international marketing chapter 4 the economic environment copyright © 1999 by harcourt brace &...

International Marketing

Chapter 4

The Economic Environment

Copyright © 1999 by Harcourt Brace & Company

All rights reserved. Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt Brace & Company, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777.


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Group of Five - Seven - Ten

United States Britain France Germany Japan

United States Britain France Germany Japan Italy Canada Sweden Netherlands Belgium

United States Britain France Germany Japan Italy Canada


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Market Characteristics

Population Infrastr

ucture

IncomeConsumption Patterns

Foreign Involvement in the Economy


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Regional Economic Integration


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Levels of Economic Integration

Free Trade AreaCustoms UnionCommon MarketEconomic UnionImport Substitution


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Regional Integration


Chapter 5

The Financial Environment


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Credit Policy


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The Credit Policy Allows the Exporter To:

Determine the extent of risk they are willing to absorb.

Explore new ways of financing exports.

Prepare for a changing environment.


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Types of Financial Risk

Commercial risk: Insolvency -Default of Payment

Internal changes in the firm Loss of a key customer Cash flow problems Natural disasters Slow payment by government buyers

Political risk: war, revolution, license,expropriation, confiscation, unwanted regulation, etc.

Foreign exchange risk


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Sources of Financing

Commercial Banks Forfaiting:exporter receives cash at the time of shipment

Factoring: purchase of exporter’s receivables at a discount - Official trade finance

Private sector export trade insurance: Pre-Export Support : Working capital to build inventory - Loans Export Credit Insurance: A competitive advantage -Marketing tool -

Expand Sales

The Export-Import Bank (Ex-Im Bank) :“to aid in financing

and facilitating exports”


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Financial Risk Management


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Problems in assessing a foreign buyers creditworthiness:

Credit reports may not be reliable. Audited reports may not be available. Financial reports may be in a different format. Many governments require that assets be reevaluated upward. Statements are in local currency. Exchange controls may stop conversion of local currency into dollars. Countertrade Debt/equity swap Debt/product swap


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Foreign Exchange Risk

Exchange Rate Fluctuation


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The Foreign Exchange Market

Exchange rate: The price of one currency in terms of another.

Spot market: The price of one currency in terms of another.

Forward market: The currency market on closing contracts for 30,

60, or 90 days. Hedge: Protection against exchange risks.


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The Management of Foreign Exchange Risk

Transaction exposure: Refers to the effect of outstanding contracts (I.e. receivables).

Translation exposure: Exchange risk

Economic exposure: Long term implications in the target market


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Options

Gives the holder the right to buy or sell foreign currency at: a pre-specified price on a pre-specified day


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Futures

An obligation:

to buy a pre-specified currency

at some point in the future

at a pre-specified price


Chapter 6

The International Political and Legal Environment


All rights reserved. Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt Brace & Company, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777.


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Home Country Political and Legal Environment

The Environmental Superfund Intellectual Property Rights Gray MarketEmbargoes and Sanctions : ...government actions

to distort the free flow of trade in goods, services, or ideas for adversarial and political purposes”


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Export Controls

Export control systems Critical commodities list Export license

Determinants for Export Controls National Security Foreign Policy Short Supply Nuclear Nonproliferation

Critical Commodities List Products sensitive to national security Products controlled for other purposes


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Decision Steps in the Export Licensing Process

F or a P articu la r E n d u se?

To a G iven E n d u ser?

To a G iven C ou n try?

S h ou ld a G iven P rod u c t B e E xp orted ?


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A Changed Environment for Export Control

Collapse of the Iron Curtain Export controls have moved from a “strategic balance”

to a ‘tactical balance” approach. The loosening of mutual bonds among allied nations. Increased foreign availability of high technology

products. The speed of change and dissemination of information

and innovation has shifted. Miniaturization of state-of-the-art technology.


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Export Control Problems and Conflicts

Dual use products


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Import Controls

The quota system


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Regulation of International Business Behavior

Boycotts

Antitrust Laws

Corruption


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Boycotts


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Antitrust Laws


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Corruption

The Foreign Corrupt Practices Act in 1977

The 1998 Trade Act

In 1995 the Organization of American States (OAS) condemned bribery

The World Trade Organization put bribery rules on its agenda.


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Host Country Political and Legal Environment

international marketing chapter 4 the economic environment copyright © 1999 by harcourt brace &...

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