Economic Environment

The Foreign Economies

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 Agenda – Week 2
u Economic environment
u Cultural environment

u Video: doing business in China

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The International Marketing
Task Foreign environment
(uncontrollable)
Political/legal 1 Economic
forces forces
Domestic environment
(uncontrollable)
2
7 Competitive
Political/
legal (controllable) structure Competitive
Cultural Forces
forces
forces Environmental
Price Product
uncontrollables
7 3 country market A
Channels of
Promotion Environmental
distribution
6 uncontrollables
country
market B
Geography Level of
Economic climate Technology Environmental
and
Infrastructure 4 uncontrollables
5 country
Structure of market C
distribution
156338 Week2 2014 3
 NAFTA

u The North American Free Trade

Agreement (NAFTA) created the
world’s largest free market.
u http://www.nafta-sec-alena.org/
– 390 million U.S., Canadian, and
Mexican consumers and a total
output of $10 trillion.
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Integration in Asia

u Asia Infrastructure Investment

Bank (AIIB)
u Association of Southeast Asian
Nations (ASEAN)
http://www.aseansec.org/7
4.htm
u East Asia Economic Group
u Asia-Pacific Economic
Cooperation (APEC)
http://www.apec.org/
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 Analysis of Foreign Markets
u Two often used measurements: size
and nature
u Size of the market
– Measurement indicators:
u Geographic size
u Population: growth rates, distribution

u Income: distribution (bimodal economy),

GNP/capita
u Market potential

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 Nature of the economy
(What’s the market like?) (I)
u Four items:
– physical endowment
– nature of economic activity
– Infrastructure
– degree of urbanization

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 Nature of the economy (II)
u Physical endowment of the nation
– Natural resources: include actual and potential
forms of wealth supplied by nature eg
minerals, waterpower, land area etc
– Topography: the surface features of a
country’s land, including rivers, lakes, forests,
deserts and mountains.
u Impacts of topography on marketing programmes
– Climate
u Impacts of climate on international marketing
activities?

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 Nature of the economy (III)
u Natureof economic activity (e.g.,
resources based economy)

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 The World Economic
Pyramid
Annual per Capita Income* Tiers Population in Millions

More Than $20,000 75-100

$1,500-$20,000 1,500-1,750

Less Than $1,500 4,000

*Based on Purchasing power parity in U.S. $.

SOURCE: U.N. World Development Reports

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 Nature of the economy (IV)
u Infrastructure of the Nation
– Economic infrastructure
u Energy
u Transportation
u Communications

– Commercial infrastructure
u Advertising
u Distribution
u Financial system (banking, financial
institutions etc)

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 Nature of the economy (V)
u Extent of urbanization
– Farm versus city
– Jain (1989) and Chung (2003, 2005,
2018) cross-market theory

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 Other Characteristics
u Inflation

u Role of government
u Foreign investment in the country

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NAVIGATING OUR
GLOBAL FUTURE

Click to play video

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CHINESE CONSUMERS HAVE
A NEW WISH LIST

Click to play video

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The Cultural
Environment

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The International Marketing
Task Foreign environment
(uncontrollable)
Political/legal 1 Economic
forces forces
Domestic environment
(uncontrollable)
2
7 Competitive
Political/
legal (controllable) structure Competitive
Cultural forces Forces
forces Price Product Environmental
uncontrollables
7 3 country market A
Channels of
Promotion Environmental
distribution
6 uncontrollables
country
market B
Geography Level of
Economic climate Technology Environmental
and
Infrastructure 4 uncontrollables
5 country
Structure of market C
distribution
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Success and Culture

An understanding of cultural
differences allows marketers
to determine when adaptation
may be necessary and when
commonalities allow for
regional or global approaches

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Defining Culture

u An integrated system of
learned behavior patterns that
are distinguishing
characteristics of the members
of any given society.
u The definition encompasses a
wide variety of elements, from
materialistic to the spiritual.
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 Elements of Culture

Elements

Language Manners and Customs

• verbal Aesthetics
• non-verbal Education
Religion Social Institutions
Values and Attitudes

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Dominant Religions of The
World

u Christianity- 2.0 billion followers

u Islam - 1.2 billion followers

u Hinduism - 860 million followers

u Buddhism - 360 million followers

u Confucianism - 150 million

followers

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 Manners and Customs

u Potential problem areas for marketers arise from an

insufficient understanding of:
– different ways of thinking.
– the necessity of saving face.
– knowledge and understanding
of the host country.
– the decision-making process
and personal relations.
– the allocation of time
for negotiations.

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 Aesthetics
u Aesthetics refers to the ideas in a
culture concerning beauty and good
taste, as expressed in the fine arts--
music, art, drama, and dancing--and
the particular appreciation of color
and form.
u Design, Colour, Music, Brand Names

u Example: Australian exporting firm’s “pure

white” design for HK
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https://www.google.com/search?sa=X&rlz=1C1CHBD_enNZ857NZ857&q=Australian+exporting+firms+%E2%80%9Cpure+white%E2%
80%9D+design+for+HK&tbm=isch&source=univ&ved=2ahUKEwiqwtTu2NDjAhXZfX0KHWlwBJMQsAR6BAgJEAE&biw=1920&bih=969#im
grc=uQGtK_oXgSBuHM:
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 Social Institutions

u Kinship relationships
– immediate and extended family
u Reference groups
u family,coworkers
u professional associations, trade
organizations

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International Business
Cultural differences

Click to play
video

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Video: Doing Business in China
u http://webcast.massey.ac.nz/Mediasi
te/Play/cc1ea9f71d1d4fbe9e3ceda1a
1458cfe1d

u Key players
u Key issues

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