Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

1. Marketing’s Role in the
   Global Economy

Text © The McGraw−Hill

Companies, 2002

20 Chapter 1

ters to help stamp out illegal elephant hunting. Uganda didn’t have $25 million to

pay for the helicopters, so a countertrade specialist for the helicopter company set

up local projects to generate the money. One Ugandan factory now turns local

pineapples and passion fruit into concentrated juice. The concentrate is sold to Euro-

pean buyers identified by the countertrade specialist. Similarly, soft-drink bottlers in

Mexico trade locally grown broccoli for Pepsi concentrate; then Pepsi finds a mar-

ket for the broccoli in the U.S.

Distribution systems and middlemen intermediaries have not yet developed in

these countries to handle this sort of exchange. So, in pursuing their own opportu-

nities, companies like Pepsi and McDonnell Douglas are stimulating economic

development. While deals such as this may seem unusual, that is not the case. Coun-

tertrade is becoming an extremely important part of foreign trade for both large and

small companies. In fact, experts say that the use of countertrade doubled in the

last decade. Now, about 20 to 25 percent of all U.S. exports rely on countertrade.^17

There are still many obstacles to free trade among nations. And trade “wars”

among nations are likely to continue. Even so, the trend shows a slow movement

toward fewer restrictions on trade among different countries. Perhaps the most vis-

ible evidence of this trend is the creation in 1995 of the World Trade Organization

(WTO)—the only international body dealing with the rules of trade between nations.

At its heart are the WTO agreements, the legal ground rules for international com-

merce and for trade policy. The agreements have three main objectives: (1) to help

trade flow as freely as possible, (2) to provide an impartial means of settling dis-

putes, and (3) to facilitate further negotiation. The WTO agreements in general try

to encourage competition, discourage protectionism, and seek to provide more pre-

dictable policies.

Because each trade rule affects different countries in different ways, reaching

agreements is a slow and complicated process. Even with the WTO in place, some

people feel that there is more talk than change. Yet, progress is slowly being made.

The WTO agreements cover services and intellectual property as well as goods; prior

agreements were limited to goods. Thus, with the formation of the WTO global

trade is becoming an even more important factor in economic development—and

a more important source of opportunity for individual firms.^18

Global trade is
increasing

Urbanization brings together large numbers of people. They must depend on oth-

ers to produce most of the goods and services they need to satisfy their basic needs.

Also, in advanced economies, many consumers have higher discretionary incomes.

They can afford to satisfy higher-level needs as well as basic ones. A modern econ-

omy faces a real challenge to satisfy all these needs.

Fortunately, advanced economies can often take advantage of mass production

with its economies of scale—which means that as a company produces larger num-

bers of a particular product, the cost for each of these products goes down. You can

Economies of scale
mean lower cost

Can Mass Production Satisfy a Society’s Consumption Needs?

Internet

Internet Exercise The World Trade Organization is a very important force

behind the global move toward free trade, but sometimes there are still dis-

putes. Go to the WTO website (www.wto.org) and find out how the WTO

settles disputes. Do you think that this procedure favors the developed

nations, the less-developed nations, or neither? Give your thinking.