DRIVING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING

1. DRIVING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING Multilateral economic agreements p. 56

2. Multilateral AgreementsNAFTA

3. ASEAN The Association of Southeast Asian Nations, commonly abbreviated ASEAN is a geo-political and economic organization of ten countries located in Southeast Asia, which was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Since then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam. Its aims include the acceleration of economic growth, social progress, cultural development among its members, the protection of the peace and stability of the region, and to provide opportunities for member countries to discuss differences peacefully. ASEAN- Other Countries ASEAN has concluded free trade agreements with PR China, Korea, Japan, Australia, New Zealand and most recently India. The agreement with People's Republic of China created the ASEAN–China Free Trade Area (ACFTA), which went into full effect on January 1, 2010. In addition, ASEAN is currently negotiating a free trade agreement with the European Union.

4. DRIVING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING • Converging market needs & the information revolution

5. Converging market needs & the information revolution

6. Information revolution

7. DRIVING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING Transportation & communication improvements

8. Transportation & Communication improvements

9. DRIVING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING • Product development costs

10. Product development costs Cost of developing a new drug in 1976- $54M Cost of developing a new drug in 2009-$400 Million Such huge investments can be recovered only in global market place. Refer Table 1-10 on Page 58

11. DRIVING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING Quality p. 59

12. Quality Global marketing strategies generate greater opportunities and greater revenue which intern support design and manufacturing quality.

13. DRIVING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING World economic trends

14. World Economic Trends

15. Leverage DRIVING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING

16. Leverage • Global companies possess the unique opportunities to develop leverage. • It means the type of advantage that a company enjoys by virtue of the fact that it has experience in more than one country. • Experience transfer • Scale of Economies • Resource Allocation • Global strategy

17. Leverage: Experience Transfers A global company can leverage its experience in any market in the world. It can draw on management practices, strategies, products, advertising appeals, or sales or promotional ideas that have been tested in actual markets and apply them in other comparable markets. ABB- 1400 subsidiaries in 140 countries. Very famous for running the operations with the minimum number of staff

18. Leverage: Scale of Economies The global company can take advantage of its greater manufacturing volume to obtain traditional scale advantages within a single factory. Also, finished products can be produced by combining components manufactured in scale-efficient plants in different countries. The larger scale of the global company also creates opportunities to improve corporate staff competence and quality.

19. Leverage : Resource Allocation A major strength of the global company is its ability to scan the entire world to identify people, money, and raw materials that will enable it to compete most effectively in world markets. Global companies utilizes the resources where there is the greatest opportunity to serve a need at a profit

20. RESTRAINING FORCES AFFECTING GLOBAL INTEGRATION & GLOBAL MARKETGING Management myopia & Organizational culture Opposition to globalization National controls – (to protect local industries) p. 62

21. Management myopia • Management ignores (will not see) the opportunities to peruse global marketing. • Global marketing does not work without a strong local team that can provide information about the local market conditions.

22. Summary • Global marketing is the process of focusing resources on global marketing opportunities • Goal is to create customer value & competitive advantage by maintaining focus • FOUR classifications of management orientation: ethnocentric, polycentric, regiocentric, geocentric • Global marketing importance is shaped by a variety of driving & restraining forces

23. Looking Ahead to Chapter 2 The global economic environment

24. Introduction • This chapter includes • An overview of the world economy • A survey of economic system types • The stages of market development • The balance of payments

25. The World Economy—An Overview • In the early twentieth century economic integration was at 10%; today it is 50% • EU and NAFTA are very integrated • Global competitors have displaced or absorbed local ones

26. Economic Systems Resource Allocation Market Command Private Resource Ownership State Centrally planned capitalism Market capitalism Market socialism Centrally planned socialism

27. Market Capitalism • Individuals and firms allocate resources • Production resources are privately owned • Driven by consumers • Government’s role is to promote competition among firms and ensure consumer protection Eg: United States

28. Centrally Planned Socialism • Opposite of market capitalism • State holds broad powers to serve the public interest; decides what goods and services are produced and in what quantities • Government owns entire industries and controls distribution • Demand typically exceeds supply • Eg: North Korea, Venezuela etc.

29. Centrally Planned Capitalism • Economic system in which command resource allocation is used extensively in an environment of private resource ownership • Examples • Sweden • Japan

30. 13 Stages of Economic Development (p. 80-93) BIG EMERGING MARKETS (BEMs) • China • India • Indonesia • South Korea • Brazil • Mexico • Argentina • South Africa • Poland • Turkey B R I C • Brazil • Russia • India • China

31. BRIC • Since the four BRIC countries are developing rapidly, by 2050 their combined economies could eclipse the combined economies of the current richest countries of the world. • These four countries, combined, currently account for more than a quarter of the world's land area and more than 40% of the world's population.

32. WORLD’S TOP ECONOMIES

33. Low-Income Countries • GNP per capita of $825 or less • Characteristics • Limited industrialization • High percentage of population involved in farming • High birth rates • Low literacy rates • Heavy reliance on foreign aid • Political instability and unrest • Concentrated in Sub-Saharan Africa

35. Lower-Middle-Income Countries • GNI per capita: $826 to $3,255 • Characteristics • Rapidly expanding consumer markets • Cheap labor • Mature, standardized, labor-intensive industries like textiles and toys • India is the only BRIC Country

37. Upper-Middle-Income Countries • GNP per capita: $3,256 to $10,065 • Characteristics • Rapidly industrializing, less agricultural employment • Increasing urbanization • Rising wages • High literacy rates and advanced education • Lower wage costs than advanced countries • Also called newly industrializing economies (NIEs) • Examples: BRCI COUNTRIES ARE BRAZIL, RUSSIA & CHINA

39. High-Income Countries • GNI per capita: $10,066 or more • Also know as advanced, developed, industrialized, or postindustrial countries • Characteristics • Sustained economic growth through disciplined innovation • Service sector is more than 50% of GNI

40. High-Income Countries • Importance of information processing and exchange • Ascendancy of knowledge over capital, intellectual over machine technology, scientists and professionals over engineers and semiskilled workers • Future oriented • Importance of interpersonal relationships

41. High Income countries

42. High Income countries (Contd..)

43. Marketing Opportunities in LDCs • Characterized by a shortage of goods and services • Long-term opportunities must be nurtured in these countries • Look beyond per capita GNP • Consider the LDCs collectively rather than individually • Consider first mover advantage • Set realistic deadlines

44. G-8, the Group of Eight • Goal of global economic stability and prosperity • United States • Japan • Germany • France • Britain • Canada • Italy • Russia (1998) 2007 G-8 leaders in Germany

45. Assignment-2 • Study about the Association of South East Asian Nations (ASEAN) and its marketing issues and opportunities. • Submit the assignment in the class and one group shall present the topic in the class.

46. OECD, the Organization for Economic Cooperation and Development • 34 nations • Post–World War II European origin • Canada, United States (1961), Japan (1964) • Promotes economic growth and social well-being • Focuses on world trade, global issues, labor market deregulation

47. THE OECD

48. The Triad • United States, Western Europe, and Japan • Represents 75% of world income • Expanded triad includes all of North America and the Pacific Rim and most of Eastern Europe • Global companies should be equally strong in each part

49. Balance of Payments • Record of all economic transactions between the residents of a country and the rest of the world • Current account—record of all recurring trade in merchandise and services, and humanitarian aid • Trade deficit—negative current account • Trade surplus—positive current account • Capital account—record of all long-term direct investment, portfolio investment, and capital flows

50. International finance: An Overview