The Global Economic Environment

Global Marketing

What’s happening?• Asia Pacific• Western

Europe• North America• South America

Why and what are the

implications?

THE ECONOMIC ENVIRONMENT

• Overview Local, regional, and global economic

environments are interactive. What happens within and among them profoundly influences marketing mix decisions.

The Local Economy - The Country Where Marketing Takes Place

• The Consumers1. Disposable income (after-tax

income)

2. What, when, where, and how much consumers buy is influenced by disposable income

The Local Economy - The Country Where Marketing Takes Place

• The Country1. Healthy economies facilitate

higher purchasing power for consumers

The Local Economy - The Country Where Marketing Takes Place

2. Economic variables: GDP; GDP per capita; GDP growth rates; savings and investments rates; inflation and unemployment rates; imports and exports; inflow and outflow of FDI; number of global corporations in the country; structure of industries; commercial, fiscal, and monetary policies of the central government

3. These variables reflect the overall country, not specific groups of consumers - don’t generalise

The Local Economy - The Country Where Marketing Takes Place

• The Competition - Know Where You Stand in Relation to the Competition

4. Porter’s five forces determining the state of competition: rivalry among existing firms, potential impact of newcomers, power of suppliers, power of buyers, substitute goods

5. Prominence of each force varies by industry

The Regional Economy• Agreements Among Nations Include

1. Free-trade areas - no barriers among members, national barriers against the rest of the would

2. Customs unions - no barriers among members, adopt common barriers against the rest of the world

3. Common markets - form customs unions with free movement of labor and capital

4. Economic unions - one economy, one currency, unified fiscal and monetary policies

The Regional Economy

• The European Economic Integration

1. 15 Western European countries moving towards economic union

2. EU - to enhance competitive edge of EU firms in relation to non - EU firms

The Regional Economy

• The Asian Pacific Economies1. The NICs - South Korea, Taiwan, Hong Kong, Singapore -

high-value-added competitors

2. Malaysia, Indonesia, Thailand, Philippines - entering high-value-added marketers

3. Trade in region has been fueled by

a) Increasing domestic demand

b) Expanding business involvement overseas

c) Growing competitiveness of firms based in region

The Regional Economy

• The North America Free Trade Agreement (NAFTA)

1. U.S., Canada, Mexico

2. Designed to increase size of north American market, reduce trade barriers within, increase competitive edge of member firms

The Global Economy• Increasing Trade and Investment1. Why exports increased

a) Businesses - to improve competitiveness and performance

b) Governments - to stimulate domestic economic growth2. Foreign direct investment growing faster than

exportsa) Role in transferring technology, managerial expertise,

financial resourcesb) Five major sources: U.S., United Kingdom, Germany,

France, Japan

The Global Economy

• Increasing Interdependence - Our fate is tied to that of others

• Increasing Competition - More players, More intensive competition

• Increasing Complexity - Policies designed for one country affect the performance of others

THE GLOBALIZATION OF THE U.S. ECONOMY

• Future Growth Cannot Rely Exclusively on Domestic Market

• Firms with Global Operations can better1. Develop new products

2. Establish new markets3. Cross-subsidize products and markets - use

financial resources from one market to fight in another

Thank You!