International Marketing - Lecture 3

LECTURE 3
INTERNATIONAL MARKETING
Easing Trade Restrictions
• As the Global Marketplace evolves, trading countries have focused
attention to ways of eliminating Tariffs, Quotas and other Trade
Barriers. Two ongoing activities to make trade easier are GATT
(now graduating into WTO) and IMF.
• As the Global Marketplace evolves, trading countries have focused
attention to ways of eliminating Tariffs, Quotas and other Trade
Barriers. Two ongoing activities to make trade easier are GATT
(now graduating into WTO) and IMF.
• Historically, trade treaties have been bilateral, with little attention

given to relationships with other countries. This resulted in a
tendency to raise barriers rather than extend markets and improve
Global Trade. 23 countries signed the original GATT Treaty after
World War II. This was the first attempt at a worldwide Tariff
agreement. Thru’ the Tokyo round of talks in 1979, and Uruguay
round in 1987, this increased to over 100 members.
• Basic Elements of GATT (WTO)
• Trade shall be conducted on a non-discriminatory basis

• Protection to Domestic Industry shall be through a reducing Import

Duty basis and not through Quotas and Sanctions.
• Protection to Domestic Industry shall be through a reducing Import

Duty basis and not through Quotas and Sanctions.
• Consultation shall be the primary method of solving Global Trade

problems.
What Free Trade means to different Industries
• Gainers
• Banks can trade freely, with no Government control.
• Insurance Companies worldwide can sell Policies, even in tightly

closed Markets.
• Movie and Video counterfeiters would be stopped in a lot of South

Asian countries.
• Pharmaceutical imitation would stop.
• Worldwide Software piracy would stop.

• Gainers
• Gainers

closed Markets.
• Gainers

closed Markets.

Asian countries.
• Gainers

closed Markets.

Asian countries.

• Gainers

closed Markets.

Asian countries.
• Worldwide Software piracy would stop.

• Losers
• Losers
• Glassware Tariffs would reduce, threatening 40,000 US jobs.
• Losers
• Textile quotas would go, risking 1,10,000 jobs.

• Losers
• Abolition of Peanut quotas would risk 19,000 farmers’ jobs.

• Losers
• Dairy imports of foreign cheese, presently limited to 1,10,000 tons

would risk 2,40,000 US farmers’ jobs.
• Losers
• Dairy imports of foreign cheese, presently limited to 1,10,000 tons

would risk 2,40,000 US farmers’ jobs.
• Sugar import ceiling would hurt 11,000 beet and cane growers.
• Pressures to GATT (WTO)
• GATT/WTO, are therefore under pressure, even from advanced

countries, for “Dissolution”!!!

• Free international markets, however, help underdeveloped countries

become self sufficient, as well as open up greater markets for the
industrialized nations as the buying power of the developing nations
increase with their industrialization.

• Free international markets, however, help underdeveloped countries

become self sufficient, as well as open up greater markets for the
industrialized nations as the buying power of the developing nations
increase with their industrialization.
• The future of open Global Markets lies with the controlled and globally
Cultural Environment
• Culture is a way of life for a population segment, one
which embodies all kinds of behaviour, developed over
successive generations. It exists with people who have
Values, Institutions and Technology.
• Culture is a way of life for a population segment, one
which embodies all kinds of behaviour, developed over
successive generations. It exists with people who have
Values, Institutions and Technology.
• Realms of Culture:
– European Culture (Christian Culture)
– African Culture (Tribal Culture)
– Indian Subcontinental Culture (Hindu Culture)
– Arab Culture
– Latin American Culture
– Chinese Culture
• Realms of Culture (contd.):
– Language
– Religion
– Agrarian Society
– Industrial Culture
– Language
– Religion
• Cultural Knowledge:
– Factual Knowledge
– Interpretive Knowledge
– Cultural Sensitivity and Tolerance
– Language
– Religion
• Cultural Knowledge:
– Factual Knowledge
– Interpretive Knowledge
– Cultural Sensitivity and Tolerance
• Its not the gift that counts, but how you present it!
Political Environment
• Political Risks confronting a Company
in International Marketing
• Political Risks confronting a Company
• Confiscation (Host Country Government takes away Company’s assets)
• Expropriation (Host Country Government offers some reimbursement for

seized investments)
• Domestication (Host Country Government attempts to transfer control of

foreign investments to national ownership and bring the Company’s
activities in line with National Interest)
• Economic Risks confronting a Company
• Exchange Control (Host Country Government imposes controls over
capital movement to conserve Foreign Exchange)
• Local Control Laws (In addition to restricting Imports of essential supplies
to force local purchase, the Host Country Government can require a portion
of product sold within the country to have local content)
• Import Restrictions (Host Country Government imposes selective
restrictions on import of raw materials, machines and spare parts to force
Companies to buy locally, thus develop Domestic industry)
• Tax Controls (Host Country Government can use taxes as means of
controlling Foreign Investments)
• Price Controls (Host Country Government can impose Price Controls on
essential commodities like food, drugs, gasoline, etc.
• Labour Problems (This does not need further discussion in West Bengal)!
• Factors that determine politically sensitive products
• Is the availability of the product ever subject to important political debates?
• Do other industries depend on the production of the product?
• Is the product considered socially or economically essential?
• Is the product essential to agricultural industries?
• Does the product affect national defence capability?
• Does the product include important components that could be available from local
sources?
• Is there local competition or potential competition from local manufacturers in the near
future?
• Does the product relate to channels of mass communication?
• Is the product primarily service oriented?
• Does the design or use of the product rest on some legal requirement?
• Is the product potentially dangerous to the user?
• Does the product induce a net drain of scarce foreign exchange?

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LECTURE 3

• Historically, trade treaties have been bilateral, with little attention

• Trade shall be conducted on a non-discriminatory basis

• Trade shall be conducted on a non-discriminatory basis

• Protection to Domestic Industry shall be through a reducing Import

• Trade shall be conducted on a non-discriminatory basis

• Protection to Domestic Industry shall be through a reducing Import

• Consultation shall be the primary method of solving Global Trade

• Banks can trade freely, with no Government control.

• Insurance Companies worldwide can sell Policies, even in tightly

• Movie and Video counterfeiters would be stopped in a lot of South

• Pharmaceutical imitation would stop.

• Worldwide Software piracy would stop.

• Banks can trade freely, with no Government control.

• Insurance Companies worldwide can sell Policies, even in tightly

• Banks can trade freely, with no Government control.

• Insurance Companies worldwide can sell Policies, even in tightly

• Movie and Video counterfeiters would be stopped in a lot of South

• Banks can trade freely, with no Government control.

• Insurance Companies worldwide can sell Policies, even in tightly

• Movie and Video counterfeiters would be stopped in a lot of South

• Pharmaceutical imitation would stop.

• Banks can trade freely, with no Government control.

• Insurance Companies worldwide can sell Policies, even in tightly

• Movie and Video counterfeiters would be stopped in a lot of South

• Pharmaceutical imitation would stop.

• Worldwide Software piracy would stop.

• Textile quotas would go, risking 1,10,000 jobs.

• Textile quotas would go, risking 1,10,000 jobs.

• Abolition of Peanut quotas would risk 19,000 farmers’ jobs.

• Textile quotas would go, risking 1,10,000 jobs.

• Abolition of Peanut quotas would risk 19,000 farmers’ jobs.

• Dairy imports of foreign cheese, presently limited to 1,10,000 tons

• Textile quotas would go, risking 1,10,000 jobs.

• Abolition of Peanut quotas would risk 19,000 farmers’ jobs.

• Dairy imports of foreign cheese, presently limited to 1,10,000 tons

• GATT/WTO, are therefore under pressure, even from advanced

• GATT/WTO, are therefore under pressure, even from advanced

• Free international markets, however, help underdeveloped countries

• GATT/WTO, are therefore under pressure, even from advanced

• Free international markets, however, help underdeveloped countries

• Confiscation (Host Country Government takes away Company’s assets)

• Expropriation (Host Country Government offers some reimbursement for

• Domestication (Host Country Government attempts to transfer control of

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