Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.1 Global Marketing Management, 4e Chapter 2-3 Global Economic/Financial Environment

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.2 Chapter Overview 1. Intertwined World Economy(p.34(1)-p.37(2)) 2. Country Competitiveness(p.38(1)-p.40(2)) 3. Evolution of Cooperative Global Trade Agreements(p.55(5)-p.61(1)) 4. Regional Economic Arrangements(p.64(2)-p.68(1)) 5. Multinational Corporations(p.68(2)-p.69(2)) 6. Ch.3, p.107 : Case 3-1 Samsung’s Survival of the Asian Financial Crisis

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.3 1. Intertwined World Economy ( 세계경제의 상호연관성 )

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.4 1. Intertwined World Economy  The larger the country’s domestic economy, the less dependent it tends to be on exports and imports relative to its GDP( 국내 경제규모가 클 수록 국내총생산대비 수출입 의존도는 낮아짐 ).  Intertwining of economies by the process of specialization due to international trade leads to job creation in both the exporting and importing country ( 국제무역에 따른 분업과정에 의한 경제의 상호연계성으로 수출국 및 수입국의 고용창출 ).  Foreign direct investment (FDI) involves investment in manufacturing and service facilities in a foreign country( 해외직접투자는 해외에 제조 및 서비스 시설을 투자하는 것임 ).

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.5 1. Intertwined World Economy  As firms invest in manufacturing and distribution facilities outside their home countries to expand into new markets around the world, they have added to the stock of foreign direct investment.  The increase in foreign direct investment has also been promoted by the efforts of many national governments to woo multinationals.  Portfolio investment or indirect investment refers to investments in foreign countries that are withdrawable at short notice, such as investments in foreign stocks and bonds.

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.6 1. Intertwined World Economy 해외직접투자 유입액 ( )

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.7 1. Intertwined World Economy  The weekly volume of international trade in currencies(1 주일 국제 외환거래 규모 ) exceeds the annual value of the trade in goods and services( 연간 재화 및 서비스 교역 금액 ).  All nations with even partially convertible currencies are exposed to the fluctuations in the currency markets( 부분적으로 태환이 가능한 통화를 갖는 국가들도 외환시장 변동에 노출 ).  A rise in the value of the local currencies make exports more expensive( 현지 통화 가치 상승은 수출가격 인상으로 이어짐 ); a rising currency value also deters foreign investment in a country and may encourage outflow of investment( 한 국가의 통화가치가 상승하면 외국인투자가 감소하고 투자유출은 증가 ).

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.8 1. Intertwined World Economy  Examples of severe currency fluctuations( 심각한 환율변동 사례 ) are the 1995 Mexican meltdown, and the Asian financial crisis ( ).  Unfortunately, the influence of these short-term money flows( 단기자금흐름의 영향 ) are nowadays far more powerful regarding exchange rates than an investment by a Japanese or German automaker.

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.9 2. Country Competitiveness ( 국가경쟁력 )  Country competitiveness refers to the productiveness of a country, which is represented by its firms’ domestic and international productive capacity( 국가경쟁력이란 일국 기업들의 국내 및 국제적 생산능력으로 표현되는 국가 생산성을 의미 ).  Country competitiveness is not a fixed thing.  The role of human skill resources( 숙련된 인적자원 ) has become increasingly important as a primary determinant of industry and country competitiveness( 산업 및 국가경쟁력의 핵심결정요인 )

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Country Competitiveness  The World Economic Forum’s Global Competitiveness Report of placed two Asian Tigers (Taiwan and Singapore) among the world’s top 10 economies along with Finland, the United States, Sweden, Denmark, Iceland, Switzerland, Norway, and Australia (see Exhibit 2- 4).  Although the United States and Switzerland have been the most innovative in the last three decades, other OECD countries have been increasingly catching up( 따라 잡고 있음 ).

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Country Competitiveness 과제 1: Ranking in “The Global Competitiveness Report ” by WEF. Global Competitiveness Report 2007 – Interview, Michael Porter, Professor, HBS(

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Country Competitiveness

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Evolution of Cooperative Global Trade Agreements  ITO (International Trade Organization: 국제무역기구 ): –ITO was established after World War II ( 미국의회 반대로 실패 ).  GATT (General Agreements on Tariffs & Trade: 관세 및 무역에 관한 일반협정 ): –After 1950, GATT succeeded ITO(1948 년 23 국에 의해 창립된 GATT 가 1950 년 이후 ITO 를 대신함. 협정이었지만 사무국 유지 ). –The main operating principle of GATT was the concept of most favored nations (MFN: 최혜국대우 : 어떤 국가에 특별한 혜택을 주는 것이 아니라 모든 국가를 동등하게 대우한다는 원칙 ). –GATT was successful in lowering trade barriers( 케네디라운드 (64-67, 관세율 평균 35% 인하 ), 동경라운드 (73-79, 비관세장벽 철폐를 위한 협정체결 ), 우루과이라운드 (86-94, 추가적인 관세인하 33%, 비관세장벽 대폭 철폐, 농산물, 서비스, 지재권, 직접투자 등 의제추가 ) 등 8 차의 다자간무역협상을 통해서 무역장벽 완화 ).

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Evolution of Cooperative Global Trade Agreements  WTO (World Trade Organization Trade): –The eighth and last round of GATT talks – called the “Uruguay Round” ( ) established an international body called the WTO which took effect on January 1, 1995( 협상위반 효과적 규제 및 서비스 교역, 투자, 지재권 등 무역환경 복잡화에 대응 ). –As of February 16, 2005, WTO had 148 member countries. –WTO has statutory powers to adjudicate trade disputes among nations ( 국가간 무역분쟁 해결의 법적 권한 보유 ) and has its own secretariat( 사무국 ). –WTO is the new legal and institutional foundation for a multilateral trading system( 다자무역체제의 법적, 제도적 기반 ).

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Evolution of Cooperative Global Trade Agreements  WTO’s ninth round(9 번째 다자간무역협상 --- called the “Doha Development Agenda” ( 도하개발아젠다, Doha Round) was launched in Doha, Qatar in November 2001 (see Exhibit 2-5). Interim deal in December 2005 to end farm export subsidies( 농업수출보조금 ) by 2013 prevented collapse of the latest round of the talks.  The Doha Round of 2001 facilitated the way for China and Taiwan to get full membership in the WTO. 과제 2: 2008 년도 DDA 협상결과 언론보도 요약

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Evolution of Cooperative Global Trade Agreements

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Evolution of Cooperative Global Trade Agreements  Although WTO is a global institutional proponent of free trade, it is not without critics.  The WTO dispute settlement mechanism is faster, more automatic, and less susceptible to blockages( 분쟁해결절차는 무역규범위반에 취약하지 않고 신속하며 자동적으로 적용 ) than the old GATT system.  The WTO Work Program on Electronic Commerce is in the process of defining the trade-related aspects of electronic commerce that would fall under the parameters of WTO mandates(WTO 논의주제가 될 수 있는 전자상거래의 무역관련 측면 정의작업 진행 ).

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Regional Economic Arrangements( 지역경제통합 )  An evolving trend in international economic activity is the formation of multinational trading blocs( 지역경제통합체의 형성 ).  There are over 120 regional free trade areas worldwide(120 개 이상의 지역무역협정 ).  Market groups take many forms, depending on the degree of cooperation and inter-relationships, which lead to different levels of integration among the participating countries.

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Regional Economic Arrangements  Types of Regional Economic Arrangements: –Free Trade Areas( 자유무역지역 ): Formal agreement among two or more countries to reduce or eliminate customs duties and nontariff barriers. Examples: NAFTA( 북미자유무역지역 ), MERCOSUR( 남미공동시장 ), CAFTA-DR & FTAA (proposed and currently stalled) –Customs Union( 관세동맹 ): Addition of common external tariffs to the provisions of free trade agreements. Example: ASEAN( 동남아시아국가연합 ).

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Regional Economic Arrangements –Common Market( 공동시장 ): Eliminates all tariffs and other barriers, adopts a common set of external tariffs on nonmembers, and remove all restrictions on the flow of capital and labor among member nations. Example: European Union. –Monetary Union( 통화동맹 ): Represents the fourth level of integration with a single currency among politically independent countries. Example: EU and the euro. –Political Union( 정치동맹 ): Highest level of integration resulting in a political union. Sometimes, countries come together in a loose political union for historical reasons, as in the case of the British Commonwealth which exists as a forum for discussion and common historical ties.

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Multinational Corporations ( 다국적기업 )  The U.S. government defines a multinational corporations (MNC) for statistical purposes as a company that owns or controls 10 percent or more of the voting securities, or the equivalent, of at least one foreign business enterprise( 해외기업의 의결권 주식 및 동등 유가증권의 최소 10% 이상 보유 또는 통제를 하고 있는 기업 ).  At present, there are 70,000 MNCs with 690,000 affiliates in foreign countries.  MNCs’ total sales exceed $19 trillion.

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Multinational Corporations  Two-thirds of of world trade in goods and services is controlled by multinational companies.  Of the 100 largest economies in the world, 51 are corporations( 전세계 100 대 경제권 중 51 개는 기업임 ).  The sovereignty of nations( 국가주권 ) will perhaps continue to weaken due to multinationals and the increasing integration of economies.

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Multinational Corporations  In 1970, of the 7,000 multinationals identified by the United Nations, more than half were from two countries: the United States and Britain.  By 1995, less than half of the 36,000 multinationals identified by the United Nations came from four countries: the United States, Japan, Germany, and Switzerland.  The nation-state, while considerably weaker than its nineteenth century counterpart, is likely to remain alive and well.

Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc Multinational Corporations  Currently, factors such as currency movements( 외환이동 ), capital surpluses( 자본잉여 ), faster growth rates( 높은 경제성장율 ), and falling trade and investment barriers( 무역투자장벽의 완화 ) have all helped multinationals from other countries join the cross-border fray( 국제무대등장 ).  It is not unusual for a startup firm to become global at its inception. Those firms are known as “born global.”

과제 3: Please, read case 3-1: Samsung’s Survival of the Asian Financial Crisis, and make answers(in Korean) for discussion questions listed at the end of the case. Thank you for your attention!!! – SBL Chapter 2Copyright (c) 2007 John Wiley & Sons, Inc.25