Impact of Economic Environment on Social Development:

The close relationship between economic and social development, many of the figures
can be used as social indicators such as share of urban population, life expectancy, number of
physicians per capita, literacy rate, percentage of income received by the richest 5 percent of
the population, and percentage of the population with access to electricity. The Physical
Quality of Life Index (PQLI) is a composite measure of the level of welfare in a country. It
has three components: life expectancy, infant mortality, and adult literacy rates. The three
components of the PQLI are among the few social indicators available to provide a
comparison of progress through time in all of the countries of the world.
Differences in the degree of urbanization of target markets in lesser-developed
countries influence international marketer’s product strategies. If products are targeted only
to urban areas, products need minimal adjustments, mainly to qualify them for market entry.
However, when targeting national markets, firms may need to make extensive adaptations to
match more closely the expectations and the more narrow consumption experiences of the
rural population. In terms of infrastructure, improved access in rural areas brings with it an
expansion of non-farm enterprises such as shops, repair services, and grain mills. It also
changes customs, attitudes, and values.
As societies attain a certain level of wealth, income becomes less of a factor in
people’s level of satisfaction. Emotional well-being may be determined by the quality of
social relationships, enjoyment at work, job stability, and overall conditions in the country
(such as democratic institutions).
The presence of multinational corporations, which by their very nature are change
agents, will accelerate social change. If government control is weak, the multinational
corporation bears the social responsibility for its actions. In some cases, governments restrict
the freedom of multinational corporations if their actions may affect the environment. As an
example, the Indonesian government places construction restrictions (such as building height)
on hotels in Bali to avoid the overcrowding and ecological problems incurred in Hawaii when
that state developed its tourism sector vigorously.

Regional Economic Integration:

 Preferential Trade Area

Preferential Trade Areas (PTAs) exist when countries within a geographical region agree to
reduce or eliminate tariff barriers on selected goods imported from other members of the
area. This is often the first small step towards the creation of a trading bloc. Agreements may
be made between two countries (bi-lateral), or several countries (multi-lateral).

 Free Trade Area

Free Trade Areas (FTAs) are created when two or more countries in a region agree to reduce
or eliminate barriers to trade on all goods coming from other members. The North Atlantic
Free Trade Agreement (NAFTA) is an example of such a free trade area, and includes the
USA, Canada, and Mexico.
  Customs Union
A customs union involves the removal of tariff barriers between members, plus the
acceptance of a common (unified) external tariff against non-members. This means that
members may negotiate as a single alliance with third parties, such as with other trading
unions or with the World Trade Organization (WTO).

 Common Market
A common market is the first significant step towards full economic integration, and occurs
when member countries trade freely in all economic resources, not just tangible goods. This
means that all barriers to trade in goods, services, capital, and labour are removed. In
addition, as well as removing tariffs, non-tariff barriers are also reduced and eliminated. For a
common market to be successful there must also be a significant level of harmonisation of
micro-economic policies, and common rules regarding monopoly power and other anti-
competitive practices. There may also be common policies affecting key industries, such as
the Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP) of the
European Single Market (ESM).

 Economic Union
Economic Union is a term applied to a trading alliance that has both a common market
between members, and a common trade policy towards non-members, but where members
are free to pursue independent macro-economic policies.

 Monetary Union
Monetary union is the first major step towards macro-economic integration, and enables
economies to converge even more closely. Monetary union involves scrapping individual
currencies, and adopting a single, shared currency, such as the Euro for the Euro-16
countries, and the East Caribbean Dollar for 11 islands in the East Caribbean. This means that
there is a common exchange rate, a common monetary policy, including interest rates and the
regulation of the quantity of money, and a single central bank, such as the European Central
Bank or the East Caribbean Central Bank.