ASSIGNMENT – A
Q .1 What do you understand by the term globalization? What are the factors behind the globalization of the automobile Industry?
The worldwide movement toward economic, financial, trade, and communications integration. Globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labour and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately
Globalisation (or globalization) is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities
The term globalization has been increasingly used since the mid-1980s and especially since the mid-1990s. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people, and the dissemination of knowledge. Further, environmental challenges such as climate change, cross-boundary water, air pollution, and over-fishing of the ocean are linked with globalization. Globalizing processes affect and are affected by business and work organization, economics, socio-cultural resources, and the natural environment.
The automotive industry is facing new and pressing challenges. Globalization, individualizations, digitalization and increasing competition are pressing the face of the industry. In addition, increasing safety requirements and voluntary environmental commitments by the automotive industry have also contributed to the changes ahead. Size is no longer a guarantee of success. Only those companies that find new ways to create value will prosper in the future. The purpose of this paper is to present a short overview of the automotive industry today and highlight challenges facing the industry. Based on this perspective, some strategic methodology which enabling them to transform themselves for the competition.
Automobile Industry in India has witnessed a tremendous growth in recent years and is all set to carry on the momentum in the foreseeable future. Indian automobile industry has come a long way since the first car ran on the streets of Bombay in 1898. Today, automobile sector in India is one of the key sectors of the economy in terms of the employment. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher.
Some of the major characteristics of Indian automobile sector are:
- Second largest two-wheeler market in the world.
- Fourth largest commercial vehicle market in the world.
- 11th largest passenger car market in the world
- Expected to become the world´s third largest automobile market by 2030, behind only China and the US.
- India ranks fifth in the production of commercial vehicles. Hyundai Motors ranks second in car production in the world.
Globalization is basically the idea that the world is getting smaller (not literally)
- Technology- the internet obviously brings us together and lets people learn about distant issues the fact that world cultures are now mixing into one international culture (thanks to the internet) is also a part of globalization
- Transport-we can now move stuff (goods) around the world cheaply, meaning people can buy stuff made further away. Separately, the fact that people can now meet others from other countries and keep in touch after brings nations together.
- Economies- money is infinitely more complicated than it was 300 years ago. The fact that people in one country loan money to another country to they can buy something somewhere else shows how connected the world has become. For example, the American housing crisis, largely a national issue, destroyed the global economy because the capital flow in all countries is now intricately connected.
- migration- lots of people now live in places they weren´t born in. they bring their native culture with them when they settle, and they bring their adopted culture back when they leave
Four aspects of the financial system are particularly relevant to the process of globalisation.
1 The creation and supply of money to national economies as we have seen, the financial system currently adopted by all nations is based on fractional reserve banking. Only the existence of permanent debt maintains the money dock in circulation. Modern debt is therefore, in aggregate, un-repayable.
Furthermore, difficulty is experienced in the repayment of individual debts in all four sectors — private, commercial, government and Third World.
2 International trade imbalances
Chapter 4 of Goodbye America! Discussed how, at Bretton Woods, the American delegation insisted that nations with a trade surplus should not be obliged to spend the revenues they thereby gained back into nations with a trade deficit. As a result, countries are under no obligation to maintain a balance of trade with other nations, and are permitted to seek an indefinite trade surplus. This is a key factor in the pattern of trade we see today.
3 Third World debt
The position of acute debt afflicting the developing nations is one of the main ingredients of globalisation. Multinationals operate in the ‘development gap’ between the poorer nations and the richer nations. Backed up by a large capital base, and negotiating with impoverished nations desperate for any influx of foreign currency, multinationals are able to secure valuable natural resources and labour at rock-bottom prices.
4 The international flow of financial capital
During the 1980s, the industrialised nations undertook extensive ‘deregulation’ of finance, dropping barriers to the outflow of money and seeking to attract inflows of foreign investment. The floodgates to international finance were opened. It was subsequent to this deregulation that international money markets began the switch from 95% trade-related exchanges and 5% financial speculative investment, to the current reversed position of 5% trade-related and 95% speculation.
Q .2 What is culture? What are the different components of culture? Explain why culture of a country might influence the cost of doing business in that country. Illustrate your answer with suitable examples.
The sum of attitudes, custom and beliefs that distinguishes one group of people from another. Culture is transmitted, through language, material objects, ritual, institutions, and art, from one generation to the next.
Components of Culture - are simply parts (ingredients, items, pieces, features) that make up a culture. These components look different in each culture.
There is different way to break down the components of culture - below is one way.
- food - edible source of energy
- clothing - protective covering for the body
- defence - tools and strategies used to protect people from threats
- shelter - structure used to protect people and their belongings
- Education - the way people in a culture learn what they need to know in order to be successful in their culture
- Transportation - the way a culture gets people and goods from one place to another
- Communication - the way a culture shares ideas and messages
- Economy - the way people in a culture get what they need and want
- Technology - manmade tools that make life easier
- Social Structure - who is considered important in a culture and who isn´t
- Beliefs and Traditions - the ideas a culture believes in and the way they celebrate those beliefs
- Rules and Regulations - the rules that maintain order in a culture and the structure that maintains those rules
- Arts & Recreation - the way a culture spends its spare time and expresses itself creatively
Cultures varies from one another and it shares four major components, these are the communication, cognitive, material and behavioural aspects.
Communication components include language and symbols. Through having a language, a group of people interact with one another, socially sharing their thoughts, feelings or ideas to the people with same language
The second major components of culture are the cognitive component. It include Ideas, knowledge and belief, values and accounts
Conceptions that people accepts true. It can originate from experience, faith, tradition, or scientific method. Some examples are as follows:
- Some believe that the soul never dies.
- Meritocracy is a myth.
- Talent is inborn.
Compared to norms, values are more abstract. They refer to ideas which support or justify norms. They are general conceptions of desirable things which people should look for and which will guide human behaviour. They are shared conceptions in a culture of what is considered as good or bad, as worthwhile or unimportant. While beliefs tell us how the world and people in it operate, values are conceptions of how the world should operate and how people should behave. We can consider that norms are derived from values. For example, one of the values of mankind is the preservation of life on earth. From this value, we try to see how we can put this idea in practice and this value can give birth to a number of norms. For example, one is careful while driving, one attends to a person in danger, one does not kill an individual when seeking to repair the harm committed.
The third major component of culture is the behavioural components. Behavioural components is the major components of culture that is concerned about on how we act. It include norms which further categorizes in Mores, laws, folkways and rituals.
Norms guide the behaviour of individuals. Norms can also be considered as a form of social control since those who go against these rules are sanctioned. Some rules, if broken, are severely sanctioned while others tend to have weaker sanctions. Sumner (1960) draws a classification of norms which distinguishes between folkways, mores and laws.
Folkways are about customary ways of behaving and are more of a traditional nature; for example, inviting all neighbours and relatives to one´s marriage ceremony. However, should one not act accordingly, no formal sanction is taken and the sanction itself might be of only minor inconvenience.
Mores refer to must-behaviours or must-not behaviours. Though of a traditional origin, mores are more strictly enforced. In our society, mores refer particularly to religious symbols which, if not observed, lead to strong sanctions. For instance, Muslims avoid eating in restaurants which offer non-halal meat or pork.
When norms are brought to a formal level, we can consider them as the law of the country. Deviation from the law can lead to severe as well as weak sanctions, depending on the nature of the offence committed.
The fourth major component of culture is the material component. This include materials or objects created by humans for practical use or for artistic reasons. These objects are called as “material culture”. Material components serves as an expression of an individual culture.
"Because international business includes people from different cultures, every business ... is subject to cultural challenges"
The cultural environment has influences on some of the other environments:
- the cultural environment strongly influences the labour environment
- and the socio-economic environment
- and the politics of the populace
- which effects the Political / Regulatory / Legal Environment..
The cultural environment is in turn influenced by some of the other environments:
- the economic environment
- is the standard of living comfortable, or stressed
- the technological environment
- how people are able to do things
- do they walk to work, drive
- can they use a phone, access the internet
- the geographic environment
- effects weather
- growing food
- housing and living conditions
- An important aspect of any business is to be able to analyze and evaluate the environment, both internally and externally, in which the business is to operate. The cost of doing business overseas is a concept that is related to evaluating the external environment, where a manager or business owner must consider such elements as “the strengths and weaknesses of suppliers and partners, the availability of additional labor and technology, and the needs of external customers” (Plunkett, Attner, & Allen, 2008).. The analysis is created by stating limitations and available resources in order to develop an idea of the costs and benefits.
- Many countries base their values, morals, and beliefs on their customs, child rearing, and laws. These beliefs and customs influence the manner to which laws are written. Laws are written to protect people from being harmed, promote morality, and ensure justice is carried out. Different countries have different requirements and luxuries of their employees. Some of which affect the hours they can work, healthcare that needs provided, way people look at each other, common American gestures that are offensive overseas, the personal conversations of talking, eagerness to do business, sanctity and timeliness of prayer, propositions of gifts.
- When the culture of an organization, in a foreign country, is expected to conform to the precise business model, of the native organization’s country, is troubling for the business, because they do not understand cultural relativism. In the Wal-Mart example: Wal-Mart failed to realize the importance of employee communication, not being versed in the language, nor understanding the needs of the consumer.
- Another example is in Egypt. Workers will only work 6 hours a day during the holy month of Ramadan. This is not a cultural difference your business could afford to eschew, as it is also the law there. This would affect productivity of any businesses you had there, as well as the timing of business deals
Many countries have different requirements for providing gifts, and etc. Also, many cultures are wary of working with unfamiliar businesses, so money and time would have to be spent in building relationships with them, as well as possibly with an intermediary.
Q .3 critically evaluate the various alternatives available to an organization to enter the foreign market. Give suitable examples to support your answer.
Mode of entry into an international market is the channel which your organization employs to gain entry to a new international market. This lesson considers a number of key alternatives, but recognizes that alternatives are many and diverse. Here you will be consider modes of entry into international markets such as the Internet, Exporting, Licensing, International Agents, International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacture and International Sales Subsidiaries. Finally we consider the Stages of Internationalization.
An organization wishing to "go international" faces three major issues:
- i) Marketing - which countries, which segments, how to manage and implement marketing effort, how to enter - with intermediaries or directly, with what information?
- ii) Sourcing - whether to obtain products, make or buy?
iii) Investment and control - joint venture, global partner, acquisition?
Decisions in the marketing area focus on the value chain (see figure 7.1). The strategy or entry alternatives must ensure that the necessary value chain activities are performed and integrated.
The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations. The e-Marketing space consists of new Internet companies that have emerged as the Internet has developed, as well as those pre-existing companies that now employ e-Marketing approaches as part of their overall marketing plan. For some companies the Internet is an additional channel that enhances or replaces their traditional channel(s). For others the Internet has provided the opportunity for a new online company. More
There are direct and indirect approaches to exporting to other nations. Direct exporting is straightforward. Essentially the organization makes a commitment to market overseas on its own behalf. This gives it greater control over its brand and operations overseas, over an above indirect exporting. On the other hand, if you were to employ a home country agency (i.e. an exporting company from your country - which handles exporting on your behalf) to get your product into an overseas market then you would be exporting indirectly. Examples of indirect exporting include:
- Piggybacking whereby your new product uses the existing distribution and logistics of another business.
- Export Management Houses (EMHs) that act as a bolt on export department for your company. They offer a whole range of bespoke or a la carte services to exporting organizations.
- Consortia are groups of small or medium-sized organizations that group together to market related, or sometimes unrelated products in international markets.
- Trading companies were started when some nations decided that they wished to have overseas colonies. They date back to an imperialist past that some nations might prefer to forget e.g. the British, French, Spanish and Portuguese colonies. Today they exist as mainstream businesses that use traditional business relationships as part of their competitive advantage.
Licensing includes franchising, Turnkey contracts and contract manufacturing.
- Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise.
- Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include Dominos Pizza, Coffee Republic and McDonald´s Restaurants.
Licensing gives the following advantages:
- Good way to start in foreign operations and open the door to low risk manufacturing relationships
· Linkage of parent and receiving partner interests means both get most out of marketing effort
· Capital not tied up in foreign operation and
Options to buy into partner exist or provision to take royalties in stock.
The disadvantages are:
- Limited form of participation - to length of agreement, specific product, process or trademark
· Potential returns from marketing and manufacturing may be lost
Partner develops know-how and so licence is short
Licensees become competitors - overcome by having cross technology transfer deals and
Requires considerable fact finding, planning, investigation and interpretation.
International Agents and International Distributors
Agents are often an early step into international marketing. Put simply, agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country. They rarely take ownership of products, and more commonly take a commission on goods sold. Agents usually represent more than one organization. Agents are a low-cost, but low-control option. If you intend to globalize, make sure that your contract allows you to regain direct control of product. Of course you need to set targets since you never know the level of commitment of your agent. Agents might also represent your competitors - so beware conflicts of interest. They tend to be expensive to recruit, retain and train. Distributors are similar to agents, with the main difference that distributors take ownership of the goods. Therefore they have an incentive to market products and to make a profit from them. Otherwise pros and cons are similar to those of international agents.
Strategic Alliances (SA)
Strategic alliances is a term that describes a whole series of different relationships between companies that market internationally. Sometimes the relationships are between competitors. There are many examples including:
- Shared manufacturing e.g. Toyota Ayago is also marketed as a Citroen and a Peugeot.
- Research and Development (R&D) arrangements.
- Distribution alliances e.g. iPhone was initially marketed by O2 in the United Kingdom.
- Marketing agreements.
Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate.
Joint Ventures (JV)
Joint Ventures tend to be equity-based i.e. a new company is set up with parties owning a proportion of the new business. There are many reasons why companies set up Joint Ventures to assist them to enter a new international market:
- Access to technology, core competences or management skills. For example, Honda´s relationship with Rover in the 1980´s.
- To gain entry to a foreign market. For example, any business wishing to enter China needs to source local Chinese partners.
- Access to distribution channels, manufacturing and R&D are most common forms of Joint Venture.
Joint ventures give the following advantages:
- Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process
- Joint financial strength
- May be only means of entry and
- May be the source of supply for a third country.
They also have disadvantages:
- Partners do not have full control of management
May be impossible to recover capital if need be
Disagreement on third party markets to serve and
Partners may have different views on expected benefits.
Overseas Manufacture or International Sales Subsidiary
A business may decide that none of the other options are as viable as actually owning an overseas manufacturing plant i.e. the organization invests in plant, machinery and labor in the overseas market. This is also known as Foreign Direct Investment (FDI). This can be a new-build, or the company might acquire a current business that has suitable plant etc. Of course you could assemble products in the new plant, and simply export components from the home market (or another country). The key benefit is that your business becomes localized - you manufacture for customers in the market in which you are trading. You also will gain local market knowledge and be able to adapt products and services to the needs of local consumers. The downside is that you take on the risk associated with the local domestic market. An International Sales Subsidiary would be similar, reducing the element of risk, and have the same key benefit of course. However, it acts more like a distributor that is owned by your own company.
Export processing zones (EPZ)
Whilst not strictly speaking an entry-strategy, EPZs serve as an "entry" into a market. They are primarily an investment incentive for would be investors but can also provide employment for the host country and the transfer of skills as well as provide a base for the flow of goods in and out of the country. One of the best examples is the Mauritian EPZ, founded in the 1970s
Q .4 What is PEST analysis? How is it used to evaluate the attractiveness of a foreign market? Explain with the help of relevant examples.
In addition to the industry factors that can affect a company´s performance, there are also a number of outside factors that play a role in how successful businesses can be. In order to determine how big a role those external factors play, many organizations conduct a PEST analysis. PEST is an acronym for political, economic, social and technological.
A PEST analysis looks at how those external factors can affect a business´s activities and performance, and it can be used in combination with other tools, like Porter´s five forces and a SWOT analysis, to determine an organization´s overall outlook for success
This factor looks at how government regulations and legal issues affect a business’s chance to be profitable and successful. Issues that must be considered include tax guidelines, political stability, trade regulations, employment laws and safety regulations.
This factor examines the outside economic issues that can play a role in a company´s success. Items that must be looked at include economic growth, exchange, inflation and interest rates, the current business cycle of the country where the company is located in and unemployment policies.
This issue analyzes the demographic and cultural aspects that can help determine whether a business can compete in the current market. These factors help businesses examine consumer needs and what pushes them to make purchases. Among the items that should be examined are country demographics, population growth rates, age distribution, attitudes toward work, lifestyle changes, education and environmental and health consciousness.
This factor takes into consideration the technology issues that impact how an organization brings its product or service to the marketplace. Depending on the technology available, it can make it easier or harder to enter the industry and increase production level. Among the specific items that need to be considered are any new technology advancements, government spending on technology research, the life cycle of current technology, the role of the Internet and any changes to it play and the impact of potential information technology changes.
Expanding the analysis to PESTLE or PESTEL adds:
- Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.
Other factors for the various offshoots include:
- Demographic factors include gender, age, ethnicity, knowledge of languages, disabilities, mobility, home ownership, employment status, religious belief or practice, culture and tradition, living standards and income level.
- Regulatory factors include acts of parliament and associated regulations, international and national standards, local government by-laws, and mechanisms to monitor and ensure compliance with these
To better understand how a PEST analysis should be conducted and the benefits it offers, businesses can examine numerous examples online. The online site Buzzle conducted several PEST Analysis examples, including one for restaurants. It examined the various political, economic, social and technological factors that a potential restaurant owner needs to consider when entering the restaurant industry, including:
- Government regulations regarding hygiene, health and food regulations, food standards, etc.
- Economic policies of government regarding the restaurant industry and running eating joints; these may include licenses, inspections by Health and Food Ministry departments, etc.
- Interest rate would impact the cost of capital, the rate of interest being directly proportionate to the cost of capital.
- Rate of inflation determines the rate of remuneration of employees and directly affects the price of the restaurant´s products. Again, the proportion between the inflation rate and wages/prices is direct.
- Economic trends act as an indicator of the sustenance and profitability of your business in the chosen region and help you in deciding your marketing strategy.
- Eating habits of the people in your chosen business environment may, and certainly will, affect your marketing decisions.
- Ratio of people preferring to eat out regularly.
- A good technical infrastructure would lead to better production, procurement and distribution logistics, resulting in reduced wastage and lower costs.
- Sound technology may be a decisive factor for food technology innovation, better presentation, more effective business marketing, etc
Q .5 Write short notes on any three of the following:-
In economics, "dumping" is a kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production
In international trade, the export by a country or company of a product at a price that is lower in the foreign market than the price charged in the domestic market. As dumping usually involves substantial export volumes of the product, it often has the effect of endangering the financial viability of manufacturers or producers of the product in the importing nation. Dumping is also a colloquial term that refers to the act of offloading a stock with little regard for its price.
While the World Trade Organization reserves judgment on whether dumping is unfair competition, most nations profess to be against the practice. Dumping is legal under World Trade Organization rules unless the foreign country can reliably show the negative effects of the exporting firm on the domestic producers. In order to counter dumping, most nations use tariffs and quotas to protect their domestic industry from the negative effects of predatory pricing.
In an increasingly global economy, consumers in a nation that has been the target of dumping activity may have few qualms about consuming products that have been dumped, as long as they are of comparable quality to local merchandise but are priced much lower. Over time, dumping may have a negative impact on the local economy by driving domestic producers out of business, which would result in job losses and a higher rate of unemployment.
Dumping can be of several types, and the one adopted by a country largely depends upon its objectives and other attend it circumstances.
- Persistent Dumping:
This type of dumping is a continuous, long-term one. Its probability increases when international trade is characterized as in these days] by product differentiation and monopolistic competition.
The reason for its persistence is that no single exporter finds it easy to get out of this pattern of activities. If it tries to do so, it runs the risk of getting competed out of the market. The situation can be remedied only if all the firms take a collective action, but this is highly unlikely.
However, if the foreign-country firm also dumps, the result will be an emergence of two-way trade even though there is no initial difference in the price of the dumped item in the two markets.
It should, however, be noted that reciprocal dumping cannot be sustained under constant or diminishing returns. In contrast, under economies of scale, both countries can gain and trade is sustainable.
- Sporadic Dumping:
It is occasional dumping of a product whereby the seller wants to get rid of surplus stocks or wants to dispose of stock of an older technology item which is being replaced by a newer technology one. It is not aimed at competing rivals right out of the market or capturing the market permanently.
- Predatory Dumping:
This is also a temporary type of dumping. However, as suggested by its name, its purpose is to kill the competition and capture the market by inflicting heavy losses on the competing firms.
This type of dumping carries with it the risk of dragging on for a period longer than planned and, therefore, can be undertaken only by firms with huge resources... In this type of dumping, there is a risk of retaliatory action also.
b).Role of WTO in promoting international trade
The role of WTO in international trade is as stipulated in the Agreement establishing it (Article III of the Agreement establishing WTO) and includes:
1. Facilitating the implementation, administration and operation and furthering the objectives of the agreement establishing it and other Multilateral Trade Agreements and providing the framework for the implementation, administration and operation of the Plurality Trade Agreements. (Article III of the Agreement establishing WTO)
2. Providing the forum for negotiations among its Members concerning their multilateral trade relations in matters dealt with under the agreements in the Annexes to the Agreement setting it up and for the results of such negotiations as may be decided by the Ministerial Conference. (Article III of the Agreement establishing WTO)
3. Administering the Understanding on Rules and Procedures Governing the Settlement of Disputes or the Dispute Settlement Understanding which is Annex 2 to the agreement setting it up. (Article III of the Agreement establishing WTO)
4. Administering the Trade Policy Review Mechanism in Annex 3 of the agreement setting it up. (Article III of the Agreement establishing WTO)
5. Cooperating as appropriate with the International Monetary Fund and the International Bank for Reconstruction and Development [a.k.a. the World Bank] with a view to achieving greater coherence in global economic policy making. (Article III of the Agreement establishing WTO)
This is aimed at building better understanding and coordination between a trade organization like WTO and monetary institutions like IMF and World Bank. It may be said in passing that these are two financial institutions without good reputation with developing countries and that are seen by them to have been recommending economic reforms and structural adjustment programmes that destroy, rather than rebuild, their economies
The Organization, through its Secretariat, implements the decisions and policies approved by its members. This platforms was created in order to assist its member in ensuring the smooth progress of various negotiations and even to ensure the correct application and enforcement of rules concerning international trader. Aside from these, WTO has five (5) main functions, which are the following (WTO, 2013):
a. Trade negotiations
This function covers agreements on goods, as well as services and even intellectual property. Specifically, WTO, through this mandate, deals with ensuring the commitment of every member states to lower their customs tariffs and even other barriers of trade. Of course, these are in sync with the agreements of the members, which are being reviewed regularly.
b. Implementation and monitoring
According to the WTO agreements, its members are required to make their trade policies transparent. This is being done by notifying the WTO on the laws or measures that the members adopt. All of the members of the WTO are required to undergo regular scrutiny of their policies and practices related to trade.
c. Dispute settlement
Even though that WTO has some established procedures and guidelines, there might still come a time when trade quarrels may arise. It is in this light that the members are covered by the Dispute Settlement Understanding, which provide for rules in settling disputes. This usually happens, most especially when a member thinks that their rights under their specific agreements are being violated. The judgments will be made by the appointed independent experts.
d. Building trade capacity
The WTO agreements also have some special provisions concerning developing countries in order to increase opportunities for their trading and supporting them boost their trading capacity. Aside from that, the Organization is also assisting these countries in handling disputes, as well as implementing technical standards. These are being through annual courses offering that aim to develop the countries’ skills and infrastructure requirements.
- International, Global, Multinational and Transnational Corporations
Enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation.
There are four categories of multinational corporations: (1) a multinational, decentralized corporation with strong home country presence, (2) a global, centralized corporation that acquires cost advantage through centralized production wherever cheaper resources are available, (3) an international company that builds on the parent corporation´s technology or R&D, or (4) a transnational enterprise that combines the previous three approaches. According to UN data, some 35,000 companies have direct investment in foreign countries, and the largest 100 of them control about 40 percent of world trade
A multinational corporation (MNC) or multinational enterprise (MNE) are organizations that own or control production or services facilities in one or more countries other than the home country. For example, when a corporation that is registered in more than one country or that has operations in more than one country may be attributed as MNC. Usually, it is a large corporation which both produces and sells goods or services in various countries. It can also be referred to as an international corporation.
They play an important role in globalization. Arguably, the first multinational business organization was the Knights Templar, founded in 1120. After that came the British East India Company in 1600 and then the Dutch East India Company, founded March 20, 1602, which would become the largest company in the world for nearly 200 years.
A transnational corporation (TNC) differs from a traditional MNC in that it does not identify itself with one national home. While traditional MNCs are national companies with foreign subsidiaries, TNCs spread out their operations in many countries sustaining high levels of local responsiveness. An example of a TNC is Nestlé who employ senior executives from many countries and try to make decisions from a global perspective rather than from one centralized headquarters
Q .6 By 2020 we will see emergence of enormous global markets for standardized consumer products. Do you agree with this statement? Justify your answer.
We live in tines chaiactenzed by change and volatility yet as businesses we need to make investment decisions that will equip us to serve markets and consumers as they will be in 10 years and beyond.
By drawn together insights into economic and demographic trends, considerations of finite resources and sustainability and the ever more dramatic impact of technology on our daily lies, it sets out to make some predictions about how our attitudes and patterns of consumpuon with change over the next decade.
The major emerging markets are expected to continue growing rapidly in the next decade, thereby creating a much larger market of middle class consumers.
Consider eight important emerging markets: the four BRICs (Brazil, Russia, India, and China), plus Indonesia, Mexico, Turkey and Vietnam.
The major emerging markets are expected to continue growing rapidly in the next decade, thereby creating a much larger market of middle class consumers.
As countries become more developed, the opportunity for women to become educated increases, thus leading to increased female labour participation. This is taking place now in India, for example. The rise in the number of two- income households then leads to increased demand for the convenience of modem retailing. This also leads to increased demand for products and services that save time, many of which can be sold easily in modern retail stores. Demand increases for processed foods, prepared foods, and meals outside of the home.
As the middle class rises, there is often an increase in the availability of consumer credit In some emerging markets, such as Mexico, banks and retailers have already recognized the profitability of lending small amounts to large numbers of low income consumers. As this takes place, it leads to increased purchases of big ticket items such as electronics furniture, and automobiles.
As the number of automobiles increases rapidly in major emerging markets, lifest,4es can change dramatically. Automobile ownership allows greater freedom in choosing where to shop or be entertained; it enables spending larger amounts on each shopping tflp, and thus allows for less frequent shopping farther from home. Finally it allows for a greater emphasis on entertainment and leisure. As such, it can significantly increase the demand for travel and leisure services.
Middle-class consumers, with discretionary spending power, have the ability to set aside some of their income for future needs such as retirement, healthcare, or children’s education. An increased ability to save leads to increased demand for financial services.
Ready or not Whatever level of awareness they have now, it is highly likely that consumers in the next decade will live more sustainably whether they want to or not. A variety of factors will play a role in this:
The impact of true resourcing costs (for example, the way higher gasoline prices affect transportation costs of raw materials and finished products) will be reflected in the price of products and services, making unsustainable products and services less attractive to consumers.
Awareness and education:
Education can play a significant role in influencing socially acceptable behaviour and thus speed up adoption. Typically once consumers become carbon footprint-educated, they change consumption habits across several categories including choices in food, energy recycling, transportation, clothes, makeup, and electronics. As they adopt more sustainable habits they will, through example or otherwise, pressure friends and family to do the same.
Most consumers will still think of themselves before society and the environment. Implicitly asking, what’s in it for me or my family? However, they are quite likely to change their behaviour if they realize that certain sustainable products, services, or practices benefit them personally in terms of better value, lower price, or health, or that the purchase makes a statement about their identity portraying an image for which they want to be known. For example, consumers might start looking for value in long-term savings like energy efficiency built-to last,” and re-sale value, especially in categories such as consumer electronics, apparel with hand-me-down articles, household white goods, and luxury products, whose high-quality craftsmanship can be considered worthy investments.
Sense of citizenship:
Consumers are not only influenced by messages from companies, governments and social influencers, but also by their membership in a broader social community. Despite self-interest, they identify themselves as citizens of their societies. Therefore, connecting individual choices on sustainability with wider outcomes and making sustainability a social
norm can be powerful strategies for engaging consumers as citizens.
Positive and negative incentives:
External influence in the form of incentives can come in the form of rebates, educed energy bills, and other savings on the purchase of hybrid vehicles and energy-efficient appliances .On the other hand, incentives may also be negative in the sense that local or federal legislation can compel people to recycle by levying fines if they fail to do so.
Once consumers have incorporated sustainability into their lifestyle (e.g., recycling, shopping at local farmers’ markets), it consciously or unconsciously just becomes part of their routine.
Lack of other options:
Many consumers will simply adapt sustainable behaviours as the world around them changes. For example, UK building codes have banned products that use formaldehyde in adhesives. One company has launched a new compostable bag for its snacks that will decompose in weeks in compost. In cases such as these, consumers have no choice but to make “sustainable” purchases.
Communicating, connecting, and socializing
Engaging consumers, whether to adopt more sustainable behaviours or just purchase more products and services, will no longer just be about marketing and communicating to them but will be about connecting and socializing with them. In the last two decades, the Internet and technologies such as mobile devices have truly revolutionized the consumer-focused industries. With e-commerce, companies began selling and marketing directly to consumers. And consumers now have the power of information at their fingertips, literally enabling them to comparison shop and purchase anytime, anywhere, as well as the tools to filter and block unwanted messages.
Social revolution and consumers
However, the true revolution has been the utilization of the Internet to reach out and connect with one another in new, and endlessly increasing, ways. Social media technologies and tools such as Face book, Twitter, and blogs. Have provided consumers with a massive platform for not just communicating information with one another but for interacting and socializing.
Consumers will continue to increasingly expect anytime. Anywhere information. In this regard, mobile communication is likely to be an even larger transformative technology in the future, as it provides independent access to information and is efficient for on- the-go information collection .Consumers will always be on and increasingly expect instant gratification. They will have ever-increasing access to information about companies, products, services, pricing, and availability and will also be instantly aware of problems, recalls, and scandals. They will increasingly expect sales associates’ knowledge to match or exceed theirs — a level that may well exceed the ability of many retailers to educate their staff.
The convergence of economic, demographic, and technological forces discussed in this report will bring about unprecedented changes in consumer behaviour. While there is no crystal ball to help predict exactly how this will play out, it is fairly clear that businesses will need to take a much more active role in shaping the conversation with consumers. Those that do so will in all likelihood be best positioned to seize opportunities in the future. But to accomplish this they will need to engage consumers on several key issues.
Q .7 a) Explain different types of pricing strategies used in international marketing.
Introduction to International Pricing Strategy
If you have a product that is successful in the domestic market, your company already has a pretty good handle on pricing strategy. An international pricing strategy should be considered completely independent of your domestic pricing. The reasons are many – if your company and product are largely unknown outside of the U.S. then you’ll be unable to utilize any kind of goodwill you may have developed and your product may need to be resized, repackaged, and rebranded to maximize its success. Additionally, your cost structure is likely to be different and your prices should take that into account.
Pricing is an important part of brand positioning. At the risk of over-simplifying an enormously complex topic we’ll show you a basic framework that can be used to develop a pricing strategy. The steps are:
- Identify the factors that will affect price
- Determine your short-term and long-term goals
- Select an appropriate pricing model
Let’s look at each of the above steps in further detail.
Costs and Pricing Considerations
Regardless of the target market, every pricing strategy must take into consideration the following:
- Fixed and variable costs of production
- Current demand and projected demand growth
- Regulatory and other legal factors
- Product and company positioning
Preparing a product for international distribution with added export costs requires additional considerations, including:
- Currency and political risks
- Governmental protectionist policies
- Consumer receptivity to foreign goods<