But as global trade grows, global competition is also intensifying. Foreign firms are expanding aggressively into new international markets, and home markets are no longer as rich in opportunity. Few industries are currently safe from foreign competition. If companies delay taking steps toward internationalizing, they risk being shut out of growing markets. Firms that stay at home to play it safe might not only lose their chances to enter other markets but also risk losing their home markets. A global firm is one that, by operating in more than one country, gains marketing, production, research and development (R&D), and financial advantages that are not available to purely domestic competitors. Because the global company sees the world as one market, it minimizes the importance of national boundaries and develops global brands. The global company raises capital, obtains materials and components, and manufactures and markets its goods wherever it can do the best job. A company faces six major decisions in international marketing: Looking at the global marketing environment; 48
Canadian companies looking abroad must start by understanding the international trade system . When selling to another country, a firm may face restrictions on trade between nations. Governments may charge tariffs or duties , taxes on certain imported products designed to raise revenue or protect domestic firms. Tariffs and duties are often used to force favourable trade behaviours from other nations. Countries may set quotas , limits on the amount of foreign imports they will accept in certain product categories. The purpose of a quota is to conserve on foreign exchange and protect local industry and employment. Firms may also encounter exchange controls , which limit the amount of foreign exchange and the exchange rate against other currencies. A company may face nontariff trade barriers , such as biases against its bids, restrictive product standards, or excessive host-country regulations or enforcement. At the same time, certain other forces can help trade between nations. Examples include the World Trade Organization (WTO) and various regional free trade agreements. The General Agreement on Tariffs and Trade (GATT), established in 1947 and modified in 1994, was designed to promote world trade by reducing tariffs and other international trade barriers. It established the World Trade Organization (WTO), which replaced GATT. The WTO also imposes international trade sanctions and mediates global trade disputes. Certain countries have formed free trade zones or economic communities . These are groups of nations organized to work toward common goals in the regulation of international trade. The international marketer must study each country’s economy. Two economic factors reflect the country’s attractiveness as a market: its industrial structure and its income distribution. The country’s industrial structure shapes its product and service needs, income levels, and employment levels. The four types of industrial structures are as follows: SUBSISTENCE ECONOMIES: In a subsistence economy, the vast majority of people engage in simple agriculture. They
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