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Chapter economic environment, what you should learn from chapter 2: The benefi ts of international markets, the changing face of U.S. business, the scope of the international marketing task, the importance of the self-reference criterion (SRC) in international marketing, the increasing importance of global awareness, the progression of becoming a global marketer.
GLOBAL MARKETING MANAGEMENT Seventh Edition Chapter PowerPoint Economic Environment MASAAKI KOTABKE | KRISTIAAN HELSEN Chapter Copyright © 2017 John Wiley & Sons, Inc Chapter Overview Intertwined World Economy Country Competitiveness Emerging Economies Evolution of Cooperative Global Trade Agreements Information Technology and the Changing Nature of Competition Regional Economic Arrangements Multinational Corporations Chapter Copyright © 2017 John Wiley & Sons, Inc Introduction In 2008, the annual global merchandise trade amounted to $16.3 trillion From 1997 to 2007, world GDP grew more than 30 percent In the same period, total world exports of merchandise increased by more than 60 percent The World Bank (at the time of this writing) predicted that the global GDP growth would grow 2.9 percent in 2016 and strengthen to 3.1 percent in 2017-18 Chapter Copyright © 2017 John Wiley & Sons, Inc Exhibit 2-1: Growth in the Volume of World Merchandise Trade and GDP, 2007-2014 Chapter Copyright © 2017 John Wiley & Sons, Inc Introduction According to the World Trade Organization (WTO), the top five merchandise exporting countries in 2014 were: China ($2,343 billion) The United States ($1,610 billion) Germany ($1,547 billion) Japan ($710 billion) France ($583 billion) Chapter Copyright © 2017 John Wiley & Sons, Inc Introduction • Collectively, the top nine export nations accounted for nearly half of world merchandise trade in 2014 • The Triad Regions (North America, Western Europe, and Japan) of the world collectively produced nearly 60 percent of world GDP in 2007, down from 78 percent in 2004 Chapter Copyright © 2017 John Wiley & Sons, Inc Introduction • The net result of these factors? – Increased interdependence of countries/economies – Increased competitiveness – Need for firms to keep a constant watch on the international economic environment • Consumers and companies in the U.S and Japan are able to find domestic sources for their needs because of their diversified and extremely large economies Chapter Copyright © 2017 John Wiley & Sons, Inc Intertwined World Economy • Despite the increasingly intertwined world economy, the United States is still relatively more insulated from the global economy than other nations In 2014, the U.S economy was about $17.4 trillion and about 13.4 percent of what Americans consumed was imported in the United States Chapter Copyright © 2017 John Wiley & Sons, Inc Exhibit 2-2: Top 10 Exporters and Importers in World Merchandise Trade, 2014 Chapter Copyright © 2017 John Wiley & Sons, Inc Intertwined World Economy • The larger the country’s domestic economy, the less dependent it tends to be on exports and imports relative to its GDP • Intertwining of economies by the process of specialization due to international trade leads to job creation in both the exporting and importing country • Foreign direct investment (FDI) involves investment in manufacturing and service facilities in a foreign country Chapter Copyright © 2017 John Wiley & Sons, Inc 10 Leading Emerging Economies in 2014 Chapter Copyright © 2017 John Wiley & Sons, Inc 20 Evolution of Cooperative Global Trade Agreements • GATT (General Agreements on Tariffs and Trade): – – – Chapter After 1950, GATT succeeded ITO The main operating principle of GATT is the concept of Normal Trade Relations (NTR) status GATT was successful in lowering trade barriers Copyright © 2017 John Wiley & Sons, Inc 21 Evolution of Cooperative Global Trade Agreements • WTO (World Trade Organization): – – – – Chapter The eighth and last round of GATT talks, called the Uruguay Round (1986-1994), established an international body called the WTO, which took effect on January 1, 1995 As of April 2015, WTO had 161 member countries WTO has statutory powers to adjudicate trade disputes among nations and has its own secretariat WTO is the new legal and institutional foundation for a multilateral trading system Copyright © 2017 John Wiley & Sons, Inc 22 Evolution of Cooperative Global Trade Agreements • WTO’s ninth round -called the “Doha Development Agenda” (Doha Round) was launched in Doha, Qatar in November 2001 (see Exhibit 2-6) Interim deal in December 2005 to end farm export subsidies by 2013 prevented collapse of the latest round of the talks • The Doha Round of 2001 facilitated the way for China and Taiwan to get full membership in the WTO Chapter Copyright © 2017 John Wiley & Sons, Inc 23 Exhibit 2-6: Agenda for the Doha Round Chapter Copyright © 2017 John Wiley & Sons, Inc 24 Evolution of Cooperative Global Trade Agreements • Although WTO is a global institutional proponent of free trade, it is not without critics • The WTO dispute settlement mechanism is faster, more automatic, and less susceptible to blockages than the old GATT system • The WTO Work Program on Electronic Commerce is in the process of defining the trade-related aspects of electronic commerce that would fall under the parameters of WTO mandates Chapter Copyright © 2017 John Wiley & Sons, Inc 25 Information Technology and the Changing Nature of Competition • Information technology and the changing nature of competition have created many challenges for the firms • Over the Internet, any piece of electronically represented intellectual property can be copied • The Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement was concluded as part of the GATT Uruguay Round Update to accord ensuring patent protection does not block developing countries’ access to affordable medicines is the top of the agenda Chapter Copyright © 2017 John Wiley & Sons, Inc 26 Information Technology and the Changing Nature of Competition • Proliferation of E-Commerce and Regulations: Countries’ regulators have not kept pace with the rapid proliferation of international e-commerce and Internet-related activities • In many countries, rules and regulations are vague regarding e-commerce transactions • The United Nations Commission on International Trade Law (UNCITRAL) has formed a Working Group on Electronic Commerce to reexamine these treaties Chapter Copyright © 2017 John Wiley & Sons, Inc 27 Regional Economic Arrangements • An evolving trend in international economic activity is the formation of multinational trading blocs • There are more than 120 regional free trade areas worldwide • Market groups take many forms, depending on the degree of cooperation and inter-relationships, which lead to different levels of integration among the participating countries Chapter Copyright © 2017 John Wiley & Sons, Inc 28 Regional Economic Arrangements • Types of Regional Economic Arrangements: – Free Trade Areas: Formal agreement among two or more countries to reduce or eliminate customs duties and nontariff barriers Examples: NAFTA, CAFTA-DR, EFTA, MERCOSUR, TPP, and FTAA (proposed and currently stalled) – Customs Union: Addition of common external tariffs to the provisions of free trade agreements Example: ASEAN Chapter Copyright © 2017 John Wiley & Sons, Inc 29 Regional Economic Arrangements – Common Market: Eliminates all tariffs and other barriers, adopts a common set of external tariffs on nonmembers, and remove all restrictions on the flow of capital and labor among member nations Example: European Union (EU) – Monetary Union: Represents the fourth level of integration with a single currency among politically independent countries Example: EU and the euro – Political Union: Highest level of integration resulting in a political union Sometimes, countries come together in a loose political union for historical reasons, as in the case of the British Commonwealth which exists asCopyright a forum forWiley discussion and common 30 © 2017 John & Sons, Chapter Inc historical ties Multinational Corporations • The U.S government defines multinational corporations (MNCs) for statistical purposes as companies that own or control 10 percent or more of the voting securities, or the equivalent, of at least foreign business enterprise • The outward FDI stock reached $25.9 trillion in 2014 —a little more than an 11-fold increase since 1990 ($2.3 trillion) Chapter Copyright © 2017 John Wiley & Sons, Inc 31 Multinational Corporations • In 1970, of the 7,000 multinationals identified by the United Nations, more than half were from two countries: the United States and Britain • By 1995, less than half of the 36,000 multinationals identified by the United Nations came from four countries: the United States, Japan, Germany, and Switzerland • The nation-state, while considerably weaker than its nineteenth century counterpart, is likely to remain alive and well Chapter Copyright © 2017 John Wiley & Sons, Inc 32 Exhibit 2-7: Selected Indicators of Foreign Direct Investment and International Production, 1990-2014 Chapter Copyright © 2017 John Wiley & Sons, Inc 33 Multinational Corporations • Currently, factors such as currency movements, capital surpluses, faster growth rates, and falling trade and investment barriers have all helped multinationals from other countries join the crossborder fray • It is not unusual for a start-up firm to become global at its inception Those firms are known as “born global.” Chapter Copyright © 2017 John Wiley & Sons, Inc 34 ... up Chapter Copyright © 20 17 John Wiley & Sons, Inc 16 Exhibit 2- 4: Global Competitiveness Ranking Chapter Copyright © 20 17 John Wiley & Sons, Inc 17 Exhibit 2- 5: Leading Emerging Economies in 20 14... stocks and bonds Chapter Copyright © 20 17 John Wiley & Sons, Inc 11 Exhibit 2- 3: Foreign Direct Investment Inflows, 1995 -2 0 14 Chapter Copyright © 20 17 John Wiley & Sons, Inc 12 Intertwined World... writing) predicted that the global GDP growth would grow 2. 9 percent in 20 16 and strengthen to 3.1 percent in 20 1 7-1 8 Chapter Copyright © 20 17 John Wiley & Sons, Inc Exhibit 2- 1: Growth in the Volume