Chapter 14 Doing business in advanced economies
description
Transcript of Chapter 14 Doing business in advanced economies
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 14Doing business in advanced
economies
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
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
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
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
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
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
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$5065)
– primary products (21.5–41.43%)
* food; raw materials; ores and minerals
– manufactures (58–78%)
* iron and steel
* chemicals
* other semi-manufactures
* machinery and transport equipment (28–46.5%)
* textiles
* clothing
* other consumer goods
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
14–9
Australia and New Zealand’s merchandise imports by source (%), 1990 and 2003
Supplier 1990 2003
North America 23.4 17.0
Latin America 1.0 0.9
Western Europe 27.2 24.4
Africa 0.4 1.1
Central & Eastern Europe 0.4 0.2
Middle East 3.4 2.3
Japan 17.9 12.2
Australia & New Zealand 8.5 9.3
Other Asia 17.9 32.6Source: adapted from WTO International Trade Statistics 2001, 2004, Table A2
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
14–10
Merchandise imports of NIEAs by source, 2003, US$ billion and %
Singapore Taiwan Hong Kong
Rep. of Korea
Total US$ b.out of which %
127.9 127.2 232.5 178.8
Asia 80.7 50.7 58.2 57.7
W.Europe 9.7 12.0 12.8 14.3
N&C America 6.2 16.1 14.4 15.0
Middle East 1.2 12.8 8.2 8.7
L.America 0.5 2.1 1.5 0.4
Africa 0.4 1.3 2.1 0.5
Oceania 0.8 3.6 2.5 1.9
Rest of the world
0.5 1.5 0.2 1.5
Source: adapted from Asian Development Bank statistics, http://www.adb.org
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
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
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
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
USA Japan UK Aust-ralia
NZ Hong Kong
Sing-apore
$US/
Head
522 286 283 264 249 274 293
% of total expenditure
TV 36.4 46.1 31.4 36.0 33.1 34.2 42.8
Radio 13.0 4.3 4.2 9.3 13.6 6.3 7.9
Print 42.7 34.5 54.8 49.7 50.2 51.3 42.9
Cinema 0.2 12.6 1.8 0.8 0.5 0.2 0.7
Outdoor 3.0 2.4 6.1 3.4 2.6 7.3 5.6
Online 4.7 0 1.8 0.8 0.7 0Source: adapted from Euromonitor, Global Market Information Database, January 2005
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
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
02468
10121416
US
$ B
illio
n
0.0
1.0
2.0
3.0
4.0
5.0
% o
f wor
ld Australia
New Zealand
CER share
Source: adapted from UNCTAD, World Investment Report, 2004
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
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