Understanding the Global Environment

Before deciding whether or not to sell abroad, a company must thoroughly understand the international marketing environment. That environment has changed a tariff

A tax levied by a government against certain imported products. Tariff * are designed to raise revenue or to protect domes tic firms.

quota

A limit on the amount of goods that an importing country will accept in certain product categories; it is designed to conserve on foreign exchange and to protect local industry and employment.

great deal in the last two decades, creating both new opportunities and new problems. The world economy has globalized. First, world trade and investment have grown rapidly, with many attractive markets opening up in western and eastern Europe, Russia, China, the Pacific Rim and elsewhere. Official sources suggest that world trade in goods grew by 8 per cent in volume terms and FDI rose some 40 per cent over 1996 alone. In tact, during the 1990s, international trade has grown faster titan world output.4 There has been a growth of global brands in motor vehicles, food, clothing, electronics and many other categories. The number of global companies has grown dramatically. While the United States' dominant position in world trade has declined, other countries, such as Japan and Germany, have increased their economic power in world markets (see Marketing Highlight 5.1). The international financial system has become more complex and fragile. In some country markets, foreign companies face increasing trade barriers, erected to protect domestic markets against outside competition. There has also been increasing concern among members outside the European Union that 'Fortress Europe' presents greater harriers to penetrating the EU markets. Japanese car plants, for example, have been attracted to the United Kingdom by the thought that they can by-pass the EU's restrictions on imports of Japanese cars.

• The international Trade System

The company looking abroad must develop an understanding of the international trade system. When selling to another country, the firm faces various trade restrictions. The most common is the tariff, which is a tax levied by a foreign government against certain imported products. The tariff may be designed either to raise revenue or to protect domestic firms: for example, those producing motor vehicles in Malaysia and whisky and rice in Japan, The exporter also may face a quota, which sets limits on the amount of goods the importing country will accept in certain product categories. The purpose of the quota is to conserve foreign exchange and to protect local industry and employment. An embargo is the strongest form of quota, which totally bans some kinds of import.

Firms may face exchange controls that limit the amount of foreign exchange and the exchange rate against other currencies. The company may also face non-tariff trade barriers, such as biases against company bids or restrictive product standards that favour or go against product features.5

At the same time, certain forces help trade between nations. Examples are the General Agreement on Tariffs and Trade (replaced by the World Trade Organization in 1993) and various regional free trade agreements.

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