They consume most of their output and barter the rest for simple goods and

They consume most of their output and barter the rest

This preview shows page 49 - 50 out of 53 pages.

In a subsistence economy, the vast majority of people engage in simple agriculture. They consume most of their output and barter the rest for simple goods and services. These economies offer few market opportunities. Many African countries fall into this category. RAW MATERIAL EXPORTING ECONOMIES: These economies are rich in one or more natural resources but poor in other ways. Much of their revenue comes from exporting these resources. Some examples are Chile (tin and copper) and the Democratic Republic of the Congo (copper, cobalt, and coffee). These countries are good markets for large equipment, tools and supplies, and trucks. If there are many foreign residents and a wealthy upper class, they are also a market for luxury goods. EMERGING ECONOMIES (INDUSTRIALIZING ECONOMIES): In an emerging economy, fast growth in manufacturing results in rapid overall economic growth. Industrialization typically creates a new rich class and a growing middle class, both demanding new types of imported goods—with more imports of raw textile materials, steel, and heavy machinery, and fewer imports of finished textiles, paper products, and automobiles. As more developed markets stagnate and become increasingly competitive, many companies are now targeting growth opportunities in such emerging markets as Indonesia and Malaysia. And although the BRIC countries—Brazil, Russia, India, and China—used to exemplify emerging economies, among them only India is still seen as a country with significant growth potential. INDUSTRIAL ECONOMIES: Industrial economies are major exporters of manufactured goods, services, and investment funds. They trade goods among themselves and also export them to other types of economies for raw materials and semi- finished goods. The varied manufacturing activities of these industrial nations and their large middle class make them rich markets for all sorts of goods. Examples include Canada, the United States, Japan, and Norway. The second economic factor is the country’s income distribution . Industrialized nations may have low-, medium-, and high-income households. In contrast, countries with subsistence economies consist mostly of households with very low family incomes. Even poor or emerging economies may be attractive markets for all kinds of goods. These days, companies in a wide range of industries—from cars to computers to candy—are increasingly targeting even low- and middle-income consumers in emerging economies. Nations differ greatly in their political-legal environments. In considering whether to do business in a given country, a company should consider factors such as the country’s attitudes toward international buying, government bureaucracy, political stability, and monetary regulations. Companies must also consider a country’s monetary regulations. Sellers want to take their profits in a currency of value to them. Ideally, the buyer can pay in the seller’s currency or in other world currencies. Short of this, sellers might accept a blocked currency—one whose removal from the country is restricted by the buyer’s government—if they can buy other goods in that country that they need or can sell elsewhere for a needed currency. In addition to currency limits, a changing exchange rate can create high
Image of page 49
Image of page 50

You've reached the end of your free preview.

Want to read all 53 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture