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    Global Marketing Environment

    Global Marketing Management by

    Lee & Carter, Keegan & Bhargava,Business Line, www.ilo.org,

    http://www.ilo.org/http://www.ilo.org/
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    Global marketing environment

    ......It is the environment comprising thosevariables, largely out of the organizations control

    but which it must account for, within which it

    conducts its businessglobally

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    Models of Environmental Analysis

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    Global Marketing Environment

    (Levels)

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    Why should firms analyze the global

    environment?

    Reasons

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    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

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    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

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    1. Economic systems

    1. Market allocationResource allocation is based on consumer demand

    Economic democracy

    Government acts as the watchdog

    Eg. US, Hong Kong, Singapore, Japan, Australia, etc.

    2. Command allocationState decides what to produce

    Little reliance on marketing mix variables

    Distribution handled by Government

    Eg. Cuba, Ukraine, Iran, Venezuela, etc.

    3. Mixed systemMix of the above

    Eg. Taiwan, UAE, Brazil, India, Sri Lanka, China, etc.(based on economic freedom score by www.heritage.org, 2009

    http://www.heritage.org/http://www.heritage.org/
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    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)

    http://www.heritage.org/http://www.heritage.org/
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    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.,

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    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 moreSource: www.worldbank.org/data

    http://www.worldbank.org/datahttp://www.worldbank.org/data
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    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

    Lower-middle-income countries 39% of the world population

    11% of world GNP

    Early stages of industrialization; LDCs

    India with $1410 falls in this category

    Upper-middle income countries

    7% of world population 7% of world GNP

    Rapidly industrializing and urbanizing

    Rising wages but lower than advanced countries

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    .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 politicalproblems making them unattractive for investment and

    operations Low income, no growth, civil strife

    Eg. Ethiopia, Mozambique

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    4. PCI, PPP, & Spread of Income

    For low-unit cost product, population is an importanteconomic variable

    For high-unit cost product, income is an importanteconomic variable

    Spread of income within the population is morereliable 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 higherincome groups attract global marketers

    (*World Fact Book country comparison: GDP, 2009; Keegan & Bhargava, pp.50)

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    5. The location of population

    Population an important economic variablefor firms producing low-unit cost products

    The 10 most populous countries in the world

    account for roughly 60% of the worldpopulation and income

    5 largest populous nations accounted for 48%

    of world income in the year 2000 Negative correlation between population

    growth rate and PCI

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    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

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    7. International Trade Alliances

    Degrees of economic cooperation Free trade area

    Customs union

    Common market Economic union

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    6-18

    Forms of

    economic integration

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    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)

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    Common market (CM)

    CU + free flow of factors (labour and capital)

    within the market

    Eg. Central American common market

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    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

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    Political Union

    EU + political harmony + centralized

    government policies

    Eg. US and Canada

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    Forms of Economic Agreement: Examples

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    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

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    6-26

    Major trading blocs

    European Union

    Association of

    South East Asian

    Nations (ASEAN)

    Asia Pacific

    Economic

    Cooperation (APEC)

    North American

    Free Trade Area

    (NAFTA)

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    9. International facilitating institutions

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    Thank you

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