International Marketing Chapter 3

What Are Institutions and Why Are They Useful?

What Are Institutions and Why Are They Useful?

• Organizations of groups, societies, or cultures to achieve a common goal: "to provide stability and meaning to social life"
• A collection of norms that "regulate the relations of individuals to each other"

New Institutional Theory

- Social Constructs: norms that structure relations between people
- Societal Expectations: basic rules & social expectations of groups, written and unwritten

Formal Institutions

- Influence behavior through laws and regulations
- City, State, and National Governments, EU
- Operate through Laws & Rules

Informal Institutions

- Influence behavior through norms, values, customs, ideologies
- Normative - set Standards: NGOs & Professional Organizations
- Cognitive - shared conceptual ideals

The United Nations (UN)

• 192 member countries dedicated to world peace and stability
• Fosters global business relationships • Helps write international law
• Helps stabilize global economy
• Headquartered in New York City

UN Center for Trade Facilitation and Electronic Business (UN/CEFACT)

- Technical standards and norms
- Standardized trade documents
- Standards for E-data exchange

UN Educational, Scientific and Cultural Organization (UNESCO)

- Investment in emerging economies
- Development in health, education, governance & political stability

• UN Agencies deal with downsides to globalization:

- Terrorism
- Crime
- Drugs
- Arms Traffic

UN Environmental Programme (UNEP)

- Climate control Convention
- Kyoto Protocol
- Sustainable Business Practices

The Global Compact

Education and health issues needing private industry/developing nation partnerships

UN Economic and Social Council promotes:

- Social Justice
- Human Rights - Labor Rights

The UN Global Compact

Framework for businesses committed to aligning operations and strategies
• 10 universally accepted principles for:
- Human rights - Labor
- The Environment
- Anticorruption

UN Organization 5 working bodies/organs

1. The General Assembly
2. The UN Security Council 3. Economic and Social Council (ECOSOC)
4. International Court of Justice (ICJ)
5. The Secretariat

UN Organs

General Assembly, Security Council, Economic and Social Council, Trusteeship Council, International Court of Justice, SecretariatGeneral Assembly, Security Council, Economic and Social Council, Trusteeship Council, International Court of Justice, Secretariat

General Assembly

- Adopts resolutions
- Decisions reflect world opinion
- Decisions NOT legally binding

The UN Security Council

- Maintains international peace & security
• 15 members including 5 permanent members

Economic and Social Council (EOCSOC)

Economic & social issues
• Trade & Transport
• Industrialization • Economic development
• Population growth
• Children
• Housing
• Women's rights • Racial discrimination
• Illegal drugs & crime
• Social welfare & youth
• The human environment

International Court of Justice (ICJ) or World Court

- 15 judges
- Worldwide jurisdiction
- Legal decisions between national governments

The Secretariat

- UN staff
- 40,000 people worldwide
- Headed by the Secretary General

International Monetary Institutions

coordinates and enforces international monetary rules

World Bank

lends money for development projects

WTO

- deals with rules of trade between nation

WTO Principles:

1. Trade without discrimination (MFN Principle)
2. Freer trade through negotiation
3. Predictability through binding and transparency
4. Promoting fair competition
5. Encouraging development and economic reform

Doha Development Agenda

- provides market access to least developed nations
- Duty and quota-free imports on manufactured goods
- Agriculture hard to agree on

Trade-related Intellectual Property Rights (TRIPS)

Copyright, trade mark, trade secrets and intellectual property protection

Free Trade Area (FTA)

tariffs among members eliminated but external tariffs remain

Customs Union

collaboration that adds common external tariffs to an FTA

Common Market

customs union that includes mobility of services, people, and capital within a union

Complete Economic Integration

integration on economic and political levels

3 areas of integration (EU)

1. Economic Community
2. Foreign Policy
3. Domestic Affairs

EU Profile Today

- 27 member countries
- 500+ million people
- 7.3%+ of world population
- 20% of global imports & exports
- Supranational body with regional government

European Parliament

legislative body; members popularly elected from member nations

Council of the European Union

the EU's primary policy setting institution

European Commission

27 commissioners responsible for EU's daily operations

Court of Auditors

Reviews spending of EU funds

European Economic and Social Commission (EESC)

• Focuses on occupational & social interests

Committee of Regions (CoR)

Local views on transportation, education & health

European Investment Bank

Finances projects of EU objectives

European Central Bank (ECB)

sets and implements EU monetary policy

European Court of Justice

rules on issues related to EU policies under the Treaty of Rome