December 2, 2021

TRADE RESTRICTIONS/PROTECTIONISM The theory of comparative advantage advocates the gains from free trade and specialisation.in practice however, many governments impose barriers to trade this now refers to the implementation of policies which restrict free flow of goods and services internationally. It also refers to imposition of measures aimed at restricting trade among countries. METHODS/FORMS OF PROTECTIONISM By imposing tariffs: these are taxes charged on imports to make them expensive hence discouraging consumption in the local market. -The tariffs can be in form of custom duties (import duties). This is a source of revenue to the government although it is used to discourage imports. -A specific tariff is levied on commodities according to quantities purchased ie a fixed tax per unit of goods, compound tariff is fixed tax combining both the advolerm and specific tariff, while Advalorem tariff is charged on goods according to their value. 2.Non tariff barriers-this are more problematic this are measures designed to restrict imports or artificially boost exports these barriers may take the following forms; Quotas-this are quantitative limits placed on importation of specified commodities they may be set on value/volume of imports. under quota system, any increase in domestic demand is expected to be satsisfied by increasing production locally a good example is of embargo where we have zero quota. Foreign exchange control-the government can therefore make acquisition of foreign exchange more difficult to restrict international trade. Voluntary export restrains(VERS)-this are voluntary imposed limits by a government of an exporting country on the exports of a certain commodity aimed at forestalling official protective action on part of the importing country.eg japan has entered into a number of VERS with the USA and EU countries relating to the export of its cars. Bureaucratic export procedures-this involves imposition of complex and time consuming bureaucratic procedures for goods entering a country  which may increase the difficulty and cost of exporting. Product standard specifications-imports can be restricted on basis that they have not met quality standards.health and safety regulations can be used to limit imports on standard goods. Subsidies-this is an indirect measure providing protection from overseas producers by making domestic products more attractive relative to imports. Moral persuasion-the government appeals to importers and exporters to willfully restrict importation/exportation of a certain commodity. Embargoes-this is an official order that forbids buying/selling of a commodity.it is usualy established for political rather than for economic reasons. ARGUMENTS /REASONS FOR PROTECTION Revenue argument-it is a source of revenue for state mainly through tariffs. Infant industy argument-they are protected in the short run. Declining industy argument-without dealing with this ,industries might collapse leading to sudden mass unemployment. The dumping argument/discourage dumping-this is the practice of selling abroad at a price lower than charged for same product in domestic market.it has a short term benefits for countries receiving  the cheaper commodities, the longer term consequences may be a reduction in domestic output and employment this is because it kills small industries in the less developed countries where the cheap goods have been dumped by the developed nations because the consumers will automatically buy this cheap products most developing countries therefore impose high tariffs meant to discourage dumping. Balance of payment argument-tariffs and quotas may therefore be used in an attempt to restrict imports and improve balance of payment position. The strategic industy argument-this is a non –economic argument stating that industries produce goods and services which are of strategic importance in times of crises or armed conflict this industries need to be protected since they are very strategic to a country e.g. food production is very important to a country incase of a war,a country has to be in a position to ensure there is enough food in country and this explains why some countries protect their agricultural sectors. To avoid the dangers of specialization-specialisation may lead to diseconomies of scale e.g. agricultural specialization may contribute  to monoculture, which can  in turn lead to soil erosion, vulnerability to pests and falling agricultural yields in future over specialization can cause a country to be completely vulnerable to certain changes in  demand or to costs and availability of imported raw materials or energy or new inventions, which eliminate its  comparative advantage. Economic sanctions-a measure taken in respect of some economic activity which has the effect of damaging another countrys economy ie weaken a political economy. Creation and protection of employment-by imposing trade restrictions, imports are discouraged encouraging establishment of local industries to provide commodities that would otherwise have been imported existing industries continue to thrive thereby ensuring that employed  remain in employment. To preserve morals and culture- people of different nations interact to carry out trade and people may end up borrowing cultural values of other country the government ban foreign goods which are likely to interfere with culture, moral and health standards of its people e.g. films and literature may erode  cultural practices of society. To expand domestic market-buying imported goods expand s market for foreign goods government may reverse this by introducing protective masures with the aim of encouraging citizens to consume locally produced goods and this will expand market for domestic products due to an increase in demand demand may further stimulate investment. To facilitate economic recovery-where an economy is facing a recession/depression, the government may adopt protective measures which will stimulate investment this is aimed at achieving economic recovery. DISADVANTAGES OF TRADE RESTRICTION Production of low quality products-the protected local industries may end up producing low quality commodities due to lack of competition. The local consumer is therefore denied the chance of enjoying high quality goods which might have otherwise come from the other country. Overprotection of infant industries-they should be protected to a given period of time and then exposed to competition. Overprotection reduces their competitiveness and the international market is also limited. Raising the prices of goods-the protected local industries may not enjoy economies of large scale due to their small sizes and they therefore incur high production costs for their products leading to increase in prices of commodities.

ECONOMIC INTERGRATION/REGIONAL GROUPINGS This  refers to where two or more countries in same region join up and co-operate with each other for their mutual economic benefit.it also refers to economic cooperation within a region. It means abolition of discrimination within an area.it also means any type of arrangement in which countries agree to coordinate their trade, fiscal and or monetary policies. In a region where complete economic integration is in practice implies that there is: Free trade in all goods and services. Free flow of capital. Freedom of migration. Freedom of establishment of business. Free flow of information and ideas No difference in taxation. No national difference in rules governing competitors and monopoly. No differences in environmental regulations A single currency in use. This type of integration is beneficial to member countries as they are able to develop faster than if they were to carry their economic activities individually. FORMS OF ECONOMIC INTEGRATION They are  categorized depending on their degree of integration. PREFERENTIAL TRADE AGREEMENT.(preferred treatment). This is the weakest form of economic integration here, countries would offer tariff reductions and not eliminations, to a set of partners countries in some product categories. FREE TRADE. This is a group of two or more custom authorities in which duties and other restrictive territories regulations of commerce are eliminated here, tariffs between the member countries are abolished but each country retains its own tariffs against non-members ie member countries apply uniform tariff rates to each other but separate individual tariffs to the remaining countries. Customs union. It allows no tariffs /other trade barriers between member countries as in free trade areas but the difference  is that it harmonizes trade policies of member countries with those of the rest of world e.g. member countries setting common tariffs according to the rest of world. Common market. It goes beyond the customs union and in addition to eliminating trade barriers among member countries and sharing trade policies,free movement of labour and capital among member nations is allowed e.g. EAC where one can work and establish business in any part in the region. Economic union It will typically maintain free trade in goods and services, set common external tariffs among members, allow the free mobility of capital and labour and will also relegate some fiscal spending responsibilities to a supra-national agency. An example is of the European union common agriculture policy(CAP) Monetary union. It establishes a common currency among a group of countries this involves the formation of a central monetary authority which will determine monetary policy for the entire group as well as using common public services e.g. Railway and communication network e.g. European Union (E.U) which has adopted Euro as their common currency. Multilateralism versus regionalism. The main objective here is on trade liberalization. The logic here is that the larger the regional trade area, relative to the size of the world market, the larger will be that regions market power in trade the more market power, the higher would be the regions optimal tariffs and export taxes. Duty free zones/free economic zones. This are set up to attract foreign investment by allowing raw materials and intermediate products to be imported duty free. IMPORTANCE/CASE FOR  ECONOMIC INTEGRATION TO A COUNTRY Enables countries to specialize in production of those commodities where they have comparative advantage thus trading surplus commodities. Enables a country to exploit economies of scale as it provides wider market for goods and services and therefore promotes employment in the countries involved. Encourages peace, free flow of information and  better relations both economically and politically as the countries involved depends on each other. Encourages foreign investment because the possibility of making large profits in a more enabling economic environment. Trade stability is enhanced in cases where there is use of a common currency e.g. the Euro in the European Monetary Union. Regional unemployment differences are reduced in where  regional integration involves permitting free movement of factors between factors. It fosters a great degree of competition thus promoting economic efficiency and consumer sovereignity through a wider variety of goods and services. It leads to redistribution of income in favour of low income areas through low cost production in such areas and exporting to areas where prices are higher. Availability of market/extension of locally produced goods-a wider market for a countrys products is created. Creation of industries-this is so as to cater for the increased demand. Extension of research-to cater for large markets ,research institutions are established to enhance efficiency in production as well as production of quality products. There is higher bargaining power in the world market and this helps the countries to get better prices for their goods. Flow of resources-member states which might be disadvantaged in terms of technical and human resource capabilities benefit from those which are more advanced. E.g. Kenya being more advanced than her neighbours will benefit from the big pool of human and technical resources in Kenya as there will be a free flow of resources among the countries. CASE AGAINST/PROBLEMS FACED BY ECONOMIC INTEGRATION. Political instability within the countries and political aggression between the various countries failing the integration efforts. Production of similar products thus limiting scope of trade. Unequal distribution  of the benefits of regional integration where industrialized countries tend to grow more as they already enjoy certain economies of scale. It leads to trade diversions where trade leads to of sources of commodities from low to high cost produce. Since it involves reduction of tariff barriers between member countries, it leads to loss of revenue which implies that the government has less money to spend on developing projects. In cases where there is sharing of common services such as railway and ports it may be difficult to allocate the benefits and costs of such sharing. Inefficient industries may be killed off by imports from other member states, which is likely to result in increased unemployment in countries where industries have to close down. EXAMPLES OF ECONOMIC INTEGRATION European common market. TRADING BLOCS IN AFRICA

Reasons why Companies may opt to exit/divest from their foreign markets Sustained losses – Key markets are often entered with a long-term perspective. Most companies recognize that an immediate payback of their investments is not realistic and are willing to absorb losses for many years. Difficulty in cracking the market – A company may also decide to pull the plug (stop/close) when it has difficulty to break the market in the host country. This was the main reason why Nokia decided to stop making and selling mobile phones for the Japanese market in 2008. Volatility / instability – Companies often underestimate the risks of the host country’s economic and political environment. Many multinationals have rushed into emerging markets lured by tempting prospects of huge populations with rising incomes. Unfortunately, countries with high growth potential often are very volatile. However, it is easy to ignore or downplay the risks associated with entering such markets, such as those stemming from exchange rate volatility, weak rule of law, political instability, economic risks, and inflation. Numerous multinational companies pulled out of Argentina and Indonesia in the wake of these countries’ economic turmoil. As the then CEO of a major multinational wisecracked during an analyst meeting: ‘‘I wish we could just close Argentina.’’ Premature entry – As we discussed earlier, the entry-timing decision is a crucial matter. Entering a market too early can be an expensive mistake. Entries can be premature for reasons such as an underdeveloped marketing infrastructure (e.g., in terms of distribution, supplies), low buying power, and lack of strong local partners. Often exiting a market is the only sensible solution instead of hanging on. Ethical reasons – Companies that operate in countries such as Myanmar or Cuba with a questionable human rights record often get a lot of flak in other markets. The bad publicity engendered by human rights campaigners can tarnish the company’s image. Rather than running the risk of ruining its reputation, the company may decide to pull out of the country. Heineken, for instance, decided to pull out of Myanmar in 1996 under pressure from a boycott of its products triggered by human rights activists. Intense competition – Intense rivalry is often another strong reason for exiting a country. Markets that look appealing on paper usually attract lots of competitors. The outcome is often overcapacity, triggering price wars, and loss-loss situations for all players competing against one  another. Rather than sustaining losses, the sensible thing to do is to exit the market. Resource reallocation – A key element of marketing strategy formulation is resource allocation. A strategic review of foreign operations often leads to a shake-up of the company’s country portfolio, spurring the MNC to reallocate its resources across markets. Just as there are barriers to entry, there are exit barriers that may delay or complicate an exit decision. Obstacles that compound divestment decisions include: Fixed costs of exit – Exiting a country often involves substantial fixed costs. In Europe, several countries have very strict labor laws that make exit very costly (e.g., severance payment packages). It is not uncommon for European governments to cry foul and sue a multinational company when the firm decides to shut down its operations. Long term contracts that involve commitments such as sourcing raw materials or distributing products often involve major termination penalties. Damage to corporate image – A negative spillover of a divestment decision could also include damage to the firm’s corporate image if plant closures lead to job losses. Nokia’s decision to close down its manufacturing operations in Germany and shift them to more cost-friendly sites in Eastern Europe led to calls for a boycott of the firm’s phones in Germany. Kurt Beck, the head at the time of the Social Democrats SPD) told a local newspaper that ‘‘As far as I am concerned there will be no Nokia mobile phone in my house. Disposition of assets – Assets that are highly specialized to the particular business or location for which they are being used also create an exit barrier. Signal to other markets – Another concern is that exiting one country or region may send strong negative signals to other countries where the company operates. Exits may lead to job losses in the host country; customers risk losing after-sales service support; distributors stand to lose company support and might witness a significant drop in their business. Therefore, an exit in one country could create negative spillovers in other markets by raising red flags about the company’s commitment to its foreign markets. Long-term opportunities – Although exit is sometimes the only sensible thing to do, firms should avoid shortsightedness. Volatility is a way of life in many emerging markets. Four years after the ruble devaluation in August 1998, the Russian economy made a spectacular recovery. The country became one of the fastest growing markets worldwide for many multinationals, including Procter & Gamble, L’Oreal, and Ikea. Rather than closing shop, it is often better to pay a price in the short term and maintain a presence for the long haul. Exiting a country and re-entering it once the dust settles, comes at a price.

INTERNATIONAL MARKET ENTRY STRATEGIES Making the ‘‘right’’ entry decisions heavily impacts the company’s performance in global markets. Entry decisions heavily influence the firm’s other marketing mix decisions. Several interlocking decisions need to be made. The firm must decide on: The target product/market The corporate objectives for these target markets The mode of entry The time of entry A marketing mix plan A control system to monitor the performance in the entered market. Target market Selection A crucial step in developing a global expansion strategy is the selection of potential target markets. Companies adopt many different approaches to pick target markets. To identify market opportunities for a given product (or service) the international marketer usually starts off with a large pool of candidate countries (say, all central European countries). To narrow down this pool of countries, the company will typically do a preliminary screening, whose goal is to minimize the mistakes of ignoring countries that offer viable opportunities for your product, and  minimize the mistakes wasting time on countries that offer no or little potential. Step 1: Indicator selection and data collection – First, the company needs to identify a set of socioeconomic and political indicators it believes are critical. A company might also decide to enter a particular country that is considered as a trendsetter in the industry. Typically countries that do well on one indicator like market size rate poorly on other indicators e.g. market growth. Therefore the company needs to combine its information to establish an overall measure of market attractiveness for these candidate markets. Step 2: Determine the importance of country indicators – It’s where the company determines the importance weights of each of the different country indicators identified in the previous step. One common method is the ‘‘constant-sum’’ allocation technique, where it allocates 100 points across the set of indicators according to their importance in achieving the company’s goals (e.g., market share).The more critical the indicator, the higher the number of points it is assigned. The total number of points should add up to 100. Step 3: Rate the countries in the pool on each indicator – Here, each country in the pool is assigned a score on each of the indicators. For instance, you could use a 10- point scale (0 meaning very unfavorable; 100 meaning very favorable). The better the country does on a particular indicator, the higher the score. Step 4: Compute overall score for each country – The final step is to derive an overall score for each prospect country. The weights are the importance weights that were assigned to the indicators in the second step. Countries with the highest overall scores are the ones that are most attractive. Decision Criteria for Mode of Entry Several decision criteria influence the choice of entry mode. There are two classes of decision criteria that can be distinguished: internal (firm-specific) criteria and external (environment-specific) criteria. 1.Internal criteria Company Objectives – Corporate objectives are a key influence in choosing entry modes. Firms that have limited aspirations will typically prefer entry options that entail a minimum amount of commitment (e.g., licensing). Proactive companies with ambitious strategic objectives, on the other hand, will usually pick entry modes that give them the flexibility and control they need to achieve their goals. Need for Control – Most MNCs would like to possess a certain amount of control over their foreign operations. Control may be desirable for any element of the marketing mix plan: positioning, pricing, advertising, the way the product is distributed, and so forth. Caterpillar, for instance, prefers to stay in complete control of its overseas operations to protect its proprietary know-how. For that reason, Caterpillar avoids joint ventures. The smaller the commitment, the lower the control. Internal Resources, Assets and Capabilities – Companies with tight resources (human and/or financial) or limited assets are constrained to low-commitment entry modes such as exporting and licensing that are not too demanding on their resources. Internal competencies also influence the choice-of-entry strategy. When the firm lacks certain skills that are critical for the success of its global expansion strategy, it can try to fill the gap by forming a strategic alliance. Flexibility – An entry mode that looks very appealing today is not necessarily attractive 5 or 10 years down the road. The host country environment changes constantly. New market segments emerge. Local customers become more demanding or more price conscious. Their preferences may change over time. Local competitors become more sophisticated. To cope with these environmental changes, global players need a certain amount of flexibility. The flexibility offered by the different entry mode alternatives varies a great deal. Given their very nature, contractual arrangements like joint ventures or licensing tend to provide very little flexibility. When major exit barriers exist, wholly owned subsidiaries are hard to divest and, therefore offer very little flexibility compared to other entry alternatives. External Criteria (Environment Specific) Market Size and Growth – In many instances, the key determinant of entry choice decisions is the size of the market. Large markets justify major resource commitments in the form of joint ventures or wholly owned subsidiaries. Risk – Risk relates to the instability in the political and economic environment that may impact the company’s business prospects. The greater the risk factor, the less eager companies are to make major resource commitments to the country (or region) concerned. Note that level of country risk changes over time. Many companies opt to start their presence with a liaison office in markets that are high-risk but, at the same time, look very appealing because of their size or growth potential. A liaison office functions as a low-cost listening post to gather market intelligence and establish contacts with potential distributors and/ or clients. Government Regulations (Openness) – Government regulations are also a major consideration in entry mode choices. In score of countries, government regulations heavily constrain the set of available options. Example is the regulation of the airline industry in the United States: airlines are classified as ‘‘strategic assets’’ and as

INTERNATIONAL MARKETING RESEARCH Marketing research is defined as the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services to provide information useful to marketing decision making. Although the research processes and methods are basically the same, whether applied in different countries, international marketing research involves two additional complications. First, information must be communicated across cultural boundaries. That is, executives in one country or state must be able to “translate” their research questions into terms that consumers in another country like Guangzhou, China, can understand. Then the Chinese answers must be put into terms (i.e., reports and data summaries) that American managers can comprehend. Second, the environments within which the research tools are applied are often different in foreign markets. Rather than acquire new and exotic methods of research, the international marketing researcher must develop the capability for imaginative and deft applications of tried and tested techniques in sometimes totally strange milieus. Types of Research based on Information needed General information about the country, area, and/or market Information necessary to forecast future marketing requirements by anticipating social, economic, consumer, and industry trends within specific markets or countries Specific market information used to make product, promotion, distribution, and price decisions and to develop marketing plans. Types of information gathered in International Marketing Research Economic and demographic – General data on growth in the economy, inflation, business cycle trends, and the like; profitability analysis for the division’s products; specific industry economic studies; analysis of overseas economies; and key economic indicators for the United States and major foreign countries, as well as population trends, such as migration, immigration, and aging. Cultural, sociological, and political climate – A general noneconomic review of conditions affecting the division’s business. In addition to the more obvious subjects, it covers ecology, safety, and leisure time and their potential impacts on the division’s business. Overview of market conditions – A detailed analysis of market conditions that the division faces, by market segment, including international. Summary of the technological environment – A summary of the state-of-the-art technology as it relates to the division’s business, carefully broken down by product segments. Competitive situation – A review of competitors’ sales revenues, methods of market segmentation, products, and apparent strategies on an international scope.   The International Marketing Research Process A marketing research study is always a compromise dictated by the limits of time, cost, and the present state of the art. A key to successful research is a systematic and orderly approach to the collection and analysis of data. Marketing Research steps Define the research problem and establish research objectives Determine the sources of information to fulfill the research objectives. Consider the costs and benefits of the research effort. Gather the relevant data from secondary or primary sources, or both. Analyze, interpret, and summarize the results. Effectively communicate the results to decision makers. Marketing Information Sources The two major sources of information are primary data and secondary data. 1.Primary data – this is defined as information that is collected firsthand, generated by original research tailor-made to answer specific, current research questions. Problems associated with primary data source Ability to Communicate Opinions – The ability to express attitudes and opinions about a product or concept depends on the respondent’s ability to recognize the usefulness and value of such a product or concept. Willingness to Respond – Cultural differences offers the best explanation for the unwillingness or the inability of many to respond to research surveys. The role of the male, the suitability of personal gender-based inquiries, and other gender-related issues can affect willingness to respond. Language and Comprehension – The most universal survey research problem in foreign countries is the language barrier. Differences in idiom and the difficulty of exact translation create problems in eliciting the specific information desired and in interpreting the respondents’ answers. 2.Secondary data is defined as information that has already been collected for other purposes and is thus readily available. Problems of comparing secondary data on international marketing Reliability of Data Available data may not have the level of reliability necessary for confident decision making for many reasons. Official statistics are sometimes too optimistic, reflecting national pride rather than practical reality, while tax structures and fear of the tax collector often adversely affect data. Comparability of Data Comparability of available data is another shortcoming faced by foreign marketers. In the United States, current sources of reliable and valid estimates of socioeconomic factors and business indicators are readily available. In other countries, especially those less developed, data can be many years out of date as well as having been collected on an infrequent and unpredictable schedule. Furthermore, even though many countries are now gathering reliable data, there are generally no historical series with which to compare the current information. Primary Research When secondary data are unavailable, irrelevant, or obsolete, the marketer must turn to primary research. One decision that must be made is whether to compile or buy the information. In other words, the question to be decided is whether outside agencies such as marketing research firms should be used to collect the information needed or whether the firm should use its own personnel for this purpose. Secondary Research There are many different ways to collect secondary data, and there are many information sources for this purpose. Such sources may be grouped under either public or private sources. Private sources A very basic method of finding business information is to begin with a public library or a university library.A library with a reasonable collection should contain standard reference guides, commercial and industrial directories, financial reference manuals, and other materials containing pertinent business information. One useful source of information is the World Trade Centers Association (WTCA) which has more than 300 World Trade centers in eighty-nine countries. WTCA promotes international business relationships through a network of members worldwide. These centers offer referrals, contacts, and information for businesses. Another good source of information is a community’s chamber of commerce. Public sources Public sources of

INTERNATIONAL MARKETING ENVIRONMENT/TASK  The only difference between the definitions of domestic marketing and international marketing is that in the latter case, marketing activities take place in more than one country. This apparently minor difference, “in more than one country,” accounts for the complexity and diversity found in international marketing operations. Marketing concepts, processes, and principles are universally applicable, and the marketer’s task is the same, whether doing business in Dimebox, Texas, or Dar es Salaam, Tanzania. Business’s goal is to make a profit t by promoting, pricing, and distributing products for which there is a market. If this is the case, what is the difference between domestic and international marketing? The answer lies not with different concepts of marketing but with the environment within which marketing plans must be implemented. The uniqueness of foreign marketing comes from the range of unfamiliar problems and the variety of strategies necessary to cope with different levels of uncertainty encountered in foreign markets. Competition, legal restraints, government controls, weather, fickle consumers, global market, risky and complex, huge financial capacity, different countries and markets, barriers-language, traditions &customs and any number of other uncontrollable elements can, and frequently do, affect the profitable outcome of good, sound marketing plans. Generally speaking, the marketer cannot control or influence these uncontrollable elements but instead must adjust or adapt to them in a manner consistent with a successful outcome. What makes marketing interesting is the challenge of molding the controllable elements of marketing decisions (product, price, promotion, distribution, and research) within the framework of the uncontrollable elements of the marketplace (competition, politics, laws, consumer behavior, level of technology, and so forth) in such a way that marketing objectives are achieved. Even though marketing principles and concepts are universally applicable, the environment within which the marketer must implement marketing plans can change dramatically from country to country or region to region. The difficulties created by different environments are the international marketer’s primary concern. The international marketer’s task/environment is more complicated than that of the domestic marketer because the international marketer must deal with at least two levels of uncontrollable uncertainty instead of one. Uncertainty is created by the uncontrollable elements of all business environments, but each foreign country in which a company operates adds its own unique set of uncontrollable factors. The exhibit below illustrates the total environment of an international marketer. The inner circle depicts the controllable elements that constitute a marketer’s decision area, the second circle encompasses those environmental elements at home that have some effect on foreign-operation decisions, and the outer circles represent the elements of the foreign environment for each foreign market within which the marketer operates. As the outer circles illustrate, each foreign market in which the company does business can (and usually does) present separate problems involving some or all of the uncontrollable elements. Thus, the more foreign markets in which a company operates, the greater is the possible variety of foreign environmental factors with which to contend.