Global Marketing Environment

Global Marketing Management by Lee & Carter, Keegan & Bhargava, Business Line, www.ilo.org,

Global marketing environment

......It is the environment comprising those variables, largely out of the organizations control but which it must account for, within which it conducts its business globally

Models of Environmental Analysis

Global Marketing Environment (Levels)

Why should firms analyze the global environment?

Reasons

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

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

1. Economic systems
1. Market allocation
Resource allocation is based on consumer demand Economic democracy Government acts as the watchdog Eg. US, Hong Kong, Singapore, Japan, Australia, etc.

2. Command allocation
State decides what to produce Little reliance on marketing mix variables Distribution handled by Government Eg. Cuba, Ukraine, Iran, Venezuela, etc.

3. Mixed system
Mix of the above Eg. Taiwan, UAE, Brazil, India, Sri Lanka, China, etc.
(based on economic freedom score by www.heritage.org, 2009

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)

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.,

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 more
Source: www.worldbank.org/data

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 39% of the world population 11% of world GNP Early stages of industrialization; LDCs India with $1410 falls in this category 7% of world population 7% of world GNP Rapidly industrializing and urbanizing Rising wages but lower than advanced countries

Lower-middle-income countries

Upper-middle income countries

.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 political problems making them unattractive for investment and operations Low income, no growth, civil strife Eg. Ethiopia, Mozambique

4. PCI, PPP, & Spread of Income

For low-unit cost product, population is an important economic variable For high-unit cost product, income is an important economic variable Spread of income within the population is more reliable 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 higher income groups attract global marketers
(*World Fact Book country comparison: GDP, 2009; Keegan & Bhargava, pp.50)

5. The location of population

Population an important economic variable for firms producing low-unit cost products The 10 most populous countries in the world account for roughly 60% of the world population and income 5 largest populous nations accounted for 48% of world income in the year 2000 Negative correlation between population growth rate and PCI

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

7. International Trade Alliances

Degrees of economic cooperation
Free trade area Customs union Common market Economic union

Forms of economic integration

6-18

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)

Customs Union (CU)

FTA +members agree to common external barriers Eg. Mercosur, Andean group

Common market (CM)

CU + free flow of factors (labour and capital) within the market Eg. Central American common market

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

Political Union
EU + political harmony + centralized government policies Eg. US and Canada

Forms of Economic Agreement: Examples

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

Major trading blocs

European Union Association of South East Asian Nations (ASEAN) North American Free Trade Area (NAFTA)

Asia Pacific Economic Cooperation (APEC)

6-26

9. International facilitating institutions

Thank you