International Marketing Chapter 4 The Economic Environment Copyright © 1999 by Harcourt Brace & Company All rights reserved. Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt Brace & Company, 6277 Sea Harbor Drive, Orlando, Florida
Copyright © 1999 by Harcourt Brace & Company All rights reserved Group of Five - Seven - Ten zUnited States zBritain zFrance zGermany zJapan zUnited States zBritain zFrance zGermany zJapan zItaly zCanada zSweden zNetherlands zBelgium zUnited States zBritain zFrance zGermany zJapan zItaly zCanada
Copyright © 1999 by Harcourt Brace & Company All rights reserved Market Characteristics Population Infrastructure Income Consumption Patterns Foreign Involvement in the Economy
Copyright © 1999 by Harcourt Brace & Company All rights reserved Regional Economic Integration
Copyright © 1999 by Harcourt Brace & Company All rights reserved Levels of Economic Integration zFree Trade Area zCustoms Union zCommon Market zEconomic Union zImport Substitution
Copyright © 1999 by Harcourt Brace & Company All rights reserved Regional Integration
International Marketing Chapter 5 The Financial Environment
Copyright © 1999 by Harcourt Brace & Company All rights reserved Credit Policy
Copyright © 1999 by Harcourt Brace & Company All rights reserved The Credit Policy Allows the Exporter To: zDetermine the extent of risk they are willing to absorb. zExplore new ways of financing exports. zPrepare for a changing environment.
Copyright © 1999 by Harcourt Brace & Company All rights reserved Types of Financial Risk zCommercial risk: Insolvency -Default of Payment yInternal changes in the firm yLoss of a key customer yCash flow problems yNatural disasters ySlow payment by government buyers zPolitical risk: war, revolution, license,expropriation, confiscation, unwanted regulation, etc. zForeign exchange risk
Copyright © 1999 by Harcourt Brace & Company All rights reserved Sources of Financing yCommercial Banks yForfaiting: exporter receives cash at the time of shipment yFactoring: purchase of exporter’s receivables at a discount - Official trade finance yPrivate sector export trade insurance: xPre-Export Support : Working capital to build inventory - Loans xExport Credit Insurance: A competitive advantage -Marketing tool - Expand Sales yThe Export-Import Bank (Ex-Im Bank) :“to aid in financing and facilitating exports ”
Copyright © 1999 by Harcourt Brace & Company All rights reserved Financial Risk Management
Copyright © 1999 by Harcourt Brace & Company All rights reserved Problems in assessing a foreign buyers creditworthiness: zCredit reports may not be reliable. zAudited reports may not be available. zFinancial reports may be in a different format. zMany governments require that assets be reevaluated upward. zStatements are in local currency. zExchange controls may stop conversion of local currency into dollars. zCountertrade zDebt/equity swap zDebt/product swap
Copyright © 1999 by Harcourt Brace & Company All rights reserved Foreign Exchange Risk zExchange Rate Fluctuation
Copyright © 1999 by Harcourt Brace & Company All rights reserved The Foreign Exchange Market zExchange rate: The price of one currency in terms of another. zSpot market: The price of one currency in terms of another. zForward market: The currency market on closing contracts for 30, 60, or 90 days. zHedge: Protection against exchange risks.
Copyright © 1999 by Harcourt Brace & Company All rights reserved The Management of Foreign Exchange Risk zTransaction exposure: Refers to the effect of outstanding contracts (I.e. receivables). zTranslation exposure: Exchange risk zEconomic exposure: Long term implications in the target market
Copyright © 1999 by Harcourt Brace & Company All rights reserved Options zGives the holder the right to buy or sell foreign currency at: ya pre-specified price yon a pre-specified day
Copyright © 1999 by Harcourt Brace & Company All rights reserved Futures zAn obligation: yto buy a pre-specified currency yat some point in the future yat a pre-specified price
International Marketing Chapter 6 The International Political and Legal Environment Copyright © 1999 by Harcourt Brace & Company All rights reserved. Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt Brace & Company, 6277 Sea Harbor Drive, Orlando, Florida
Copyright © 1999 by Harcourt Brace & Company All rights reserved Home Country Political and Legal Environment z The Environmental Superfund z Intellectual Property Rights z Gray Market zEmbargoes and Sanctions :... government actions to distort the free flow of trade in goods, services, or ideas for adversarial and political purposes”
Copyright © 1999 by Harcourt Brace & Company All rights reserved Export Controls zExport control systems zCritical commodities list z Export license Determinants for Export Controls z National Security z Foreign Policy zShort Supply z Nuclear Nonproliferation Critical Commodities List z Products sensitive to national security zProducts controlled for other purposes
Copyright © 1999 by Harcourt Brace & Company All rights reserved Decision Steps in the Export Licensing Process
Copyright © 1999 by Harcourt Brace & Company All rights reserved A Changed Environment for Export Control z Collapse of the Iron Curtain zExport controls have moved from a “strategic balance” to a ‘tactical balance” approach. zThe loosening of mutual bonds among allied nations. zIncreased foreign availability of high technology products. z The speed of change and dissemination of information and innovation has shifted. z Miniaturization of state-of-the-art technology.
Copyright © 1999 by Harcourt Brace & Company All rights reserved Export Control Problems and Conflicts zDual use products
Copyright © 1999 by Harcourt Brace & Company All rights reserved Import Controls z The quota system
Copyright © 1999 by Harcourt Brace & Company All rights reserved Regulation of International Business Behavior z Boycotts z Antitrust Laws z Corruption
Copyright © 1999 by Harcourt Brace & Company All rights reserved Boycotts
Copyright © 1999 by Harcourt Brace & Company All rights reserved Antitrust Laws
Copyright © 1999 by Harcourt Brace & Company All rights reserved Corruption z The Foreign Corrupt Practices Act in 1977 z The 1998 Trade Act z In 1995 the Organization of American States (OAS) condemned bribery z The World Trade Organization put bribery rules on its agenda.
Copyright © 1999 by Harcourt Brace & Company All rights reserved Host Country Political and Legal Environment
Copyright © 1999 by Harcourt Brace & Company All rights reserved Political Action and Risk z Political Risk z Ownership Risk z Operating Risk
Copyright © 1999 by Harcourt Brace & Company All rights reserved z Transfer Risk z Expropriation z Confiscation
Copyright © 1999 by Harcourt Brace & Company All rights reserved Political Risk
Copyright © 1999 by Harcourt Brace & Company All rights reserved Ownership Risk
Copyright © 1999 by Harcourt Brace & Company All rights reserved Operating Risk
Copyright © 1999 by Harcourt Brace & Company All rights reserved Transfer Risk
Copyright © 1999 by Harcourt Brace & Company All rights reserved Legal Differences and Restraints
Copyright © 1999 by Harcourt Brace & Company All rights reserved The Two Major Legal Systems: z Common Law z Code Law
Copyright © 1999 by Harcourt Brace & Company All rights reserved Common Law
Copyright © 1999 by Harcourt Brace & Company All rights reserved Code Law
Copyright © 1999 by Harcourt Brace & Company All rights reserved Antidumping Laws
Copyright © 1999 by Harcourt Brace & Company All rights reserved The Influencing of Politics and Laws z “When in Rome, do as the Romans do”……..but according to their laws!
Copyright © 1999 by Harcourt Brace & Company All rights reserved The International Environment zThe political relations between countries can have a profound impact on firms trying to do business internationally!
Copyright © 1999 by Harcourt Brace & Company All rights reserved International law