Chapter 2 Study Map Objective Summary The increasing amount of world trade — the flow of goods and..

Chapter 2 Study Map
Objective Summary
The increasing amount of world trade—the flow of goods and services among
countries—may take place through cash, credit payments, or countertrade. A
decision to go global often comes when further domestic growth opportunities
dwindle and the firm perceives likelihood for success in foreign markets as a result
of a competitive advantage. After a firm has decided to go global, they must consider
which markets are most attractive, what market-entry strategy is best, and how to
best develop the marketing mix.
Key Terms
Greenhouse Effect
global warming
Arab Spring
world trade
countertrade
Established by the General Agreement on Tariffs and Trade (GATT) in 1984, the
World Trade Organization with its 161 members seeks to create a single open world
market where trade flows “smoothly, predictably and freely as possible.” Some
governments, however, adopt policies of protectionism with rules designed to give
home companies an advantage. Such policies may include trade quotas, embargoes,
or tariffs that increase the costs of foreign goods. Many countries have banded
Understand the big picture of international marketing and the decisions
firms must make when they consider globalization.
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Explain how international organizations such as the World Trade
Organization (WTO), economic communities, and individual country regulations
facilitate and limit a firm’s opportunities for globalization.
2.2
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together to form economic communities to promote free trade.
Key Terms
General Agreement on Tariffs and Trade (GATT)
World Trade Organization (WTO)
World Bank
International Monetary Fund (IMF)
foreign exchange rate (forex rate)
balance of payments
protectionism
import quotas
embargo
tariffs
economic communities
The economic environment refers to the economic health of a country that may be
gauged by its gross domestic product (GDP), its economic infrastructure, level of
economic development, and stage in the business cycle. Marketers use competitive
intelligence to examine brand, product, and discretionary income competition in the
microenvironment. They also consider the structure of the industry in the
macroenvironment. A country’s political and legal environment includes laws and
regulations that affect business. Marketers must understand any local political
constraints, that is, the prospects for nationalization or expropriation of foreign
holdings, regulations such as local content rules, and labor and human rights
regulations. Because technology can affect every aspect of marketing, marketers
must be knowledgeable about technological changes, often monitoring government
and private research findings. Marketers also examine a country’s sociocultural
environment, including demographics, values, social norms and customs, language,
and ethnocentricity. The ethical environment in some countries can cause problems
for marketers if they do not understand the differences in the ethical perspective on
such things such as honesty. In many least developed and developing countries,
corruption is a major stumbling block for Western businesses. Bribery and extortion
present ethical dilemmas for U.S. companies who must abide by the Foreign Corrupt
Practices Act of 1977 (FCPA)






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Understand how factors in a firm’s external business environment influence
marketing strategies and outcomes in both domestic and global markets.
2.3
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Practices Act of 1977 (FCPA).
Key Terms
least developed country (LDC)
gross domestic product (GDP)
economic infrastructure
level of economic development
standard of living
developing countries
bottom of the pyramid (BOP)
sachet
BRICS countries
developed countries
Group of Seven (G7)
business cycle
competitive intelligence (CI)
discretionary income
product competition
brand competition
monopoly
oligopoly
monopolistic competition
perfect competition
drones
unmanned aerial vehicles (UAVs)
patent
nationalization
expropriation
local content rules
U.S. Generalized System of Preferences (GSP)
demographics
cultural values
collectivist cultures
individualist cultures
social norms
consumer ethnocentrism
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2 4 Explain some of the strategies and tactics that a firm can use to enter global
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Different foreign-market-entry strategies represent varying levels of commitment for
a firm. Exporting of goods entails little commitment but allows little control over
how products are sold. Contractual agreements such as licensing or franchising
allow greater control. With strategic alliances through joint ventures, commitment
increases. Finally, the firm can choose to invest directly by buying an existing
company or starting a foreign subsidiary in the host country. Firms that operate in
two or more countries can choose to standardize their marketing strategies by using
the same approach in all countries or to localize by adopting different strategies for
each market. The firm needs to decide whether to sell an existing product, change
an existing product, or develop a new product. In many cases, the promotional
strategy, the pricing strategy, the place/distribution strategy, and the product itself
must be tailored to fit the needs of consumers in another country.
Key Terms
export merchants
licensing agreement
franchising
strategic alliance
joint venture
straight extension strategy
product adaptation strategy
product invention strategy
backward invention
free trade zones
gray market goods
dumping
Ethical business practices are important in order for the firm to do the best for all
stakeholders and to avoid the consequences of low ethical standards for the firm and
to society. Differing philosophies of ethics provide different results in ethical
decision making. Business ethics, values that guide the firm, are often used to
develop a business code of ethics. Although most marketers do make ethical
d h l f h f f h f
Explain some of the strategies and tactics that a firm can use to enter global
markets.
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2.5 Understand the importance of ethical marketing practices.
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decisions, there are examples of actions that justify some of the criticisms of
marketing. In many countries, bribery and extortion are an accepted way of doing
business.
Key Terms
utilitarian approach
rights approach
fairness or justice approach
common good approach
virtue approach
ethical relativism
business ethics
code of ethics
bribery
extortion
With growing world populations and increasing demand for products, sustainable
business practices are necessary for life in the future. Many firms practice
sustainability when then develop target marketing, product, price,
place/distribution, and promotion strategies designed to protect the environment
and the future of our communities.
Key Terms
green customers
fair trade
locavorism
sustainability metrics




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2.6 Explain the role of sustainability in marketing planning.



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