ch.16 Flashcards
(32 cards)
Define globalization
Refers to the increased flow of goods, services, people, technology, capital, information, and ideas around the world; has economic, political, social, cultural, and environmental impacts.
What are the 4 sets of factors used to assess a country’s market?
political
economic
sociocultural
technology
When analysing the political environment, there are 6 factors:
- tariff
- quota
- boycott
- exchange control
- trade agreement
- trade sanction
Explain trade sanctions when analysing the political environment
What is Embargo?
Trade sanctions are penalties or restrictions imposed by one country over another country for importing and exporting of goods, services, and investments.
If a country disapproves of some other country’s actions, it can impose trade sanctions on the other country.
Embargo: prohibits trading with a certain country or specific good by other countries
Explain tariff and quotas when analysing the political environment
What is dumpling
A tariff is a tax levied on a good imported into a country. In most cases, tariffs intend to make imported goods more expensive thus less competitive with domestic products.
- Want to avoid dumpling: The practice of selling a good in a foreign market at a price that is lower than its domestic price or below its cost.
A quota designates the maximum quantity of a product that may be brought into a country during a specified time period.
Explain boycott when analysing the political environment
Pertains to a group’s refusal to deal commercially with an organization to protest against its policies
Explain the exchange control and exchange rate in the analyzing of the political environment.
Exchange control refers to the regulation of a country’s currency exchange rate.
The exchange rate is the measure of how much one currency is worth in relation to another.
Explain trade agreements in the analysis of the political environment.
What is a trading bloc?
A trade agreement is an intergovernmental agreement designed to manage and promote trade activities for specific regions. And a trading bloc consists of those countries that have signed a particular trade agreement.
Ex: The European Union has a Monetary and Trade Union. Membership consists of Western & Eastern European countries
What are the 3 major economic factors a firm needs to look at when conducting an economic analysis of a country’s market?
general economic environment
market size & population growth
real income
What are the 4 measures needed when evaluating the general economic environment.
Gross Domestic Product
Trade surplus or deficit
purchasing power parity
human development index
Explain the human development index (HDI)
A composite measure of three indicators of the quality of life in different countries: life expectancy at birth, educational attainment, and whether the average incomes are sufficient to meet the basic needs of life in that country.
What is the purchasing power parity (PPP)
A theory that states that if the exchange rates of two countries are in equilibrium, a product purchased in one will cost the same in the other, expressed in the same currency.
What is the gross domestic product( GDP)
The market value of the goods and services produced by a country in a year; the most widely used standardized measure of output.
Explain trade surplus or deficit
trade deficit: Results when a country imports more goods than it exports.
trade surplus: Results when a country exports more goods than it imports.
Explain evaluating real income
Firms can make adjustments to an existing product or change the price to meet the unique needs of a particular country market
Explain evaluating market size &population growth
Less developed nations, by and large, are experiencing rapid population growth, while many developed countries are experiencing either zero or negative natural population growth
Why analysing sociocultural factors is important and what are the 6 cultural dimensions
Understanding another’s country’s culture is crucial to the success of any global marketing initiative.
- power distance: willingness to accept social inequality as natural
- Uncertainty avoidance: extend to which society relies on orderliness, consistency
- individualism: perceived obligation to and dependence of groups
- masculinity: the extent to which dominant values are male-oriented
- time orientation: short-versus long-term orientation.
- indulgence: the extent to which society allows for the gratification of fun and enjoyment
Explain the process of analyzing technology and infrastructure capabilities
What are the 4 key elements of infrastucture
A more sophisticated workforce means that a higher proportion of product design, development, and marketing activities can be decentralized to the foreign country.
Infrastructure: The basic facilities, services, and installations needed for a community or society to function, such as transportation and communications systems, water and power lines, and public institutions such as schools, post offices, and prisons.
The 4 key elements of a country's infrastructure are: transportation distribution channels communication systems commercial infrastructure
Choosing a Global Market Entry Strategy
What are the 6 strategies?
The strategies depend on the level of control and risk. Many firms follow a progression in which they begin with less risky strategies to enter their first foreign markets and move to increasingly risky strategies.
(from less control to low risk, to more control and more risk)
1. Exporting
2. Franchising
3. Strategic alliance
4. Joint venture
5. Direct investment
Explain exporting
Producing goods in one country and selling them in another.
This entry strategy requires the least financial risk but also allows for only a limited return to the exporting firm.
Explain franchising
Firms have limited control over market operations. Profits need to be split bt franchisee and franchiser
Explain strategic alliance
A collaborative relationship between independent firms, though the partnering firms do not create an equity partnership; that is, they do not invest in one another.
They are signing a legal contract to do business with each other in the future.
Explain Joint venture
Formed when a firm entering a new market pool its resources with those of a local firm to form a new company in which ownership, control, and profits are shared.
Explain direct investment
When a firm maintains 100 percent ownership of its plants, operation facilities, and offices in a foreign country, often through the formation of wholly owned subsidiaries.
