus
Political cooperation
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Drawbacks of
regional integration
Trade diversion
Shifts in employment
Loss of national sovereignty
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Slide 6.27
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Major trading blocs
European Union
Association of
South East Asian
Nations (ASEAN)
Asia Pacific
Economic
Cooperation (APEC)
North American
Free Trade Area
(NAFTA)
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Criticisms of using
per capita income figures
Uneven income distribution
Purchasing power not reflected
Lack of comparability
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
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Slide 6.37
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Questions for discussion (1)
Identify different types of barriers to the free
movement of goods and services.
Explain the importance of a common European
currency to firms selling goods to the European
market.
How useful is GNP when undertaking a
comparative analysis of world markets? What
other approaches would you recommend?
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Slide 6.38
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Questions for discussion (2)
Discuss the limitations of per capita income in
evaluating market potential.
Distinguish between: (a) free trade area, (b)
customs union, (c) common market, (d) economic
and monetary union and (e) political union.
Why is the international marketer interested in the
distribution of the population in a market?
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Slide 6.39
Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Questions for discussion (3)
Describe the ways in which foreign
exchange fluctuations affect: (a) trade, (b)
investments and (c) tourism.
Why is political stability so important for
international marketers? Find some recent
examples from the press to underline your
points.
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Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Questions for discussion (4)
How can the change of major political goals in a
country have an impact on the potential for
success of an international marketer?
A country’s natural environment influences its
attractiveness to an international marketer of
industrial products. Discuss.
Explain why a country’s balance of trade may be
of interest to an international marketer.