International Marketing

1
International Marketing

• Tim Beal
• Lecture 3
• 20 March 2001

2
Today

• Housekeeping
• The political framework of the global economy
• Changing social fabric

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Housekeeping

• Tutorials start this week
• Two new tutorial slots
• Tues 3
• Fri 10
• sign up today
• Two cancelled
• Tues 6, Weds 5

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Reader

• Vol I reprint should be available
• Vol II should be sufficient copies

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Last week

• Globalisation and the global economy
• Move from local/national economies to borderless
  economy
• Theory comparative advantage
• Reader has much information on growth of world
  economy

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Globalisation

• Great growth in world trade and income
• liberalisation of global economy
• discussing this week
• falling transport and communication costs
• mobility of capital, technology, products
• relative immobility of labour
• Creation of dynamic and volatile global markets

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Dynamic and volatile global markets

• Demand Societies becoming
• richer and less self-sufficient
• changing society and lifestyles
• Supply
• new products eg TVs, computers
• old products now available globally eg tourism,
  out of season fruit
• IM constantly combining continuity with change

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The Political Framework

• Why is it important to IM?
• NZ trade policy
• Trading blocs
• APEC, CER, NZ-Singapore CEP
• Organisations
• WTO
• Issues
• SPS, Dumping..Globalisation itself

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Why is politics important?

• Politics can prohibit trade
• US sanctions and embargoes on Iraq, North Korea,
  Cuba
• Politics can restrain trade
• US controls on advanced computers to China
• Australian restrictions on NZ apples (SPS)
• US and EU restrictions on agricultural imports to
  protect local industry
• NZ restrictions on Korean whiteware to protect
  local industry

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Restraintgtliberalisation and facilitation

• Governments can restrict trade
• military, local interest groups, economic (eg
  trade balance)
• Governments can also liberalise trade
• remove restrictions
• Governments can facilitate trade
• incentives/support for
• exporters
• foreign investors
• importers (eg Japan)

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NZ Trade Policy Strategy

• Consistency
• Bolgers speech shows consistency between
  National and Labor Governments
• Labour will be more proactive, and less will to
  liberalise unilaterally, but trade policy is
  unchanged
• Goal of NZ trade policy?
• to achieve sustainable economic growth through
  trade
• objective of free and open trade
• four inter-related policy tracks

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4 Policy tracks

• open and outward-looking domestic economic
  policies
• bilateral relations with individual trading
  partners
• eg CER with Australia
• interaction with regional economic groupings
• APEC, NAFTA, EU, AFTA, MERCOSUR
• Multilateral system

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Multilateral system

• support for a strong multilateral trading system
  which can open the way for freer trade and
  investment and protect the interests of small
  countries like New Zealand who are global traders
  
• GATT, WTO

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FTAs

• Free Trade Agreements (Areas)
• bilateral or regional
• three aspects
• complementarity
• competition
• externalities

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CER

• Australia New Zealand Closer Economic Relations
  Trade Agreement (ANCERTA)
• Aim to create a WTO-consistent free trade area
  linking Australia and NZ
• launched 1983
• Greatly enhanced Australia-NZ trade, investment,
  etc

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CER objectives (1-2)

• to strengthen the broader relationship between
  Australia and New Zealand
• to develop closer economic relations between
  Australia and New Zealand through a mutually
  beneficial expansion of free trade between the
  two countries

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CER objectives(3-4)

• to eliminate barriers to trade between Australia
  and New Zealand in a gradual and progressive
  manner under an agreed timetable and with a
  minimum of disruption and
• to develop trade between New Zealand and
  Australia under conditions of fair competition

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CER - three reviews

• No 1 - accelerated so that June 1990 all tariffs
  and restricts on goods meeting rules of origin
  eliminated
• No 2 - widened to include services
• open skies still not achieved
• No 3 - harmonise non-tariff measures
• eg quarantine and customs, standards, business
  law
• but NZ apples still barred how?

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Permitted exceptions include

• protection of essential security interests
• protection of public morals and prevention of
  disorder or crime
• protection of human, animal or plant life or
  health
• NZ complains that Australia (and other countries)
  use Phytosanitary Measures as a non-tariff
  barrier
• fire blight case in point

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Rules of origin

• only goods considered to originate in the Free
  Trade Area are exempt from any tariffs or
  quantitative restrictions, rules to determine the
  origin of particular goods are necessary
• Similar rules apply elsewhere, eg EU
• important issue, because with globalisation few
  goods are made exclusively in one country
• So where you can sell goods (and price) may hinge
  on where they are judged to originate from

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Minimum requirements

• the last process of manufacture should have
  occurred in Australia or New Zealand and
• at least one half of the factory or works costs
  of the goods should be made up from expenditure
  on any of
• materials originating in the Area
• labour and factory overheads incurred in the
  Area and
• inner containers originating in the Area.

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NZ Singapore CEP

• CEP Closer Economic Partnership

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Complementarity and competition

• NZ and Singapore highly complementary
• What we export, they import what they export, we
  import
• NZ agriculture, forestry, horticulture, meat and
  dairy products
• Singapore trading and financial services,
  manufacturing - no agriculture
• few areas of competition

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Externalities

• Singapore gateway to
• ASEAN Free Trade Area (AFTA)
• Asia

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APEC

• Asia Pacific Economic Co-operation
• 1989
• Australian initiative took off with Clintons
  hosting of Blake Island summit 1993
• Asia Pacific?
• Original members North America, Australasia, some
  East and Southeast Asia

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APEC grows

• Brings together China (PRC) and Taiwan - Chinese
  Taipei
• Broad grouping - Peru, Vietnam, Russia
• India one day?
• 21 members
• Combined GDP of 18 trillion (1999)
• 44 of global trade
• Small secretariat
• Series of meetings at various levels

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Meetings

• Leaders Meetings (politicians)
• Senior Officials Meetings
• APEC Business Advisory Council (ABAC)
• other committees, working groups, etc

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APEC objectives

• Free and open trade and investment in Asia
  Pacific
• 2010 for developed countries
• 2020 for developing countries
• Non-discriminatory
• complements other liberalisation mechanisms
• GATT/WTO

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Does APEC have a future?

• Liberalisation process slowing down
• opposition from Japan, etc
• Effect of Asian financial crisis
• More emphasis on capacity building measures
• ie improving capacity to trade rather than
  removing barriers to trade
• Shanghai meeting in October
• Bush is scheduled to attend, probably will have
  state visit of China afterwards
• Seen as make or break meeting

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NZ and APEC

• Complementarities
• high with Japan, China, Korea
• Competition
• high with Australia, Chile
• Externalities
• opportunity for NZ leaders (political, official,
  business) to meet counterparts
• eg US President
• provides forum for wide ranging trade discussion
  with many of our most important trading partners

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Multilateral liberalisation

• Bilateral (Australia, Singapore)
• Regional (APEC)
• gtgtMultilateral
• GATTgtgtWTO

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GATT and WTO

• General Agreement on Tariffs and Trade,
• founded 1948
• Designed to keep global economy open
• Prevent return to protectionism of 1930s
• refer to extract from World Economy in 1.2 (trade
  promotes growth)
• GATT sole multilateral body for international
  trade before WTO in 1995

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GATT rounds

• GATT was series of rounds of negotiations
• 1st led to 45000 tariff concessions
• GATT membership grew and negotiations became more
  complex
• World trade grew faster than economy partly
  because of GATT
• cheaper transportation, communications, etc

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Uruguay Round

• 1980s...mid-nineties
• Uruguay Round tackled three basic barriers to
  trade
• Tariffs
• Non-tariff barriers
• wider policy measures (eg harmonisation)

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Tariffs

• 1947 average tariffs were 40
• after UR
• industrialised countries 5 gt3.5
• EU 6.8 gt 4.1
• US 6.6 gt3.4
• Some industries in some countries tariffs
  abolished
• EU 40 of all imports are duty free

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Non-tariff barriers (NTB)

• Disguised barrier to trade
• Countries seldom admit to NTB - happens elsewhere
• Often have good reason
• eg to protect domestic crops from fire blight
• As tariffs have fallen NTB have become more
  prevalent

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Varieties of NTB

• quotas and voluntary export restraints
• US impose on Japan
• Discriminatory government procurement policies
• Customs procedures
• validation, documentation, etc
• Sanitary and Phytosanitary measures
• health of animals, plants

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Varieties of NTB

• Standards and regulations
• packaging, labelling, emission controls, etc.

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World Trade Organisation

• established 1 January 1995
• 126 members
• Chinese access major issue
• Aims to continue liberalisation of world trade

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WTOs 3 aims

• to help trade flow as freely as possible
• produce transparent and predictable rules via
  trade negotiations
• dispute settlement
• eg Australia/NZ access to US market
• 167 cases 1995-99

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WTO today

• Failure in Seattle
• Mike Moore and WTO making determined effort to
  sell free trade

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The future

• NTB will not go away
• Disputes will continue
• Legitimate concerns about liberalisation of
  global trade
• GM trade going to be major issue in coming years
• under WTO rules governments cannot prevent it

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Issues

• SPS
• foot and mouth
• BSE mad cow disease
• CWD chronic wasting disease (mad deer disease)
• Fireblight (Aus), codling moth(Japan)
• Dumping
• Fisher and Paykel and Korean whiteware
• articles in reader, on coursepage

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The BIG issue

• Is globalisation GOOD or BAD?
• Is it stoppable or changeable?
• How can the opportunities be realised, the
  negative effects minamised?
• etc. etc.
• articles in reader

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Trade policy and globalisation issues

• Debate on trade policy and globalisation will
  continue to have great impact on IM
• Marketers need to monitor what is going on
• Market access does not guarantee market success
• market access is necessary but not sufficient
• IM needs knowledge about markets and products to
  satisfy them

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Changing social fabric

• Marketing takes place within society
• Consumer behaviour course discussed interact
  between individual CB and social environment
• families, reference groups, lifestyle changes,
  attitudes
• What happens in a particular society (eg NZ)
  happens globally
• extremely complex manner

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Three examples

• immigration
• aging society
• changing (globalising) tastes

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Immigration

• Why is it important to IM?
• The Germans live in Germany, the Romans live in
  Rome, the Turkeys live in Turkey, but the English
  live at home.'
• 1909 nursery rhyme
• quoted in Reader 2.1 on culture
• 2 problems
• assumption that own cultural vales (products) are
  norm to which other should adapt.
• do they live there any more?

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Home is where I lay my head

• Germans, Italians, and English live around the
  world (inc NZ), many Turks live in Germany
• old identification of a country with an
  ethnic/cultural group is becoming increasingly
  invalid
• in many countries immigration is main social
  trend
• eg in Reader 1.4.1
• in Britain immigration much more important than
  natural population growth
• consequences for ethnic mix and age structure
• Write down some consequences

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Immigration

• on increase in EU, USA, etc.
• creation of multiethnic societies
• write down some marketing implications of changes
  in ethic composition
• Tourism has somewhat similar effects
• 700 million international tourism arrivals in
  2000
• in many countries a large part of the market is
  made up of permanent or temporary foreigners
• eg Chinas tourism market is important for NZ
  exports
• they want to eat familiar foods

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Ageing society

• part of general issue of changing age structure
  in societies
• why is age structure important for marketing?
• population pyramids the case of Japan
• Japan is foremost example of aging society
• http//www.vuw.ac.nz/caplabtb/m302w01/Japan_pop_p
  yramid.gif

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Japans ageing society

• implications for NZ?

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Globalisation of tastes

• Reader 1.4 the case of McDonalds
• epitome of globalisation few countries where
  they yet to penetrate (Afghanistan? North Korea,
  but perhaps soon)
• Who hasnt had a Big Mac?
• other examples Coke, Pepsi, jeans.
• Often connected with American cultural hegemony
• but other things move as well
• Chinese food, Italian foodetc

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Transmitted by

• media (films, TV) (images)
• migration, tourism..(people)
• Companies themselves ..IM programmes
• result is that tastes do change and can be changed

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Change

• Change is the key word
• Societies are changing around the world
• getting older, better educated, more aware of
  global trends
• Some products are facing shrinking markets
• Generating demand for new products marketed in
  new ways
• marketing strategies need to be constantly
  reexamined

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Programme

• Today
• Political framework of globalisation
• Changes in society
• Next week visiting speakers
• Joe Stafford on wine industry
• Janet Keilar and Virginia Earle on getting
  marketing information
• Following week Internet
• Tutorials start this week