Business
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IBM-4161_Chapter4.pptxWhich Foreign Markets will be Successful?
Chapter 4
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Which Foreign Markets Will be Successful?
Reactive Market Selection:
Choosing markets that have already demonstrated success for your type of product
Follow competitors into a market
Can be low cost & low risk
Proactive Market Selection:
Market selection based on your own market analysis
Don’t follow what competitors do
Requires more research, but can be more successful
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Identifying your Market
Which foreign markets will be successful for your product?
Talk to people
Industry experts
Get input from customers (they attend trade shows, read trade press)
Visit domestic trade shows (they always have foreign visitors) – visit the booths of foreign competitors
Conduct a global assessment – Research foreign market indicators
Demographic – Characteristics of your market (age, race, population)
Macroeconomic – Economy = inflation, currency stability, economic growth
Government policies – Import controls, tariffs, regulations
Environmental – Weather, geography, & infrastructure
Industry-specific – Structure of your industry, risks, threats, competition
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Trade Barriers
Barriers to trade imposed by governments to protect their local industries.
Tariff Barriers:
Taxes (import duties) applied on imported goods
Ex. The “chicken tax”
Calculated as a percentage of the value of the product
Nontariff Barriers:
Discriminatory barriers, other than import duties, facing imported products & their producers
Quotas
Import licenses
Standards & testing requirements
iPhone in South Korea
Product Labeling
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Forms of Economic Integration
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Economic Integration - Defined
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Free Trade
Tariffs between members are abolished or significantly reduced.
Ex. NAFTA, Mercosur, ASEAN
Customs Union
Eliminates all tariffs among member countries.
Common Market
Factors of production, such a labor and capital, are free to move within member countries.
Economic Union
Monetary and fiscal policies between members are harmonized as well as the use of a common currency.
Political Union
Represents the potentially most advanced form of integration with a common government.
A common tariff policy toward non-member countries is established.
It also implies a level of political integration. Ex. EU (partial)
No political unions formed yet.
Free Trade Agreements
ASEAN - The Association of Southeast Asian Nations
Established on 8 August 1967
Members: Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Laos, Myanmar and Cambodia
Dialog members: Australia, Canada, China, the European Union, India, Japan, the Republic of Korea, New Zealand, the Russian Federation, the United States of America, and the United Nations Development Program
OBJECTIVES
To accelerate the economic growth, social progress and cultural development in the region through joint endeavors in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian nations
To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries in the region and adherence to the principles of the United Nations Charter.
The ASEAN Region:
Population of about 500 million
Total area of 4.5 million square kilometers
Combined gross domestic product of US $737 billion
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Free Trade Agreements
APEC – Asia Pacific Economic Cooperation
Established in 1989 in response to the growing interdependence among Asia-Pacific economies.
Begun as an informal dialogue group, APEC has since become the primary regional vehicle for promoting open trade and practical economic cooperation.
Its goal is to advance Asia-Pacific economic dynamism and sense of community
Members – Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Chinese Taipei (Taiwan), US, Vietnam
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Free Trade Agreements
NAFTA – Canada, USA & Mexico
MERCOSUR – Argentina, Brazil, Paraguay & Uruguay
ALADI – Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Bolivia, & Venezuela
FTAA or ALCA – Goal is to integrate the economies of the Western Hemisphere into a single free trade arrangement.
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The European Union
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
United Kingdom
New Members
Bulgaria
Cyprus
Czech Republic
Estonia
Hungary
Lithuania
Latvia
Malta
Poland
Romania
Slovakia
Slovenia
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EU Expansion
Membership still pending:
Turkey
Ukraine
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Membership Means…
Free movement of:
People/Labor
Goods & Services
Money
Unified view of:
Economic Policy toward foreign states
Economic Policy within EU
Independent view of:
Foreign Policy
Sovereign Governments
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