International Marketing Chapter 4 The Economic Environment Copyright © 1999 by Harcourt Brace &...
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Transcript of International Marketing Chapter 4 The Economic Environment Copyright © 1999 by Harcourt Brace &...
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 32887-6777.
Copyright © 1999 by Harcourt Brace & Company
All rights reserved
Group of Five - Seven - Ten
United States Britain France Germany Japan
United States Britain France Germany Japan Italy Canada Sweden Netherlands Belgium
United States Britain France Germany Japan Italy Canada
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Market Characteristics
Population Infrastr
ucture
IncomeConsumption Patterns
Foreign Involvement in the Economy
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Levels of Economic Integration
Free Trade AreaCustoms UnionCommon MarketEconomic UnionImport Substitution
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The Credit Policy Allows the Exporter To:
Determine the extent of risk they are willing to absorb.
Explore new ways of financing exports.
Prepare for a changing environment.
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Types of Financial Risk
Commercial risk: Insolvency -Default of Payment
Internal changes in the firm Loss of a key customer Cash flow problems Natural disasters Slow payment by government buyers
Political risk: war, revolution, license,expropriation, confiscation, unwanted regulation, etc.
Foreign exchange risk
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Sources of Financing
Commercial Banks Forfaiting:exporter receives cash at the time of shipment
Factoring: purchase of exporter’s receivables at a discount - Official trade finance
Private sector export trade insurance: Pre-Export Support : Working capital to build inventory - Loans Export Credit Insurance: A competitive advantage -Marketing tool -
Expand Sales
The Export-Import Bank (Ex-Im Bank) :“to aid in financing
and facilitating exports”
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Problems in assessing a foreign buyers creditworthiness:
Credit reports may not be reliable. Audited reports may not be available. Financial reports may be in a different format. Many governments require that assets be reevaluated upward. Statements are in local currency. Exchange controls may stop conversion of local currency into dollars. Countertrade Debt/equity swap Debt/product swap
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Foreign Exchange Risk
Exchange Rate Fluctuation
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The Foreign Exchange Market
Exchange rate: The price of one currency in terms of another.
Spot market: The price of one currency in terms of another.
Forward market: The currency market on closing contracts for 30,
60, or 90 days. Hedge: Protection against exchange risks.
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The Management of Foreign Exchange Risk
Transaction exposure: Refers to the effect of outstanding contracts (I.e. receivables).
Translation exposure: Exchange risk
Economic exposure: Long term implications in the target market
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Options
Gives the holder the right to buy or sell foreign currency at: a pre-specified price on a pre-specified day
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Futures
An obligation:
to buy a pre-specified currency
at some point in the future
at 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 32887-6777.
Copyright © 1999 by Harcourt Brace & Company
All rights reserved
Home Country Political and Legal Environment
The Environmental Superfund Intellectual Property Rights Gray MarketEmbargoes and Sanctions : ...government actions
to distort the free flow of trade in goods, services, or ideas for adversarial and political purposes”
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Export Controls
Export control systems Critical commodities list Export license
Determinants for Export Controls National Security Foreign Policy Short Supply Nuclear Nonproliferation
Critical Commodities List Products sensitive to national security Products controlled for other purposes
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Decision Steps in the Export Licensing Process
F or a P articu la r E n d u se?
To a G iven E n d u ser?
To a G iven C ou n try?
S h ou ld a G iven P rod u c t B e E xp orted ?
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A Changed Environment for Export Control
Collapse of the Iron Curtain Export controls have moved from a “strategic balance”
to a ‘tactical balance” approach. The loosening of mutual bonds among allied nations. Increased foreign availability of high technology
products. The speed of change and dissemination of information
and innovation has shifted. Miniaturization of state-of-the-art technology.
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Export Control Problems and Conflicts
Dual use products
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Regulation of International Business Behavior
Boycotts
Antitrust Laws
Corruption
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Corruption
The Foreign Corrupt Practices Act in 1977
The 1998 Trade Act
In 1995 the Organization of American States (OAS) condemned bribery
The World Trade Organization put bribery rules on its agenda.
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Host Country Political and Legal Environment
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Political Action and Risk
Political Risk
Ownership Risk
Operating Risk
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Transfer Risk
Expropriation
Confiscation
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The Two Major Legal Systems:
Common Law
Code Law
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The Influencing of Politics and Laws
“When in Rome, do as the Romans do”……..but according to their laws!
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The International Environment
The political relations between countries can have a profound impact on firms trying to do business internationally!