Download Competitive Advantage of Nations

World Trade
• World trade refers to the flow of goods and
services among different countries - the
value of all the exports and imports of the
world’s nations
• Trade Balance
• Almost 25% world trade is non-cash based
Competitive Advantage of Nations
• Michael Porter* describes four keys to a
nation’s competitive advantage relative to
other countries
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Demand conditions
Related and supporting industries
Factor conditions
Company strategy, structure, rivalry
* Often referred to as “Porter’s Diamond”
Competitive Advantage for Companies
 Organizations that are successful in highly
competitive home markets should succeed in
international markets
 Success requires an international plan, resources,
marketing mix adaptation
 Conflict between “standardization” and
“customization”
Borders and Roadblocks
• Protectionism is a government policy which
seeks to provide home companies an
advantage over foreign companies by
implementing trade barriers
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Import quotas
Embargos
Tariffs
Red tape
Economic Communities
• Countries band together to form an alliance
– Bi or multilateral trade agreements
• Such economic communities coordinate
trade policies and ease restrictions on trade
across the member borders
– EU (European Union)
– NAFTA (North American Free Trade Agreement)
– ASEAN (Association of Southeast Asian Nations
WTO
• Objective: “to help trade flow smoothly,
freely, fairly, and predictably”
• Acts as forum for negotiations among
countries, settles trade disputes, and assists
developing countries with training programs
• General Agreement on Tariffs and Trade
(GATT) developed by UN after WW II to
moderate trade conflicts, replaced (1995) by
WTO
Top 15 Wired Countries
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5
6
7
8
USA*
Japan
Germany
Canada
UK
South Korea
China
Italy
* Singapore exceeds US
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9 France
10 Australia
11 Taiwan
12 Netherlands
13 Sweden
14 Spain
15 Russia
The Global Marketing Environment
• Economic Environment
• Political and Legal Environment
• Cultural Environment
Economic Development
• Less Developed Countries (LDC)
– lowest stage of economic development
• Developing Countries
– economies shift from agriculture to industry; standards
of living, education, and use of technology rise
• Developed Countries
– economically advanced countries; the G7 countries
(U.S., U.K., Canada, France, Italy, Germany, Japan)
Political and Legal Environment
• Political Issues
– economic sanctions
– nationalization
– expropriation
• Regulatory Issues
– product requirements
– local content rules
– taxation
• Human Rights Issues
Cultural Environment
• Values
• Norms and Customs - handed down from the past
& controls basic behaviors
• Symbols and Superstitions - colors, numbers,
words, food, gestures
• Language
• Ethnocentricity - preference for local products
• Cultural Change - culture shock, globalization
Economic Environment
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Indicators of Economic Health
Demographic Characteristics
Economic Infrastructure
Internet Coverage
Levels of Economic Development
Indicators of Economic
Health
• Gross Domestic Product (GDP) - the dollar
value of goods and services a country
produces within its borders within one year
• Gross National Product (GNP) - the value
of all goods and services produced by a
country’s individuals or organizations
whether in or out of country borders
Country Comparisons
• Total GDP
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$9.963 trillion
$3.15 trillion
$4.5 trillion
$113.9 billion
$720.8 billion
• Country
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USA
Japan
China
Hungary
Spain
Economic Indicators
• Country’s Demographic Characteristics
– birth rates
– size of different age groups
• Economic Infrastructure
– quality of a country’s distribution, financial,
and communications systems
• Internet Coverage
– percent of population online
Ethnocentrism
“Buy American”
• The tendency to prefer products or people
of one’s own culture over those from other
countries
• Ethnocentric consumers are likely to feel
ethically wrong in buying products from
other countries because they want to
support their domestic economy
Market Entry Strategies
Domestic
Strategy
Exporting Contractual Strategic
Strategy Agreements Alliances
Direct export
Export merchants
Casual
Licensing
Franchising
Subcontracting
Direct
Investment
Without equity
With equity
Joint ventures
Level of Commitment
Building
Buying
Significant
Standardization versus
Localization
• Standardization suggests that greater
efficiencies and economies of scale are
generated when all marketing is the same in
each country
• Localization recognizes that customer
satisfaction will be highest when the
marketing mix is tailored to local needs and
wants
Product Decisions
• Sell the same product in the new market
(straight extension strategy)
• Modify the product for the new market
(product adaptation strategy)
• Develop a brand new product for that new
market (product invention strategy)
Promotional Decisions
• Will the same promotional message work in
the different markets?
• Standardized strategies are more likely to
work when cultural factors are similar, and
when target customers are in cosmopolitan
urban areas
Price Decisions
• Costs associated with transportation, tariffs,
insurance, differences in currency exchange rates,
and bribes may make a product more expensive in
one country than another
• Gray marketing - unauthorized (but legal) imports
of products and selling for less than authorized
“distributors”
• Dumping - a company prices its products lower
than at home in order to establish a market or to
dispose of merchandise