international marketing final

3 types of distance in international marketing

1. physical miles

2. times zones

3. cultural distance

3 major trading blocs based on time zones

1. the americas

2. europe

3. asia

stages of economic development

1. More Developed Countries (MDCs)

2. Less Developed Countries (LDCs)

3. Least developed Counties (LLDCs)

4. Newly Industrialized Countries (NICs)

More-developed countries (MDCs)

Industrialized nations with advanced economies

Less-developed countries (LDCs)

Countries in transition with emerging markets

Least-developed countries (LLDCs)

Nations with subsistence-level economies

Newly Industrialized Countries (NICs)

Former LDCs experiencing rapid industrialization (examples: Chile, Brazil, Mexico, South Korea, Singapore, Taiwan)

9 critical factors that drive economic development

1. Political stability in development policies

2. Economic and legal reforms

3. Entrepreneurship

4. Strategic planning

5. Outward orientation toward global markets

6. Adequate factors of production

7. Targeted industries for growth

8. High domestic savings rates and infrastructure investment

9. Privatization of state-owned enterprises (SOEs)

Information Technology and Development IT investment serves as a key driver of economic growth by

• Reducing transaction costs

• Increasing global market reach

• Accelerating technology diffusion

• Reducing telecommunications infrastructure costs through mobile and wireless technologies

Infrastructure Components

Infrastructure includes the capital goods that support multiple industries and enable production and marketing activities

Strong infrastructure is essential for

• Economic growth potential

• Export capabilities

• Supporting expanding populations

• Business efficiency

Marketing contributes to national growth through

• Efficient distribution systems

• Bridging productive capacity and consumer demand

• Utilizing production resulting from economic growth

Challenges in Emerging Markets (Sheth's Five Weaknesses)

1. Market heterogeneity

2. Sociopolitical governance issues

3. Unbranded competition

4. Chronic resource shortages

5. Inadequate infrastructure

Characteristics of Market Development

• Traditional rural/agricultural sector: Subsistence-level markets

• Modern urban/high-income sector: Affluent urban consumers

• Large transitional sector: Low-income urban populations

More developed economies exhibit

• Greater variety of demanded marketing functions

• More sophisticated specialized institutions

• More developed distribution channels

BEM (Big Emerging Markets) Characteristics

• Geographically large with significant populations

• Sizable markets for diverse products

• Experiencing strong growth rates or growth potential

• Implementing significant economic reforms

• Politically important in their regions

• Regional economic drivers that stimulate neighboring markets

BRICS Nations and what they are

Brazil, Russia, India, China, and South Africa

they are the fastest growing emerging market economies

BRICS Nations represent

• 3.2 billion people (40% of world population)

• 40% of global landmass

• Combined $23.5 trillion GNP (nearly equal to US)

• Low labor costs and growth-favorable demographics

• Natural resources for global commodity markets

USMCA (United States-Mexico-Canada Agreement) Replaced What

NAFTA in 2020

USMCA (United States-Mexico-Canada Agreement) Covers what

• Tariff elimination and quota reductions

• Agricultural products, manufactured goods, digital trade

• Enhanced labor condition protections

• Improved dispute resolution systems

• Strengthened intellectual property enforcement

Other Regional Agreements

• DR-CAFTA: US trade agreement with Dominican Republic and Central America

• Mercosur: Southern Cone Free Trade Area including Argentina, Brazil, Paraguay, Uruguay

• LAIA: Latin American Integration Association

• CARICOM: Caribbean Community Common Market

La Raison d'Être (Reason to Exist)

Successful economic unions that require favorable factors in four areas

1.economic

2. political

3. geographic and temporal proximity

4cultural factors

La Raison d'Être (Reason to Exist); economic factors

• Market development and enlargement opportunities

• Preferential tariff treatment for members

• Common external tariff barriers

• Internal economic development stimulation

• Dispute resolution mechanisms

La Raison d'Être (Reason to Exist) Political Factors

• Compatible participating countries

• Similar national aspirations

• Willingness to surrender partial sovereignty

• Response to external threats

La Raison d'Être (Reason to Exist) Geographic and Temporal Proximity

• Facilitates market functioning

• Developed transportation networks

• Time zone considerations

• Immigration issues

La Raison d'Être (Reason to Exist) Cultural Factors

• Cultural similarity eases cooperation

• Shared understanding and outlook

• Language barriers less problematic than expected

• Religious differences remain challenging

Regional Cooperation for Development (RCD) Basic economic integration involving:

• Joint venture financing commitments

• Specified output purchase agreements

• Mutually beneficial industry development

Free Trade Area (FTA)

• Reduced or eliminated internal customs duties

• Maintained individual external tariff schedules

• Barrier-free internal flow of goods and services

Customs Union

• FTA benefits plus common external tariffs

• Examples: France-Monaco, Italy-San Marino, Switzerland-Liechtenstein

Common Market

• Eliminated internal tariffs and restrictions

• Common external tariffs

• Free flow of goods, services, labor, and capital

• Unified economy with maintained political sovereignty

Political Union

• Complete economic and political integration

• Voluntary (commonwealth) or enforced

• Examples: Commonwealth of Independent States (CIS), European Union

EU Institutions

• European Commission: Policy initiation and supervision with regulations, directives, and decisions

• Council of Ministers: Decision-making body for Single European Act proposals

• European Parliament: Legislative powers and budget authority

• European Court of Justice (ECJ): Supreme Court of the EU

Economic and Monetary Union (EMU)

• Established by Maastricht Treaty

• Created the euro as common currency

• Central bank establishment

• 19 member states currently use the euro

EU Challenges

1. Brexit effects and potential disintegration

2. Economic performance improvement

3. Political aspect limitations

4. Further enlargement decisions

Eastern Europe and Former Soviet States Transition Characteristics

• Movement from communist to market economies

• Privatization of state-owned enterprises

• Free-market pricing system establishment

• Import control relaxation

• Inflation management

Baltic States Success Estonia's rapid transformation through

• Quick ruble abandonment

• Company and land privatization

• Banking sector restructuring

• Free trading regime adoption

Commonwealth of Independent States (CIS)

• Formed after Soviet Union dissolution

• 12 republics in loose economic/political alliance

• Open borders without central government

• Threatened by regional conflicts (Ukraine invasion)

African Development

• Growth stimulated by foreign direct investment (particularly from China)

• Sub-Saharan countries showing remarkable progress

• Regional groups: ECOWAS, SADC, EAC

• South Africa as potential BEM and BRICS member

Middle East/North Africa (MENA)

• Political turmoil since 2011 affecting economic development

• Economic communities: GAFTA, Arab League, ECO, OIC

• Hope for democracy increasing economic opportunities

• UAE-Israel trade agreement showing potential for peace through trade

Asia Pacific Regional Characteristics

• Fastest growing region for three decades

• 1996 financial crisis followed by recovery

• 2020 Asian GDP at PPP exceeded rest of world for first time in two centuries

• Source of new products, technology, and vast consumer markets

People's Republic of China (PRC)

• Most important national market aside from US

• WTO admission and PNTR status in 2000 transformed economy

• Best viewed as group of regions rather than single country

• Emerging as global competitor despite challenges

PRC Challenges

-Human rights and legal system issues

-Environmental decline from rapid growth

-Demographic challenges from former one-child policy

-Rural-urban migration discrimination

Four Regional Economies within China

1. Northeast China

2. Beijing- Tianjin

3. Shanghai and Yangtze River Delta

4. Pearl River Delta

Northeast China

Traditional industrial heartland with proximity advantages to Japan, South Korea, Russia

Beijing-Tianjin

35 million people, IT and high-tech center, politics and R&D focus

Shanghai and Yangtze River Delta

Industrial renaissance, trade and financial center

Pearl River Delta

Including Hong Kong, manufacturing base led by Shenzhen Special Economic Zone

Hong Kong

• Special Administrative Region (SAR) since 1997

• "One country, two systems" approach

• Strong economy with convertible currency and securities markets

• Recent autonomy restrictions threaten economic progress

Taiwan (Republic of China)

• Improved mainland relations through WTO membership

• Three direct links: transportation, trade, communications

• Tech powerhouses seeking China market access

• Rising political tensions over Hong Kong democracy

Japan; Four explanations for their economic slowdown since 1990s:

1. Faulty Economic Policies

2. Political Explanation

3. Global Circumstances

4. Cultural Explanation

Faulty Economic Policies

Stock market crash, financial overconfidence

Political Explanation

"One-party sickness," bureaucratic control

Global Circumstances

Consumer purchasing decline, 2011 earthquake/tsunami, COVID-19, aging population

Cultural Explanation:

Loss of common national goal, structural rigidity

India

• Five-point reform agenda:

1. Improving investment climate

2. Developing WTO strategy

3. Reforming agriculture and small-scale industry

4. Eliminating red tape

5. Better corporate governance

India Challenges

high tariffs, inadequate IP protection, anti-business attitudes, corruption, poor growth

Four "Asian Tigers"

1.Hong Kong

2. South Korea

3. Singapore

4. Taiwan

- they achieved "East Asian miracle" status as first countries moving from developing to industrialized

Vietnam

• Post-war recovery with 91 million educated, motivated population

• Bilateral trade agreement with US providing NTR status

• Government commitment to economic growth

• $65 billion in US exports by 2019

Bottom-of-the-Pyramid Markets (BOPMs); C.K. Prahalad's Concept

• 4 billion people with annual income below $1,200

• Historically ignored due to perceived lack of resources

• Now viewed as commercially viable markets

• Industries can evolve with external support

Asia Pacific Trade Associations

1.ASEAN (Association of Southeast Asian Nations)

2. ASEAN+3

3. APEC (Asia-Pacific Economic Cooperation)

ASEAN (Association of Southeast Asian Nations)

• Initial problems with similar export products

• Four growth causes:

1. Government deregulation, liberalization, privatization

2. Shift from commodity to manufacturing base

3. Component manufacturing specialization

4. Japanese technology and capital provision

• ASEAN Vision 2025 committed to AFTA implementation

ASEAN+3

• Created after 1997-1998 Asian financial crisis

• ASEAN plus China, Japan, South Korea

• Goal: Asian currency protection from future attacks

• Discussions of common Asian market

APEC (Asia-Pacific Economic Cooperation)

• Formed 1989 including major Pacific Rim economies plus US and Canada

• Goals: free and open trade, economic collaboration, regional growth, multilateral trading system strengthening

Strategic Marketing Implications; Development and Change

• Higher incomes create market behavior changes

• Similar taste and need groups (market segments) emerge

• New demand generated across all income levels

• Middle-class growth increases demand for costly goods

• Emerging markets represent 21st century growth areas