MK 3010 1st EditionExam 2 Study Guide Chapter SevenGlobal Marketing1. Globalization= refers to the processes by which goods, services, capital people, information, and ideas flow across nation borders.2. Growth of the global economy: globalization of marketing and production a. Globalization of production= also known as offshoring; refers to manufacturers’ procurement of goods and services from around the globe to take advantage of national differences in the cost and quality of various factors of production (labor, energy, land, capital). b. Offshoring= the practice of basing some of a company's processes or services overseas, so as to take advantage of lower costs.c. General agreement on tariffs and trade (GATT) organization established to lower trade barriers, such as high tariffs on imported goods and restrictions on the numberand types of imported products that of goods across borders.d. World trade organization (WTO)= replaced the GATT in 1994; differs from the GATT inthat WTO is an established institution based in Geneva, Switzerland, instead of simply an agreement; represents the only international organization that deals with the global rules of trade among nations. e. International Monetary fund= established with original general agreement on tariffs and trade (GATT); primary purpose is to promote international monetary cooperation and facilitate the international trade. f. World Bank group= a development bank that provides loans, policy advice, technical assistance, and knowledge sharing services to low and middle income countries in am attempt to reduce poverty in the developing world. 3. Assessing global markets= a. Global Entry strategies - know each type, and know what the risk and level of control is for eacha. Exportingb. Franchisingc. Strategic Allianced. Joint Venturee. Direct Investmenta. 4 components of Country Market Assessmenta. Economic Analysis Using Metricsb. Infrastructure and technologyc. Analyzing Government Actionsd. Analyzing Sociocultural Factorsb. Economic Analysis Using MetricsGeneral economic environmentmarket size and population growthreal incomec. socialcultural analysis. Power distance. Uncertainty avoidance. Individualism. Masculinity. Time orientationd. infrastructure and technology. Transportation. Channels. Communication. Commercee. government actions. tariff. Quota. Boycott. Exchange control. Trade agreementf. What are key metrics that can help analyze the economic environment of a country?. The general economic environment, the market size and population growth rate, and real income.g. What types of government actions should we be concerned about as we evaluate acountry?Tariffs, quotas, boycotts, exchange controls, and trade agreementsh. What are five important cultural dimensions?Cultural Dimensions include power distance, uncertainty avoidance, individualism, masculinity and time orientationi. Trade deficit= results when a country imports more goods than it export.j. Trade surplus= occurs when a country has a higher level of exports than imports. k. Gross national income (GNI)= consists of gdp plus the net income earned from investments aboard.l. Gross domestic product (GDP) defined as the market value of the goods and services produced by a country in a year; the most widely used standardized measure of output. m. Purchasing power parity (PPP)= a theory that states that if the exchange rates of two countries are in equilibrium, a product purchases in one will cost the same in the other, expressed in the same currency. n. Human development index (HDI)= a composite measure of three indicators of the quality of life in different countries: life expectancy at birth, educational attainment,and whether the average income are sufficient to meet the basic needs of life in that country. o. Infrastructure= the basic facilities, services, and installation needed for a community or society to function, such as transportation and communication systems, water andpower lines, and public institutions like school, post officers, and prisons. p. Tariff= a tax levied on a good imported into a country; also called a duty. q. Dumping= the practice of selling a good in a foreign market at a price that is lower than its domestic price or below its cost.r. Quota= designates the maximum quantity of a product that may be brought into a country during a specified time period.s. Boycott= a group’s refusal to deal commercially with some organization to protest against it policies. t. Exchange control= the measure of how much one currency is worth relation to another. u. Trade agreements= intergovernmental agreements designed to manage and promote trade activities for specific regions. v. Trading bloc= consists of those countries that have signed a particular trade agreement. - (NAFT) north America free trade agreement.- (CAFTA) CENRAL AMERICAN FREE TRADE AGREEMENT.- (ASEAN) ASSOCIATION OF SOUTHEAST ASIAN NATIONS. - MERCOSUR= translated from the Spanish, Mercosure means the southern common market. CHOOSING A GLOBAL ENTRY STRATEGYw. Global Entry strategies - know each type, and know what the risk and level of control is for eacha. Exportingb. Franchisingc. Strategic Allianced. Joint Venturee. Direct Investment1. Exporting= producing goods in one country and selling them in another.2. Franchising= a contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchisor.3. Strategic alliance= a collaborative relationship between independent firms, though the partnering firms do not create an equity partnership; that is they do not invest inone another. 4. Join venture= formed when a firm entering a new market pools its resources with those of a local firm to form a new company in which ownership, control, and profits are shared.5. Direct investment= when a firm maintains 100% ownership of its plants, operation facilities, and officers in a foreign country, often through the formation of wholly owned subsidiaries. x. Global product or service strategies=. Sell the same product or service in both the home country market and the host country.. Sell a product or service similar to that sold in the home country but include minor adaptations.. Sell totally new products or services. y. Which entry strategy has the least risk and why?This entry strategy requires the least financial risk but also allows for only a limited return to theexporting firm. Global