cesa international business 2.1
Post on 18-Jan-2015
513 Views
Preview:
DESCRIPTION
TRANSCRIPT
Sources of Trade Regulation
GATT and WTO Set up to deal with tariffs and non tariff barriers to
trade Tokyo Round in mid 1970s
Tariff barriers reduced significantly Partial success with non-tariff barrier reduction mainly
due to complexity and sensitivity Uruguay Round – 1986-1993
Challenging problems addressed – technical barriers, trade in services, intellectual property rights, trade in technology etc.
More member countries – 117 Problems of developing countries addressed
WTO formed – meets every 2 years
McGraw-HillMcGraw-Hill © 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Slide 12-2INTERNATIONAL MANAGEMENT 5/e Beamish, Morrison, Inkpen and Rosenzweig
Trade Agreements and Associations U.S. – Canada Free Trade Agreement
Formed January 1988 – world’s largest free trade area
Dispute resolution mechanisms established
NAFTA formed with Mexican representatives
Association of Southeast Asian Nations
ASEAN formed August 1967 with 5 member states, presently has 10 members
Regarded as a loose economic cooperation channel but expected to change, FTA with China expected
Move towards ASEAN FTA
McGraw-HillMcGraw-Hill © 2003 TheMcGraw-Hill Companies, Inc. All rights reserved.Beamish, Morrison, Inkpen and Rosenzweig
Trade Agreements and Associations (contd..) Asia-Pacific Economic Corporation
APEC established 1989, presently has 21 members
Primary vehicle for open trade and economic cooperation
Agreement to develop free trade yet to be reached
ANDEAN and MERCOSUR Composed of South American nations with an objective
of setting a common external tariff
European Union Slow process of European integration
Founded on the principle of supranationality
McGraw-HillMcGraw-Hill © 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Slide 12-4INTERNATIONAL MANAGEMENT 5/e Beamish, Morrison, Inkpen and Rosenzweig
Opportunities and Threats
Threats Government Actions Opportunities
Increase costsReduce ROICompetitive disadvantageIncreased competitionCo-opt
RegulationTaxationExpenditurePrivatizationConsultation
Control competitionCompetitive advantageSubsidies, grants, customerLevel playing fieldInfluence policy
Opportunities and Threats from Government Actions
McGraw-HillMcGraw-Hill © 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Slide 12-5INTERNATIONAL MANAGEMENT 5/e Beamish, Morrison, Inkpen and Rosenzweig
Political Strategy
Essential for a firm to form and implement political strategy
Formulation Objectives Issues Stakeholders (allies, opponents, targets) Position/Case (“public interest”)
Implementation Timing Techniques
Direct (negotiate, litigate) Indirect (advocacy advertising, political contributions)
Vehicles (e.g. coalition, Government Relations department, consultants)
Style (e.g., confrontation or conciliation)
McGraw-Hill
Slide 12-6
NAFTA
1991 1994 1998 2003 2008
Negotiations Started
NAFTA Signed Ratified
I Schedule II Final
Beginnings
• US-Canada auto pact 1965• Canada-USA FTA 1989 First tariff cuts on January 1, 1989. Tariff cuts of different magnitude across sectors. • maquiladoras - employing 1/2 million in 1980s• US proponents of NAFTA
- trade benefits - reduce immigration pressures- prosperity, stability, democracy for Mexico
NAFTA Provisions
General features• elimination of trade barriers
- in 10 years- 15 for special products (e.g. agriculture)
• no common external tariff• restrictive rules of origin
- goods must have “a substantial transformation”- e.g. 60% of autos must be locally made- e.g. textiles must be made from NAFTA yarn
Nafta Specific Features
Investment• national treatment• dispute settlement by international tribunals• exempt – Canadian cultural industriesEnvironment• Commission on Environment• fines or trade sanctions can be imposedSafety valve• pre-NAFTA measures allowed if import surgeTransportation• no barriers eventuallyNo permanent independence• NAFTA functions through meetings of country officials
Nafta Specific Features
Open Previously-Protected Sectors of Economy
Agriculture Energy Textiles Automotive Safeguards to deal with:
Subsidies and Unfair practices Private Commercial & Agricultural Disputes NAFTA Implementation Concerns
Textile
Shock of low-priced textile.
Diversification
More labor-intensive apparel production to Mexico and apparel imports from Mexico include:
U.S. – Mexico relative exchange rates
U.S. FDI flows to Mexico
(explained by relative costs of capital, differential wages and incomes)
Tariff rates levied by Mexico on U.S. exports
Textile
Textile
US: Provides jobs for more than 1.5 million workers.
(8% of domestic industrial workforce).
The industry complex is the largest manufacturing employer in North Carolina, Pennsylvania, Alabama, Virginia, Tennessee, and California.
Textile and apparel firms are often primary employers in rural areas.
Major metropolitan areas include middle Atlantic States and California.
Textile
Focus on non-price factors of competition (Abbott & Bredhal, 1994).
Firm’s strategy (sourcing);
Industry structure;
Quality of products.
Textile
The forces of globalization caused:
Overcapacity of production;
global financial crises;
emerging trade agreements;
changing price of cotton;
cheap imports from Mexico.
U.S. Textile and Apparel Trade with Mexico
0
2000
4000
6000
8000
10000
12000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Year
Mill
ion
$
Textile Exports
Textile Imports
Apparel Exports
Apparel Imports
U.S. Textile and Apparel Trade with Mexico
0
2000
4000
6000
8000
10000
12000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Year
Mill
ion
$
Textile Exports
Textile Imports
Apparel Exports
Apparel Imports
Mexico
United States
Pre-NAFTA Maquilla Networks
TextileMills
U.S. Manufacturer Retailer
U.S.Broker
Assembly Plants(U.S. & Mexican Owned)
Subcontractors
Full-packagenetworks (orders) Assembly networks
(cut parts)
Key
OMJC
Wrangler
Mexico
Aalfs
Wrangler de Mexico
Post-NAFTA Full-Package NetworksRetailer
JC Penney
Marketer ManufacturerU.S.Lead Firms-Retailers-Marketers-Manufactuers
Kentucky-Lajat
Siete Leguas
Libra
Textile Mills
TextileMills
Full-package networks (orders)
Full-package Manufacturers
Joint Ventures/U.S. Subsidiaries
The Gap
Textile Mills
United States
Key
Assembly networks (cut parts)
Assembly Plants/Subcontractors
Table 5
Plants in North Carolina, 1990-2003
0
250
500
750
1000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Textile (For Apparel)
Textile (Non-Apparel)
Apparel
Source: The Employment Security Commision of North Carolina, Employment and Wage Data by Industryhttp://eslmi12.esc.state.nc.us/ew/EWYear.asp?Report=1NAICS codes: 313 (Textile Mills -- Apparel), 314 (Textile Mills -- Non-Apparel), 315 (Apparel Manufacturing)
North Carolina in the Global Economy http://www.soc.duke.edu/NC_GlobalEconomyDuke University, Durham, NC - Fall 2004
Employees in North Carolina, 1990-2003
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Textile (For Apparel)
Textile (Non-Apparel)
Apparel
Source: The Employment Security Commision of North Carolina, Employment and Wage Data by Industryhttp://eslmi12.esc.state.nc.us/ew/EWYear.asp?Report=1NAICS codes: 313 (Textile Mills -- Apparel), 314 (Textile Mills -- Non-Apparel), 315 (Apparel Manufacturing)
North Carolina in the Global Economy http://www.soc.duke.edu/NC_GlobalEconomyDuke University, Durham, NC - Fall 2004
Latino70%
Asian20%
White8%
African American, American Indian, or Two
or more races2%
Am ong As ian sChinese 4 4 %Korean 2 5 %V ietnamese 1 2 %Fi l ipino 7 %
Am ong Lat ino sMe x ican 7 2 %Guatemalan 7.4 %Sal vadoran 7 %
Garment Workers in Los Angeles, by Race
SUPERMARKETS
Economic Integration
Direct Investment
Strategically Alliances/Joint Ventures
Horizontal and Vertical Integration across borders
Similar business practices
Connection of production-marketing- procurement chains
Market 5729 Food and Beverage Retail Stores
No including tiendas
Sales increased 7% 2002 -2003
Floor Space increased 5.4% in 2002, 8.9% 2003
Top 4 retailers invested 233 million 2004 and 300 million 2005
Top 4 Wal-Mart, 9 percent; Soriana, 7 percent Comercial Mexicana, 4.9 percent; Gigante, 3.2 percent
Changes
1. Arrival of Foreign Retail Chains. Wal Mart, Sams, Carrefour, Auchan,
HEB, Safeway.
2. Modernization of domestic supermarket chains.
Changes
5. Decline of average food shopping trips/week (11-12 in 1995 to 7.5 in 1999).
6. Increase in variety and convenience offered to Mexican consumers.
Changes
3. Four fold increase in number of self -service food retail chain stores (1998/1993).
4. Increase on consumers preference of supermarket format. (60% of Mexicans by 1999).
Changes
7. Decline in number and sales of traditional food retail outlets.
8. Aggressive expansion plans of main food retail chains for the next five years (10-15% square feet/year).
9. If pattern continues, in 10-15 years, Mexico would have the same square feet/ capita as the US.
Challenges
1. Regional Distribution Centers (private chains)
2. Less Government-build Wholesale (terminal) markets.
3. Increase in volume, quality and consistency requirements on suppliers. Contract pricing.
4. Shortages on adequate transportation, storage and refrigeration services.
5. Need of enforceable quality grades and standards system.
6. Increased demand for a more diverse, higher quality, value added food supply.
Changing Demand
Mexico Quality/freshness Variety/Novelty Appropriate Packaging Convenience Safety Consumer services Reasonable prices
US Ethic Food Greater variety Multilingual Packaging, Services and marketing
Competitive advantage of modern supermarkets vs. traditional retail outlets
Changing Demand
Mexico Quality/freshness Variety/Novelty Appropriate Packaging Convenience Safety Consumer services Reasonable prices
US Ethic Food Greater variety Multilingual Packaging, Services and marketing
Competitive advantage of modern supermarkets vs. traditional retail outlets
Changing Demand
MexicoShort Supply: Milk powder, poultry, red meat, canned fruits, sugar, cereals and pet
food cannot meet domestic demand (Source: Bancomext). Communication: Supplier, distributor and end-user: cited often by interviewees as one of
the most important components to building a successful distribution network
NOM Norms (Mexican Official Norms)
USSanitary Sanitary needs high, with significant change from state to stateSupply: Fresh Fruit, vegetables (especially tomatoes) are high dollar and
seasonal
Wal-Mart de México, SA de CV Supercenters (89), Supermarkets (48), Clubs (61), Warehouses (162)
Wal-Mart, 62.4%
12,547 360 All major cities
Direct, local distributors; importers
Grupo Gigante, SA de CV Hypermarkets (61), Supermarkets (100), Clubs (3, closing 2/05), Warehouses (52), Gigante USA (8)
Local 2,736 224 All major cities and California
Direct, local distributors; importers
Supermercados Internacionales HEB, SA de CV Hypermarkets (8), Supermarkets (12)
US owned
801 20 Northern Mexico
Direct, local distributors
04/10/23
Typical Mexico Produce Distribution System
Producer Wholesale Market
Public Markets
Grocery Stores
Street markets
Supermarkets
Distribution Centers
Middlemen
04/10/23
International Distribution
US Exporter
US Exporter
US Exporter
04/10/23
Typical US Produce Distribution System
Packer/Shipper
Chain Distribution
CenterSupermarket
Independent WholesalersTerminal Markets
HEB
1997: San Antonio Company. First store opens in Monterrey, NL
1998: Second Store opens in Monterrey
1999: Five stores in Monterrey
2002: 18 stores open in 3 Mexican States
2004: 40 stores projected
HEB
2 Distribution Centers under implementation
30% of Mexican stores sales are IMPORTED
Growing number of “store brands” H-E-B Hill Country Fare EconoMax “Personal Expressions” Tierra Linda (Mexican products) 4% non perishable
Hypermarket
45,000 - 100,000
Almost a full line of merchandise and additional services.
Supermarket
5000 – 45,000
Food items (perishables and dry goods) limited services, pharmacy.
Megamarket
More than 100,000
Full line of merchandise and additional services such as a pharmacy.
Hypermarket
45,000 - 100,000
Almost a full line of merchandise and additional services.
HEB
WalMart
HEB
Highly advertised store brands (20% cheaper)
Processing: bread, tortillas, sodas, ice cream, yogurt, milk etc.
Starting new format “home stores” (Via Hogar)
Texan HEB suppliers exporting indirectly
Walmart
Joint Venture Strategy:
Combined with Cifra.
Concept Adaptation: First Wal Mart Supercenter in Mexico.
Force Competition: Force Mexican Monopolize.
Replicate US Logisitcs.
Introduce Warehouse.
Walmart
Initial Problems. Lack of leverage with Local Suppliers. Inefficient Distribution in Mexico. Merchandise:
Ice Skates. Leaf Blowers. Fishing.
Automated Information System: Auto reorder.
Higher Prices.
04/10/23
Wal Mart Stores In Mexico
0
100
200
300
400
500
600
91 93 94 95 96 97 98 99 0 1 2
04/10/23
Wal Mart Mexico Sales Growth
6.1%4.7%4.8%% Net Profit/Sale
s
17%15%12%SALES GROWTH
RATE
2002*20012000Year
Walmart
Consolidación 1997 WalMex.
Precio bajo Diario.
2do mas grande negocio (Volumen De Ventas).
3ro El patrón más
grande.
485 minoristas, 285 restaurantes.
1997 Consolidation WalMex.
Everyday Low Price.
2nd Largest Company (Sales Volume).
3rd Largest
employer.
485 Retailers, 285 restaurants.
Walmart Bodega Aurerra
Walmart Bodega Aurerra
Walmart Bodega Aurerra
Gigante
Horizontal and Vertical Integration across borders
Market Niche: Mexican Nationals and Ancestry, Mexican Sympathetic.
Product Transfer
Adaptive Corporate Culture and Logistics.
Gigante
3 Billion USD Annual Sales.
475 Stores in 31 States.
20 Stores in US.
Product Promotions.
Adaptive Corporate Culture and Logistics.
Gigante
1994: Strategic Alliance with Radio Shack and Office Depot.
1997: Strategic Alliance with Carrefour.
1999: Stores in San Diego.
2002: Anti Gigante Legislation eliminated in Orange.
2003 Alliance with Comercial Mexico and Soriana.
Gigante
Technology - Cultural Transfer.
Logistics.
Buying.
Marketing.
Cleanliness.
Gigante
Improve Logistics Originally “Seat of the pants” ordering
Inefficiency. Large Margins. Reports on a Weekly Basis.
Modern Logistics 9 Central Distribution Centers. 2000 introduced Data Warehouse. Went from 3 or 4 days to solve query to 15 minutes. Automatic POS transfer. Vendor Data.
Gigante
Collective Buying: Sinergia. Limitend Liability Company.
Target: Bodega Gigante:
Blue Collar. Super G:
High End. Gigante.
Promotion: Redecorating Stores: Beatles month. Classic songs played. Sold Beatles CD's, movies and T-shirts.
Gigante US
7.
Gigante US
Target: Latin. Latin Interested.
Brand: Gigante. Superprecio.
Product: Bimbo. Ariel Detergent. Tampico Juice. Jaritos Soda. Flavored Tortillas. Marinela Bread. Chilis (Variety). Meats. Larger Produce Section.
Gigante US
Buyer Behavior: US Consumer 2.2 visits a week. US Latin Consumer 4.4 visits a week. Latin’s spend 3rd more of income on food. Driving.
Price: For Mexican consumers. 15% below average.
Promotion: 70% name recognition among latinos. Spanish Language. Spanish Adds. Mexican Music.
Gigane US
Opposition: Union:
Hire Spanish Speakers. United Food & Commercial Workers Union. Clerks make 10.79 hr. Union 17.59 hr.
Residents: Anaheim Planning Commission. Liquor Laws.
Vendors: Personal Guarantees.
top related