1. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–1 Chapter 14 Doing business in advanced economies

2. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–2 Lecture plan Definition of advanced economies (AEs) Import markets in ICs – Western Europe; North America; Japan; Australia and New Zealand; newly industrialised economies (NIEA-4) Trade issues in AEs Export marketing aspects Investing in AEs

3. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–3 Features of advanced economies High per capita income and standard of living Market based economic systems; limited government intervention Mature secondary sector; dynamic tertiary sector Rational macroeconomic policies Sophisticated financial systems Well-developed infrastructures Advanced communication networks High-level education and training

4. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–4 Advanced economies as mixed economies Predominance of private sector – domestic firms (small, medium, large) – MNEs Various degrees of government intervention Substantial freedom for markets and MNEs

5. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–5 Government involvement in production of goods and services Government sector: about 1/3 of GDP of ICs + 10% of GDP for government companies Government ownership: electric and telephone utilities; banking, petroleum Australia – about 1/4 of GDP ( >US and UK; <West Europe) Privatisation trends in 1990s

6. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–6 Government involvement in international business OECD: Principle of national treatment for non-nationals (no discrimination against foreign firms). Government control of international trade and investment – tariffs; non-tariff measures; taxes – export support measures

7. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–7 Shares of main groupings in total imports of goods and services of advanced economies (AEs) in 2003 NIEA = Newly Industrialised Asian Economies Source: adapted from WTO, International Trade Statistics 2004

8. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–8 Merchandise import markets in advanced economies (W. Europe, N. America, Japan), U$S billion and %, 2003 Merchandise imports of the Triad (US$5065) – primary products (21.5–41.43%) * food; raw materials; ores and minerals – manufactures (58–78%) * iron and steel * chemicals * other semi-manufactures * machinery and transport equipment (28–46.5%) * textiles * clothing * other consumer goods

9. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–9 Australia and New Zealand’s merchandise imports by source (%), 1990 and 2003 Supplier19902003 North America23.417.0 Latin America1.00.9 Western Europe27.224.4 Africa0.41.1 Central & Eastern Europe0.40.2 Middle East3.42.3 Japan17.912.2 Australia & New Zealand8.59.3 Other Asia17.932.6 Source: adapted from WTO International Trade Statistics 2001, 2004, Table A2

10. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–10 Merchandise imports of NIEAs by source, 2003, US$ billion and % SingaporeTaiwanHong Kong Rep. of Korea Total US$ b. out of which % 127.9 127.2232.5178.8 Asia80.750.758.257.7 W.Europe9.712.012.814.3 N&C America6.216.114.415.0 Middle East1.212.88.28.7 L.America0.52.11.50.4 Africa0.41.32.10.5 Oceania0.83.62.51.9 Rest of the world0.51.50.21.5 Source: adapted from Asian Development Bank statistics, http://www.adb.org

11. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–11 Trade policy issues Free trade agreements Protection policy issues Export marketing issues Cultural differences –US vs Europe –US vs Australia/New Zealand

12. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–12 Export marketing aspects Very competitive markets (local/regional and foreign competition) Intra-MNE trade Sophisticated marketing techniques – market segmentation

13. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–13 Export marketing aspects cont. Price-setting strategies – standard; dual; market-differentiated pricing – ‘gray markets’ (parallel importation) High media spending (e.g. US, Switzerland) – legal differences in advertising Distribution channels tend to be shorter than in developing countries

14. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–14 Advertising expenditure per head ($US) and by medium (%), 2003 USAJapanUKAust- ralia NZHong Kong Sing- apore $US/ Head 522286283264249274293 % of total expenditure TV36.446.131.436.033.134.242.8 Radio13.04.34.29.313.66.37.9 Print42.734.554.849.750.251.342.9 Cinema0.212.61.80.80.50.20.7 Outdoor3.02.46.13.42.67.35.6 Online4.701.80.80.70 Source: adapted from Euromonitor, Global Market Information Database, January 2005

15. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–15 Foreign direct investment in the Triad Increasing concentration (‘the Triad’) 1999–2000 – 80% of global FDI inflows – 78% of global FDI outflows US and EU > inward FDI than Japan – foreign affiliates: 1.5% of total sales in Japan Sectoral shifts since mid 1970s – services up; primary/secondary sectors down – banking: the leading service sector

16. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–16 FDI inflows into Oceania, 1993–2003, $US billion Source: adapted from UNCTAD, World Investment Report, 2004

17. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–17 Investment considerations Political stability Nationalisation; government controls – prices, pollution Economic outlook (e.g. synchronised cycles) Attitude to foreign investment

18. Copyright  2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 14–18 Investment considerations cont. Taxes Incentives Personnel, labour and social considerations Exchange rates Ease of doing business