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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/8/12/2019 Global Marketing Environment Economic Environment
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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/8/12/2019 Global Marketing Environment Economic Environment
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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/8/12/2019 Global Marketing Environment Economic Environment
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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/data8/12/2019 Global Marketing Environment Economic Environment
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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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6-18
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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6-26
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