Chapter 8- Global marketing – Flashcards

class="flashcard__a_text">The General Agreement of Tariffs and Trade benefited everyone getting into multilateral negotiations to reduce tariffs. One negotiation between two countries benefited others, it reduced tariffs to everyone.

GATT obligates each country to accord nondiscrimative, most favored nation treatment to all other contracting parties with respect to tariffs. GATT/WTO allows the formation of customs union, which causes a significant erosion to the MFN principle

a community or society to function. A firm's ability to conduct business in a particular country is in large measure determined by that country's infrastructure Without infrastructure, a country cannot develop • Transportation • Communication • Distribution channel • Commerce

(U.S. received the highest score)/ How much does a culture emphasize collective action (Japan scored high) o Power distance index- How large is the distance between levels of the hierarchy (Mexico scored very high) o Uncertainty avoidance index- how tolerate of risk is a country/ focused on rules and regulations (ex: France) o Masculinity/femininity - How strong are each gender roles on the country • Focuses on male achievement orientation o Time orientation index- How long do companies plan ahead (U.S. scored very low- they have shorter time periods for planning)

to enter a foreign market: • Export- least risk and lowest control (simplest way to enter foreign market).

Take present product with present packaging and then ship it over seas. The minute the package is delivered, you will be paid. However, once that item is delivered to the foreign intermediaries, they can do whatever they want with it (very little control) • Franchising- A little more control with a little more risk. A franchise is a form of licensing (permission that you give to someone else to use your name, recipe, brand, etc in exchange for money).

Most franchises pay a fixed fee (royalty). This is a limited contract. When the contract expires, the franchisee becomes your competitor (a higher risk) • Strategic alliance- More control and more risk. This is an agreement to corporate.

The partners in the alliance remain independent but share recourses (airline alliances). The risk is that the partners have different visions and can separate at any time. Or, if one of the partners is very big, the small partner will not be able to control the market much • Joint venture- Even more control and even more risk. This is classified as a partnership.

Usually two or three companies join to create a third company, which is the third venture. The joint venture exists as a separate company that is owned by the two parent companies. The parents companies share the stock of the joint venture (normally not a 50/50 deal). Risk is that once the joint venture becomes dissolved, the two parent companies become competitors.

• Direct investment- highest risk and most control- This is when you create a foreign company that you fully

own (you can either buy an established company or build it from scratch, which is called a greenfield operation). However, you are now at absolute risk. You are now committed to doing business in that country and subject to any problems happening there