Economic Environment in

IM
Dr Ajitabh Dash
Introduction
The economic environment is an
important factor when considering
global operations.
It is made up of the international
economic structure that affects
marketing between nations and the
economy of the nations in which it
conducts trade.
This analysis include:
How big is the population and at
what rate is it growing?
Where is the population located and
how dense is it?
What is the population age and
distribution?
What is its disposable income and
distribution?
 Answers to these questions will
reveal
Current and future demand
The distribution strategy needed
Product strategy
the marketing opportunities available to
different
segments of the population
whether the population can afford the
goods and services
which segments offer the most potential.
 Classification of economies
less developed or lesser developed, in the earlier
stages of industrialization, growing domestic market
with increasing competitive threat (e.g. Malawi);
newly emerging, with decreasing dependence on
agriculture, industrialization, rising wages, rising
literacy rates, formidable competitors (e.g.
Botswana);
emergent, where industrialization is advanced (e.g.
Mexico);
post-industrial, marked with a knowledge
economy, information processing where new
products opportunities are in innovation (e.g. Japan).
World Banks Classification of
economies
The nature of economies and their
organizational implications
Exchange rate
The price of one currency expressed
in terms of another;
the number of units of one currency
that can be exchanged for another.
Currency risk Potential harm that
arises from changes in the price of
one currency relative to another.
Implications of Exchange
rate
The values of these national currencies, and thus their
exchange rates, fluctuate constantly. This fluctuation
means managers must keep three things in mind:
the prices the firm charges can be quoted in the firms
currency or in the currencies of its foreign customers;
the firm and its customers can use the exchange rate
as it stands on the date of each transaction, or they can
agree to use a specific exchange rate; and
because several months can pass between placement
and delivery of an order, fluctuations in the exchange
rate during that time can cost or earn the firm money.