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mkt4 - INTERNATIONAL MARKETING Chapter 4 The Economic...

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Unformatted text preview: INTERNATIONAL MARKETING Chapter 4 The Economic Environment The Economic Environment The Foreign Market The Foreign Market Environment Group of Five United States Britain France Germany Japan Group of Seven The Group of Five, plus Italy Canada Group of Ten The Group of Seven, plus Sweden the Netherlands Belgium Market Characteristics Market Characteristics Population demographics Income Age distribution, life expectancies, household size, urbanization Distribution of low, medium, and high incomes Gross domestic product per capita Purchasing power parity Consumption patterns Income spent on necessities and luxuries Product saturation or diffusion Product form differences Market Characteristics… Market Characteristics… continued Availability and quality of infrastructure Foreign involvement in the economy Rail traffic networks for distribution capabilities Communication systems for marketing Energy (electrical and fuel) consumption Degree of foreign direct investment in country or in a specific industry Rules governing foreign investment Impact of the economic environment on social development Urbanization, life expectancy, literacy rates, etc. Physical Quality of Life Index (PQLI) Regional Economic Integration Regional Economic Integration Levels of economic integration Free Trade Area Customs Union Members establish a common trade policy with respect to nonmembers. Common Market Goods and services are freely trades among all members. Each country maintains its own trade barriers vis­ à­vis nonmembers. Factors of production mobility is emphasized. A common external tariff is adopted Economic Union Integration and harmonization of economic and monetary policies is achieved leading to political union. The Free Trade Area The Free Trade Area Eliminates tariff and quota barriers among member countries Each country is free to set its own tariff and quota barriers against nonmember countries Can be formed for certain classes of goods or services only The Customs Union The Customs Union Tariff and quota barriers among member countries are eliminated Member countries establish common tariff and trade barriers against nonmember countries Tariff revenues are shared among members according to a prescribed formula The Common Market The Common Market No trade barriers among member nations No restriction on the movement of labor, capital, or technology across borders Member countries establish common tariff and trade barriers against nonmember countries The Economic Union The Economic Union has all the characteristics of a common market, harmonizes taxation, harmonizes government spending, and harmonizes monetary policies, establishes a common currency Economic Integration in Economic Integration in Regional Markets Economic Union Common Market Customs Union Free Free Trade Area Area Common External Common Trade Policy Trade Factor Mobility Harmonization of Harmonization Economic Policies Economic The Maastricht Agreement The Maastricht Agreement Created the European Union starting in January, 1994. Established European Community citizenship. Established a Central Bank and a system to manage monetary policy. Established price stability. Established a commitment by member countries to reduce governmental deficits Recommended a single currency, the Euro, become the common currency in 1999. European Integration European Integration Expected economic growth from: Eliminating transaction costs Economies of scale will be attained as production becomes concentrated More intense competition from EU companies Operations from one country can be freely expanded to other countries. Products can be freely sold across borders to millions of new consumers. Fortress Europe May Develop Fortress Europe May Develop EU integration may result in increased restrictions on trade and investment by outsiders. Economic Integration in the Economic Integration in the Americas The North American Free Trade Agreement (NAFTA) created the world’s largest free market. 390 million U.S., Canadian, and Mexican consumers The Maquiladoras The Maquiladoras Plants in Mexico that make goods and parts or process food for export back to the U.S. Other Economic Alliances Other Economic Alliances Import Substitution As a step to develop economic growth in small developing countries, new domestic industries are encouraged to produce goods that were formerly imported. Other Economic Alliances in the Other Economic Alliances in the Americas Southern Cone Common Market (Mercosur) Andean Common Market (ANCom) Central American Common Market (CACM) Caribbean Common Market (CARICOM) Caribbean Basin Initiative Free Trade Area of the Americas Free Trade Area of the Americas (FFTA) An agreement to form a regional trading zone stretching from Point Barrow, Alaska to Patagonia, Argentina. Integration in Asia Integration in Asia Asia­Pacific Economic Cooperation (APEC) Association of Southeast Asian Nations (ASEAN) East Asia Economic Group South Asian Association for Regional Cooperation (SAARC) Integration in Africa and the Integration in Africa and the Middle East Economic Community of West African States (ECOWAS) Afro­Malagasy Economic Union East Africa Customs Union West African Economic Community Maghreb Economic Community Gulf Cooperation Council (GCC) Economic Integration and the Economic Integration and the International Marketer Assessing opportunities and problems Marketers must envision the impact of integration on the firm’s mode of market entry (local production) increased scale of entry (interregional trade) the targeted markets’ readiness for change and develop a strategic response to build long­term sustainable competitive advantage through expansion, acquisitions and alliances. Determining Market Potential Determining Market Potential After analyzing the GDP and the per capital GDP from the provided data in table 4.3, determine if there is a strong correlation between the two macroeconomic indicators. In other words, can the GDP growth rates determine the market potential for exported products? If they are not strongly correlated can you list the factors that contribute to such situations. Hint: Rank the countries for both indicators. ...
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