Global Marketing Environment Economic Environment

8/12/2019 Global Marketing Environment Economic Environment

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Global Marketing Environment

Global Marketing Management by

Lee & Carter, Keegan & Bhargava,Business Line, www.ilo.org,
http://www.ilo.org/http://www.ilo.org/


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Global marketing environment

......It is the environment comprising thosevariables, largely out of the organizations control

but which it must account for, within which it

conducts its businessglobally


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Models of Environmental Analysis


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Global Marketing Environment

(Levels)


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Why should firms analyze the global

environment?

Reasons


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World Economic Changes: Post WW-II

1990s- end of Cold War- overthrow of communism

Emergence of global markets- most fundamental change

Capital movements rather than trade have become the driving force

Production uncoupled from unemployment

Domination of world economy replacing individual economies

Growth of commerce via Internet

Economic integration- 10% in 1990s to 50% in 2000s


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Economic factors that global firms

must analyze

1. Economic system

2. Economic freedom

3. Stage of economic development

4. PCI, PPP, spread of income

5. Location of population

6. Balance of Payments position and trade patterns

7. International trade alliances/grouping systems

8. Regional economic organizations/trade blocs

9. International facilitating institutions


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1. Economic systems

1. Market allocationResource allocation is based on consumer demand

Economic democracy

Government acts as the watchdog

Eg. US, Hong Kong, Singapore, Japan, Australia, etc.

2. Command allocationState decides what to produce

Little reliance on marketing mix variables

Distribution handled by Government

Eg. Cuba, Ukraine, Iran, Venezuela, etc.

3. Mixed systemMix of the above

Eg. Taiwan, UAE, Brazil, India, Sri Lanka, China, etc.(based on economic freedom score by www.heritage.org, 2009
http://www.heritage.org/http://www.heritage.org/


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2. Economic freedom

Rankings of economic freedom among countries

free, mostly free, mostly unfree, repressed

Variables considered include:

Trade policy

Taxation policy

Capital flows and foreign investment

Banking policy

Wage and price controls

Property rights Black market(based on economic freedom score by www.heritage.org, 2009)
http://www.heritage.org/http://www.heritage.org/


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Economic freedom: classification

FREE ECONOMY: US, UK, Switzerland, Hong Kong, Singapore, N.Z.,

Bahrain, Ireland, Australia

MOSTLY FREE ECONOMY: Canada, Austria, Japan, UAE, Italy, South Korea, France,

Belgium. SA,

MOSTLY UNFREE:

Russia, India, Nigeria, China, Brazil, Egypt,

REPRESSED: Iran, Iraq, North Korea, Cuba etc.,


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World Bank Classification of Economies (based

on 2011 GNI per capita)

Low income economies

$1,025 or less

Lower middle income economies

$1,026 - $4,035

Upper middle income economies

$4,036 - $12,475

High income economies $12,476 or moreSource: www.worldbank.org/data
http://www.worldbank.org/datahttp://www.worldbank.org/data


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3. Stages of Economic Development.

Low-Income countries 37% of world population

3% of world GNP

Pre-industrial; LDCs

Reliance on foreign aid and high political instability

Lower-middle-income countries 39% of the world population

11% of world GNP

Early stages of industrialization; LDCs

India with $1410 falls in this category

Upper-middle income countries

7% of world population 7% of world GNP

Rapidly industrializing and urbanizing

Rising wages but lower than advanced countries


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.Stages of Economic Development

High income countries Advanced and industrialized; few are also oil-rich

16% of world population

82% of world GNP Basket cases

Are countries with serious economic, social and politicalproblems making them unattractive for investment and

operations Low income, no growth, civil strife

Eg. Ethiopia, Mozambique


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4. PCI, PPP, & Spread of Income

For low-unit cost product, population is an importanteconomic variable

For high-unit cost product, income is an importanteconomic variable

Spread of income within the population is morereliable than measuring PCI and PPP of an economy

Eg. What is attracting global marketers to India? Though Indias PCI is low, its GDP based on PPP is fourth

highest*

moreover, the sizeable populations in middle and higherincome groups attract global marketers

(*World Fact Book country comparison: GDP, 2009; Keegan & Bhargava, pp.50)


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5. The location of population

Population an important economic variablefor firms producing low-unit cost products

The 10 most populous countries in the world

account for roughly 60% of the worldpopulation and income

5 largest populous nations accounted for 48%

of world income in the year 2000 Negative correlation between population

growth rate and PCI


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6. Balance of payments and trade

patterns

BOP is a record of all of the economic

transactions between residents of a country

and the rest of the world current account is a record of recurring trade in

merchandise and service, private gifts, public aid

Capital account is a record of all long and short-term

investments and capital flows


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7. International Trade Alliances

Degrees of economic cooperation Free trade area

Customs union

Common market Economic union


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Forms of

economic integration


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Free trade area (FTA)

Is a group of countries that have agreed to

abolish all internal barriers to trade among

themselves

They can maintain independent trade policies

with third countries

Eg. NAFTA, Indias FTAs with SAFTA, ASEAN,

Japan, Singapore, Malaysia, EU & Canada

(ongoing)


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Common market (CM)

CU + free flow of factors (labour and capital)

within the market

Eg. Central American common market


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Economic union (EU)

CM + the following

Creation of a unified central bank

Use of a single currency Common policies on agriculture, social

services, regional development, transport,

taxation, competition, etc.

Eg. European Union


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Political Union

EU + political harmony + centralized

government policies

Eg. US and Canada


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Forms of Economic Agreement: Examples


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8. Regional Economic

Organizations/Trading Blocs The European Union

NAFTA

Asian trade groups SAARC

ASEAN

Asia-Pacific Economic Cooperation South and Central American trade groups

Andean group

Southern cone common market

CARICOM

Central American Integration System (SICA)

African and middle eastern trade groups ECOWAS

Arab Maghreb Union


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Major trading blocs

European Union

Association of

South East Asian

Nations (ASEAN)

Asia Pacific

Economic

Cooperation (APEC)

North American

Free Trade Area

(NAFTA)


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9. International facilitating institutions


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Thank you

Documents

Global Marketing Environment Economic Environment