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THE INTERNATIONAL TRADINGENVIRONMENT

Session 2

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GLOBAL TRADE FLOWS

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PERCENTAGE OF THE TOTAL OF WORLD EXPORTS IN MERCHANDISE (2007)

Country

Germany

United States

China

Japan

France

Netherlands

Britain

Italy

Canada

Belgium

Percentage %

9.3

8.7

7.3

3.4

4.4

3.9

3.7

3.5

3.4

3.9Source: WTO.org

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% Changes On Previous Year:CONSUMER PRICES AND REAL GDP/GNP 2007

Country

ArgentinaAustraliaBelgiumBrazilCanadaChinaCzech RepFranceGermanyHong KongIndiaItalyJapanMalaysia

% inflation rate9.82.81.83.72.02.13.31.41.42.56.11.90.43.4

% growth rate6.32.92.13.32.4

10.44.82.01.65.09.21.21.95.2

Source: The Economist (2007)

Country

MexicoNetherlandsPolandRussiaSingaporeSouth AfricaSouth KoreaSpainTaiwanThailandTurkeyUKUSAVenezuelaEU

% inflation rate3.81.72.59.21.05.62.32.71.53.68.62.22.217.02.0

% growth rate3.22.34.76.55.04.24.23.03.94.34.02.42.25.52.0

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Trade Balance in Merchandise Trade 2007

Source: World Bank: World Development Indicators (2007)

US $ Billion

Argentina

Australia

Brazil

China

Germany

Hong Kong

Japan

Mexico

Malaysia

+12.4

-9.4

+46.1

+177.5

+203.0

-17.9

+79.6

-5.8

+28.6

Netherlands

Poland

Russia

Spain

Taiwan

Turkey

UK

USA

EU

+39.4

-4.1

+140.8

-112.8

+21.3

-53.2

-152.2

-837.2

-15.7

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COMPARATIVE ADVANTAGE

• Achieving Comparative Advantage – sustained period of

investment– lower labour cost– proximity to raw

materials– subsidies to help native

industries– building expertise in

certain key areas

• Building National Advantage (Porter, 1990)

– factor conditions– demand conditions– related and supporting

industries– firm strategy, structure

and rivalry

Source: Porter (1990) The Competitive Advantage of Nations

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ch2/7

Market Entry Barriers

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WORLD TRADING INSTITUTIONS

• Initiatives from the Bretton Woods Agreement, 1944– World Bank (IBRD)

• Currently 150 member countries• Provides financial and technical help for the development

of poorer countries

– International Monetary Fund (IMF)• Provides short-term international liquidity to countries

with Balance of Payments difficulties

– World Trade Organisation (WTO)• Evolved from GATT (treaty)

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WORLD TRADE ORGANISATION

• The WTO promotes trade by:

– Working to reduce tariffs– Prohibiting import/export bans and quotas– Eliminating trade discrimination– Eliminating non tariff barriers

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Trade liberalization ‘rounds’Latest two

• The Doha Round– Commenced 2001– Called the ‘development round’

• +75% of WTO members are developing countries• LDC's face greater barriers than DC's• Key problem areas - textiles & agriculture

– Accounting for 70% of LDC exports

– Ave.tariff on textiles are <20% against <3% on industrialised goods– In EU & US agricultural subsidies = $1 billion per day

• 6x annual amount spent by them on aid• The Uruguay Round

– 107 participants– Most complex ever attempted

• 15 sectors• US$1 trillion of trade

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MAIN TYPES OF TRADE ASSOCIATIONS

Type

Economic co-operation

Bi-lateral or multi-lateral trade treaty

Sectoral free trade agreement

Trade preference agreement

Free trade area (or agreement)

Customs union

Common market

Economic union

Political

Common external tariff

No

No

No

No

No

Yes

Yes

Yes

Yes

Free movement of capital and people

No

No

No

No

No

Possibly

Yes

Yes

Yes

Example

Canada - EC framework agreement, APEC

The Peru, Chile accord

The multi-fibre agreement

South African Development Cone (SADC)

ASEAN NAFTA Mercosur

Economic Community of West African States

European Single Market

European Monetary Union

Would resemble federal states (e.g. US, Canada, Germany)

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REGIONAL TRADING AREAS OF THE WORLD

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MAJOR CHANGES IN THE SINGLE EUROPEAN MARKET

• Removal of tariff barriers

• Removal of technical barriers

• Public procurement• Free movement of

labour and workers’ rights

• Opening up of professions

• Financial services• Transport, haulage

and coastal carriage• Company law• Fiscal barriers• The environment

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European Monetary UnionSTRATEGIC IMPLICATIONS

• Price and wage transparency

• Consumers can shop for ‘best deals’

• Exploitation of regional price differences

• Pressure on margins

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TRADE AREAS

• NAFTA: free trade area– US, Canada, Mexico– World’s richest single market

• Mercosur: customs union– Brazil, Paraguay, Uruguay and Argentina

• APEC: forum of 21 countries bordering the Pacific

• ASEAN: free trade area (to complete ‘AFTA’ by 2015?)– Thailand, Indonesia, Singapore, Brunei, Malaysia &

Philippines, Vietnam, Myanmar, Cambodia and Laos

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SOCIAL AND CULTURAL CONSIDERATIONS

Session 3

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CULTURE DEFINEDin an international marketing context

• The sum total of learned beliefs, values and customs that serve to direct customer behaviour in a particular country market

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COMPONENTS OF CULTURE #1

Beliefs:

A large number of mental and verbal processes which reflect our knowledge and assessment of products and services

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COMPONENTS OF CULTURE #2

Values:

The indicators consumers use to serve as guides for what is appropriate behaviour, they tend to be relatively enduring and stable over time and widely accepted by members of a particular market

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CULTURAL VALUES AND THEIR RELEVANCE TO CONSUMER BEHAVIOUR

Value

Achievement & success

Efficiency & practicality

Progress

Material comfort

Individualism

External conformity

Youthfulness

Features

Success flows from hard work

Admiration of things that solve problemsPeople can improve themselves

The ‘good life’

Being oneself

Uniformity of observable behaviour

State of mind that stresses being young at heart

Relevance to behaviour

Justification for acquisition of goods

Stimulates purchase of well functioning productsReady acceptance of ‘new’/‘improved’ products

Fosters acceptance of convenience/luxury productsStimulates acceptance of customised or unique products

Stimulates interest in products used by others

Stimulates acceptance of products that promote youthfulness

Source: Schiffman, L.G. & Kanuk, L. L. (2000)

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COMPONENTS OF CULTURE #3

Customs:

Overt modes of behaviour that constitute culturally approved or acceptable ways of behaving in specific situations. Customs are evident at major events in ones life eg birth, marriage, death and at key events in the year e.g. Christmas, Easter, Ramadan, etc.

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Layers of CultureHofstede (2003)

• A national level– according to one’s country which determines our basic

cultural assumptions.• A regional/ethnic/religious/linguistic affiliation level

– determining basic cultural beliefs.• A gender level

– according to whether a person was born as a girl or as a boy.

• A generation level– which separates grandparents, parents and children.

• A social class level– associated with educational opportunities, a person’s

occupation or profession.

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A CULTURAL FRAMEWORK

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THE MAIN SILENT LANGUAGES IN OVERSEAS BUSINESS #1

Source: Hall & Hall (1987)

Silent Language Implications For Marketing & Business

- Appointment scheduling- The importance of being ‘on time’- The importance of deadlines

- Sizes of offices- Conversational differences between people

- The relevance of material possessions- The interest in the latest technology

Time

Space

Things

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THE MAIN SILENT LANGUAGES IN OVERSEAS BUSINESS #2

Silent Language Implications For Marketing & Business

- The significance of trusted friends as social insurance in times of stress and emergency

- Rules of negotiations based on laws, moral practices or informal customs

Friendship

Agreements

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CULTURAL INFLUENCES ON BUYER BEHAVIOUR

Adapted from Jeannete & Hennessey; 2004

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ASSUMPTIONS TO BE QUESTIONED BY INTERNATIONAL MARKETING MANAGERS

• Maslow’s Hierarchy of Needs is consistent across cultures

• The buying process in all countries is an individualistic activity

• Social institutions and local conventions are similar across cultures

• The consumer buying process is consistent across cultures– consumer involvement– perceived risk– cognitive style

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ELIMINATINGSELF–REFERENCE CRITERIA

• Define in terms of home country cultural traits, habits and norms

• Define in terms of foreign cultural traits, habits and norms

• Isolate and analyse SRC influences and see how if effects the problem

• Redefine the problem without the SRC influence

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THE CONTEXTUAL CONTINUUM OF DIFFERING CULTURES

Source: Usiner et al (2005))

SwissGermans

ScandinaviansNorth Americans

English

Italians/Spanish

Latin Americans

Arabs

Japanese

Low

Context

High

ImplicitExplicit Messages

French

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HOFSTEDE’S CRITERIA (2001)

• Individualism– Affects the way people live together

• Power distance– Dealing with human inequality

• Uncertainty avoidance– Managing future uncertainty

• Masculinity– Male / female stereotyping

• Confucian dynamism– Universalistic or particularistic

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POWER DISTANCE/INDIVIDUALISM DIMENSIONS ACROSS CULTURES

Source: Hofstede (2003)

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COMMUNICATION TYPOLOGIES

• Direct vs Indirect– Degree of explicitness of verbal messages

• Elaborate vs Succinct– Quantity of talk people feel comfy with

• Personal vs Contextual– The role of speaker and relationships

• Instrumental vs Affective– The orientation of the speaker

Gudykunst et al; 2005

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LINEAR MODEL OF THE NEGOTIATION PROCESS

Non-task discussion

Task-related exchange of information

Persuasion

Concession and agreement

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MINIMISING CULTURAL IMPACTIN NEGOTIATIONS

• Adaptation– Demonstrate awareness of cultural differences

• Interpreters– Influence meaning

• Cultural Blocks– Not everything translates

• Stereotype– Important to avoid

• Inter-cultural preparation

Source: Usiner and Lee (2005)