CHAPTER 2

INTERNATIONAL
ENVIRONMENT
VTHN
ngocvth@uel.edu.vn
CONTENTS
The impact of international
01 environmental factors

02 Global trends

03 Environmental Analysis
Model
 “For now, the world seems to be characterized
by relatively strong growth in the United States,
disappointing but improving growth in Europe
and Japan, slowing growth in China and
weakness in many other emerging markets—the
one big exception being India, where growth is
actually quite impressive” (Deloitte, 2016)
 1.1 Overview

Need to understand
Pace of change increasing global trends & trends
within individual
Lack of familiarity with markets
international environment
Objective & experiential
Lack of knowledge about knowledge
foreign markets creates
uncertainty Constant scanning of
markets
 1.2 Global environment

- Connected Africa
- Geo-political realignment
- US-China trade war
- Depopulation waves
- Xi-Putin relationship
- Power of global brands
- Growing transparency
- Cyber-insecurity
- Economic power shift – emerging markets
- Changing consumer demographics & expectations
 1.3 Political forces
The role of the government
1. those that promote (i.e., encourage
or facilitate) IM marketing
transactions;
2. those that impede such transactions;
3. those that compete with or replace
IM transactions by private business
firms.
Government controls
Export controls
- restrict the shipment of
defense products, protect the
domestic economy from a
drain of scarce materials, &
enhance national security
- forms of protectionism or
trade barriers
License requirements
- requiring licenses that be
obtained before goods may be
exported/ imported to regulate
the nature of external trading
relationships
Tariffs
- protective tariffs are high
b/c it is designed to protect
domestic industry
- revenue tariffs are low b/c
it is designed to generate
maximum revenue for the
government
Government controls

Quotas Extra taxes Exchange controls

- absolute quotas limit - type of value-added tax, - limit the amount of
absolutely the amount that but does not affect domestic foreign currency that an
can be imported (extreme case is producers. importer pay for goods
the zero quota/embargo) - restrict imports and thus purchased and an exporter
- tariff quotas permit affect an exporter. receive & hold for goods
importation of limited sold to a foreign country.
quantities at low rates of duty
(excess subject to a substantially
higher rate)
- voluntary quotas to protect
domestic companies
Promotional activities

Government export promotion programs, and programs for IM activities in general,

are designed to deal with the following major barriers:

1. lack of motivation , as IM is viewed as more time-consuming, costly, risky, and

less profitable than domestic business;

2. lack of adequate information ;

3. operational/resource-based limitations.
State trading
- government engagement in commercial operations, directly
or through agencies under its control, either in place of or in
addition to private traders.

Action Against Government

- Civil War
- Terrorism
- Pressure Groups
- Strikes
 1.4 Economic forces
Key Economic Variables
- Population characteristics: total population and location of the
population within the country (for example, degree of urbanization)

- Income distribution: determine purchasing power, ownership of

consumer durable goods

- GNI per capita - Natural Resources

- Growth rate - Taxation
- Inflation - Trade barriers “Chinese consumers and
- Infrastructure: communications, energy, & transportation companies save too much, while
the West saves too little”
facilities.
Roach, cited on BBC, 2012
 Market development
WORLD BANK CLASSIFICATION Source - World Development Indicators 2018. World Bank
1. low-income economies (GNI per capita <US$955)
(Burundi, Tanzania, Rwanda, Chad)

2. lower middle-income economies (GNI per capita US$996 - US$3,895) (India, Egypt,
Nigeria, Vietnam)

3. upper middle-income economies (GNI per capita US$3,896 - US$12,055)

(Botswana, Bulgaria, Mexico, Romania, Thailand)

4. high-income economies (GNI per capita >US$ 12,055) (Argentina, Croatia, Panama,
Bahrain, France, Israel, Japan)

Developed countries Australia, New Zealand, Denmark, UK, US, Japan

Developing countries Malaysia, Costa Rica, Egypt, Uruguay
 Emerging markets
• Nations undergoing rapid economic growth and industrialization
• Significant secondary sector
• Rising affluence and education
• Emerging middle class
• Developing infrastructure
• Slowing EM economies
• BRICs with annual GDPs > US$1 trillion (Brazil, Russia, India, China, South
Africa), CIVETs (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa)

• E7 (China, Russia, India, Brazil, Turkey, Mexico, Indonesia)

• BEMs (China (PRC), India, Indonesia, South Korea, Brazil, Mexico, Argentina, South Africa,
Poland, and Turkey)
“India is a bright spot among emerging markets”
(Moody’s, 2016)
 Some areas of change
- Asia are expanding trade, investment, and technology links by themselves, rather
than depending on Europe/ US in the past

- China is now the world’s largest exporter

- China and India are new ‘giants’ of the world

- The US, the EU, Hong Kong, Japan and South Korea are the five top major
markets

- Latin America (Argentina, Chile, Mexico, Colombia, and Peru) – are growing rapidly and
economic conditions have improved significantly.

- Middle East and North African (MENA) region has lagged behind in economic
growth and globalization.
 Infrastructure

Transport (Road and rail networks)

Commercial (Banks, Distribution channels)
Communication (Technology, Media availability)
 2.1 Population trends
#1 World population 7.7 bn. (UN, 2018)
#2 Aging populations
#3 Emerging global middle class
#4 Urban v rural divide
#5 Multi-cultural societies
#6 Rising life-expectancy
#7 Migration
#8 Talent gap

“Sixty per cent of the global population lives in Asia (4.4 bill)”
(United Nations, 2016)
2.2 Tech trends
# 4.1 bn. Internet uses in 2019
# Take-up of tech products varies across countries
# Asia-Pacific region most growth in new internet
users
# 2.5 bill smartphone users in 2019 (Statista, 2019)
# Use of social media
# Worldwide retail E-commerce sales will reach
$2.8 trill. (Shopify, 2018)
“Facebook had 2.27 billion monthly active users”
(Facebook, 2018)

APPS Instagram YouTube Twitter

900 bn. hours > 1 bn. people use

using apps YouTube, local
(USA Today, 2017) versions in 88 countries
(YouTube, 2016)
Instagram 800 317 million active
mill users, 50 Twitter users
mill active (Statista, 2016)
“The online FMCG market is set to grow by
17% between now and 2022” (Forrester, 2018)
3. Environmental
Analysis Model
 3.1 SWOT analysis

Helpful Harmful

Internal Strengths Weaknesses

External Opportunities Threats

3.2 PEST analysis

Political Economic

Social Technological
PEST analysis vs SWOT analysis

Strengths Political

Weaknesses Economic

Opportunities Social

Threats Technological
International
institutions
● WTO

● ASEAN

● AFTA

● APEC

● IMF
 Summary
• General lack of familiarity with markets
• Every market different – don’t make
assumptions
• A wide range of factors to take into
consideration
• Fast changing global marketplace
• Importance of continuous monitoring of
international markets to identify changes
• Very difficult to eliminate risk, but can manage
it
 ?
What are today’s current
issues potentially affecting
international marketing and
what impact are they likely to
have?
 Useful Websites

journalofworldbusiness.com unctad.org
wto.org Internetworldstats.com
worldbank.org globaltrends.com
oecd.org Mckinsey.com