Final Exam - Global Marketing

Government export promotion programs

Aim to overcome internal barriers to global marketing:

• Lack of motivation - seen as time-consuming, costly, risky, and less profitable than domestic business

• Lack of adequate information

• Operational/resource-based limitations

• Popular in developing countries, especially with business community support

Ownership risk

Exposes property and life

Operating risk

Refers to interference with the ongoing operations of a firm

Transfer risk

Mainly encountered when companies want to transfer capital between countries

Trade barriers

Trade laws (often tariffs) that favour local firms and discriminate against foreign ones.

Tariff barriers

A tool used by governments to protect local companies from outside competition. The most common forms are specific, ad valorem and discriminatory.

Non-tariff barriers

Non-monetary barriers to foreign products, such as biases against a foreign company’s bids, or product standards that go against a foreign company’s product features.

Quotas

Limits on the amount of goods allowed in/out of a country

Import and export quotas impact prices and competition

Embargoes

Complete ban on trade with a country

Often used for political reasons (e.g., US embargo on Cuba, Iran)

Administrative delays

Regulatory actions designed to slow imports

Examples: inconvenient airport landings, understaffed customs offices.

Local content requirements

Laws requiring a percentage of a product to be locally sourced

Protects domestic producers and forces foreign companies to use local resources.

Historical development

Post-WWII efforts to reduce tariffs and foster free trade

Role of organizations like GATT and WTO in promoting trade.

Step 1

Political Risk Analysis Procedure: Issues of relevance to the firm

Determine critical economic/business issues relevant to the firm. Assess the relative importance of these issues

Step 2

Political Risk Analysis Procedure: Potential political events

Determine the relevant political events

Determine their probability of occuring

Determine the cause and effect relationships

Determine the government’s ability and willingness to respond

Step 3

Political Risk Analysis Procedure: Probable Impacts and responses

Determine the initial impact of probable scenarios

Determine possible responses to initial impacts

Determine initial and ultimate political risk