understanding and reaching global consumers and markets 02 22 2013 World trade flows reflect interdependencies among industries World trade flows countries and regions Global perspectives A global perspective on world trade views exports and imports as complementary economic flows o A country s imports affect its exports and imports as the exports of one country increase its national output and income rise which in turn leads to an increase in the demand for imports increased demand for exports of other nations energizes their economic activity resulting in higher national income o which stimulates their demand for imports trade feedback effect imports affect exports and vice versa not all trade involves the exchange of money for goods and services countertrade o the practice of using barter rather than money for making global sales popular with many eastern European nations United States perspectives Gross domestic product GDP country during one year Balance of trade o The monetary value of all goods and services produced in a o The difference between the monetary value of a nations exports and imports When imports exceed exports a deficit results o When a country s exports exceed its imports it incurs a Two important things have happened in U S exports and imports over the past 30 years o First imports have exceeded exports each year indicating that the United States has a continuing balance of trade surplus deficit o Second the volume of both exports and imports has increased dramatically showing why almost every American is significantly affected World trade flows to and from the united states reflected demand and supply interdependencies for goods and services among nations and industries Competitive advantage of nations As companies in many industries find themselves competing against foreign competitors at home government policymakers around the world are increasingly asking why some countries and industries in a country succeeded globally while other lose ground or fail o Four key elements Factor conditions These reflect a nations ability to turn its natural resources education and infrastructure into a competitive advantage Demand conditions These include both the number and sophistication of domestic customer for an industry s product Related and supporting industries Firms and industries seeking leadership in global markets need clusters of world class suppliers that accelerate innovation Company strategy structure and rivalry These factors include the conditions governing the way a nations businesses are organized and managed along with the intensity of domestic competition A firm that succeeds in global markets has first succeeded in intense domestic competition o Hence competitive advantage for global firms grows out of continuous improvement innovation and change Economic espionage o The clandestine collection of trade secrets or proprietary information about competitors Economic espionage act 1996 Makes the heft of trade secrets by foreign entities a federal crime in the united states Marketing in a borderless economic world Four trends in the past decade have significantly influenced the landscape of global marketing o Tend 1 gradual decline of economic protectionism by individual countries nations global customers o Trend 2 formal economic integration and free trade among o Trend 3 global competition among global companies for o Trend 4 emergencies of a networked global market space Decline of economic protectionism Protectionism o The practice of shielding one or more industries within a country s economy from foreign competition through the use of tariffs or quotes The argument for protectionism is that it limits the outsource of jobs protects a nations political security discourages economic dependency on other countries and promotes development of domestic industries Tariffs Quota o A government tax on goods or services entering a country primarily serve to raise prices on imports o A restriction placed on the amount of a product allowed to enter or leave a country Quotas can be mandated for voluntary and may be legislated or negotiated by governments o Import quotas seek to guarantee domestic industries access to certain percentage of their domestic market Every country engages in some for of protectionism o However protectionism has declined over the past 50 years due in large part of the general agreement on tariffs and trade GATT This international treaty intended to limit trade barriers and promote world trade through the reduction of tariffs GATT did not address nontariff trade barriers such quotas and world trade in services which often sparked heated trade disputes between nations o World trade organization WTO 1995 Addresses an array of world trade issues 1530 WTO member countries including the united states which accounts for more than 90 percent of world trade the WTO is a permanent institution that set rules governing trade between its members through panels of trade experts who decide on trade disputes between members and issuing binding decisions rise of economic integration in recent years a number of countries with similar economic goals formed transnational trade groups or signed trade agreements for the purpose of promoting free trade among member nations and enhance their individual economies o examples European Nation North American Free Trade Agreement and the Asian Free Trade Areas European Union labor The European Union consist of 27 member countries that have eliminated most barriers to free flow of goods services capital and The EU creates abundant marketing opportunities because firms do not need to market their products and service on a nation by nation basis o Pan European marketing strategies are possible due to greater uniformity in product and packaging standards Fewer regulatory restrictions on transportation advertising and promotion imposed by countries And removal of most tariffs that affect pricing North American Free Trade Agreement practices The North American Free Trade Agreement lifted many barriers between Canada Mexico and the United Stated and created a marketplace with more than 450 million consumers o NAFTA has stimulated trade flows among member nations as well as cross border retailing manufacturing and investments Asian Free Trade Agreements Although the trade agreements are less formal than those underlying the EU and NAFTA they have reduced tariffs among countries and promoted trade A new reality global