Lnternational marketing. The global economic environment. (Chapter 3)

1.

lnternational Marketing
Chapter 3
The Global Economic
Environment

2.

• The economic environment
• Regional economic

3.

A. The Economic environment
Economic environment is major determinant of
global market potential & opportunity.
The global economic environment plays a large role
in the development of new markets for
organizations.

4.

Economic factors
1. The World Economy
It refers to the economy of the world,
comprising of different economies of individual
countries, with each economy related with the
other in one way or another.
In the past years the global economy has
changed rapidly. Particularly marked has been
the development of world economic integration
and standardised products.

5.

The World Economic Forum is an independent
international organization committed to
improving the state of the world by engaging
business, political, academic and other leaders of
society to shape global, regional and
industry agendas.

6.

"Improve the State of the World:
Rethink, Redesign, Rebuild"

7.

8.

• Li ke qiang stated China's policies on increasing
domestic demand, readjusting economic structure
and transforming the economic growth pattern.
• As a responsible big developing country, China will
remain steadfast on the path of peaceful development
and work with other countries in a joint endeavor to
build a harmonious world of enduring peace and
common prosperity.

9.

10.

11.

2. Economic systems
Foreign countries often will have different
economic systems from the domestic
market and adjustments often need to be
made to take these differences into account.
3 main types of economic systems:
Market economy(Capitalist)
Planned economy(Socialist)
Mixed economy(Mixed)

12.

• Market economy(Capitalist)
A country may operate in a market economy
where private individuals own most of the
property and operate most of the businesses.
A market economy is usually the best economic
environment for a foreign business because of the
protection of private property and contract rights.

13.

• The essential feature of a market economy is the
total freedom of individuals and businesses to
choose from between an array of goods and
services according to their tastes and preferences.
• The decisions of what to produce, whom to
produce for in a world of limited resources, are
addressed by the forces of the market, namely the
supply and demand of a particular commodity in
question.

14.

• Planned economy(Socialist)
The state controls macro-economic policy and
entrepreneurial activity.In other words, there is
state control of the factors of production and
centralized, state planning—what to produce, how
to produce it, and who to produce it for—but with
some freedom for individual decisions, like which
job to take.
Operating businesses in this environment will be
more difficult

15.

16.

• Mixed economy(Mixed)
A degree of private economic freedom mixed with
a degree of government regulation of markets.
Most mixed economy can be described as market
economy with strong regulatory oversight, in
addition to having a variety of governmentsponsored aspects.

17.

3. Stages of Economic Development
High-Income Countries
Upper-Middle-Income Countries
Lower-Middle-Income Countries
Low-Income Countries

18.

• High-Income Countries
GNP per capita above $9,656
– Importance of service sector, information
processing and exchange, and intellectual
technology
– Knowledge as key strategic resource
– Orientation toward the future

19.

• Upper-Middle-Income Countries
GNP per capita between $3,126 to $9,655
– Rapidly industrializing
– Rising wages
– High rates of literacy and advanced education
– Lower wage costs than advanced countries
Argentina, Brazil, Mexico, South Africa

20.

• Lower-Middle-Income Countries
GNP per capita between $786 and $3,125
– Early stages of industrialization
– Cheap labor markets
– Factories supply items such as clothing, tires,
building materials, and packaged foods
Poland, Turkey, Indonesia

21.

• Low-Income Countries
GNP per capita of $785 or less
– Limited industrialization
– High percentage of population involved in
farming
– High birth rates
– Low literacy rates
– Heavy reliance on foreign aid
– Political instability and unrest

22.

Canada
Nepal
Cuba
High
Upper-middle
Finland
Ukraine
Brazil
Thailand
China
Lower-middle
low

23.

CASE

24.

Group of Twenty Finance Ministers
and Central Bank Governors
The G20 is the leading international cooperation
forum, focusing on the most important
international economic and financial issues.
It was formally established in September 1999

25.

Argentina Australia Brazil
Germany
India
Indonesia
S.Arabia
Turkey
UK
Italy
US
Canada China
Japan
UN
France
Mexico Russia
South Korea South Africa

26.

Argentina, Australia, Brazil, Canada, China,
France, Germany, India, Indonesia, Italy, Japan,
the Republic of Korea, Mexico, Russia, Saudi
Arabia, South Africa, Turkey, the United
Kingdom, the United States of America
+
European Union
(represented by the President of the
European Council and by
Head of the European Central Bank)

27.

G20 members represent almost:
90% of global GDP.
80% of international global-trade.
2/3 of the world's population lives in G20
member countries.
84% of all fossil fuel emissions are produced by
G20 countries

28.

The objectives of the G20 refer to:
1. Policy coordination between its members in
order to achieve global economic stability,
sustainable growth;
2. Promoting financial regulations that reduce
risks and prevent future financial crises;
3. Modernizing international financial architecture.

29.

• Once it became a venue for the meetings of heads
of states and governments, the G20 has been
considered a major mechanism for international
economic cooperation, regulating financial
markets and influencing global economic policy.
• ALSO.The G20 maintains close relationship with
formal international organizations, such as the
International Monetary Fund , the World Bank,
the Organization for Economic Cooperation and
Development , the World Trade Organization , the
United Nations and International Labor
Organization regularly take part in G20 meetings.

30.

4. Purchasing Power of currency
It is the number of goods or services that can be
purchased with a unit of currency.
Purchasing power is important because all else
being equal, inflation decreases the amount of
goods or services you'd be able to purchase.

31.

• The more goods and services that can be
purchased with the same amount of money in any
form.the higher the purchasing power of the
individual.
• It is all about receing the most benefit without
incurring any additional expense.
• RMB :1000(2005)- 576(2013)

32.

CASE
Exchange rate

33.

Discussion Time
• Why appreciate? Who will benefit from it?
• How about the disadvantages?

34.

Why appreciate?
1. External:
Countries like Japan .US and EU countries are
pressing China hard to adjust its exchange rates
to push the yuan value higher.
They expect to reduce their trade deficit with
China through yuan appreciation. And they
hope that the RMB appreciation would help
ease their domestic inflation pressure.

35.

2. Internal:
It would benefit China's imports of products .
imports of raw materials, energy, technology,
equipment and other products.
Consumer in china just spend a little money and
even the same price you can easily buy highquality high-end imported goods .Better for
traveling overseas or studing abroad.

36.

It will help rebalance China's economic growth
structure from reliance on exports to domestic
demand. the producers focus less on exports
markets. Rather, they will concentrate more on
the domestic market.
Allowing the currency to rise modestly can
help contain inflation.

37.

Disadvantages
The domestic market increased competition. more
imported goods into the domestic market with
lower price. Lack of independent innovation, not
grasped the core technology, relying on low-cost
domestic SMEs will fall into a very difficult
situation, seriously affected the development of
national enterprises.

38.

It would facilitate imports of agricultural
products, which would be disastrous for China's
more than 500 million farmers. leading to more
job losses.
If the yuan appreciates against the dollar,
expectations of further gains in the value of the
yuan would lead to increased capital inflows,
which would bring financial instability and would
endanger China's financial security.
Foreign demand for China goods will reduce as
they get more 'expensive'.

39.

B. Regional Economic
Asia(China.Japan...) & Oceania
North America(US) & Latin America
Europe ( France.UK...) & North Africa

40.

A. Asia & Oceania

41.

Asia-Pacific Economic Cooperation
• APECwas established in 1989 in response to the
growing interdependence among Asia-Pacific
economies.
• It has become the primary regional vehicle for
promoting open trade and practical economic
cooperation. Its goal is to advance Asia-Pacific
economic dynamism and sense of community.

42.

• APEC has 21 members:
Australia; Brunei; Canada; Chile; People's
Republic of China; Hong Kong, China; Indonesia;
Japan; Republic of Korea; Malaysia; Mexico;
New Zealand; Papua New Guinea; Peru; The
Republic of the Philippines; The Russian
Federation; Singapore; Chinese Taipei; Thailand;
United States of America; Viet Nam.

43.

• APEC has worked to reduce tariffs and other
trade barriers across the Asia-Pacific region .
creating efficient domestic economies and
dramatically increasing exports. APEC also works
to create an environment for the safe and efficient
movement of goods, services and people across
borders in the region through policy alignment
and economic and technical cooperation.
• Free and open trade and investment helps
economies to grow, creates jobs and provides
greater opportunities for international trade and
investment.

44.

How important is APEC to China?
• China seems to accept that APEC is important to
its overall economic relations with the rest of the
world.
• The APEC region accounts for more than 70% of
China's global trade, and a much higher
percentage of its foreign capital inflows.

45.

• Since it joined, China has reduced its general
tariff rates for imported goods from APEC
members from nearly 40% in 1991 to 9.8% by the
end of 2010.
• In addition to this, China created a US$10 million
“APEC cooperation fund” to encourage and
support Chinese enterprises to participate in
APEC economic and technical cooperation,
including education for Chinese companies
looking to develop business and invest in other
APEC.

46.

• “China will firmly uphold regional peace and
stability and help cement a foundation for a winwin situation in the Asia-Pacific” , President Xi
Jinping told an APEC business forum, as he
emphasized his country was the biggest trading
partner and export market for many nations in the
region.

47.

Chinese Market

48.

B.North America & Latin America

49.

North American Free Trade Agreement(NAFTA)
In 1994, NAFTA came into force.It’s a agreement
between Canada, the US, and Mexico. It removes
many international trade barriers like tariffs.quotas
and export subsides.
The agreement involve Market Access for
Goods.Protection for Foreign
Investment .Protection for Intellectual
Property .Easier Access for Business
Travelers.Access to Government Procurement

50.

• It created the world's largest free trade area, which
now links 450 million people producing $17
trillion worth of goods and services.
2 developed countries + 1 developing country
Why?

51.

Today, the NAFTA partners
exchange about US$2.6 billion
in merchandise
on a daily basis with each other.
That’s about US$108 million per hour.

52.

• Since NAFTA came into effect, Canada-U.S.
merchandise trade has more than doubled while
trade between Mexico and the U.S. has more than
quadrupled.
• It has helped to stimulate economic growth and
create jobs. Furthermore, NAFTA has provided
businesses with better access to materials,
technologies, investment capital, This has helped
make their businesses more competitive.

53.

C.Europe & North Africa

54.

European Union

55.

The European Union (EU) is an economic and
political union of 27 member states which are
located primarily in Europe.
The EU has developed a single market through a
standardised system of laws which apply in all
member states. EU policies aim to ensure the free
movement of people, goods, services, and capital,and
maintains common policies on
trade,agriculture,regional development.

56.

Austria, Belgium, Bulgaria, Cyprus, the Czech
Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, the Netherlands,
Poland, Portugal, Romania, Slovakia, Slovenia,
Spain, Sweden, and the United Kingdom.

57.

Common external tariff on all goods entering the
market. Once goods have been admitted into the
market they cannot be subjected to customs duties,
discriminatory taxes or import quotas, as they travel
internally.
Free movement of capital is intended to permit
movement of investments such as property purchases
and buying of shares between countries.

58.

Free movement of persons means that EU
citizens can move freely between member states
to live, work, study or retire in another country.
Free movement of services and of establishment
allows self-employed persons to move between
member states in order to provide services on a
temporary or permanent basis.
The euro has become the second reserve currency in
the world.

59.

The European debt crisis

60.

Summary
The economic environment involves the world
economy. economic systems.stages of economic
development and purchasing Power of the currency
Regional economic : Asia & Oceania (APEC). North
America & Latin America(NAFTA) and Europe &
North Africa (EU)

61.

Reference
• http://www.weforum.org/en/
世界经济论坛官方网站
• http://www.g20.org/ (G20)
• http://www.apec.org/ (APEC)
http://europa.eu/index_en.htm (欧盟)
• http://www.chinadaily.com.cn/bizchina/

62.

Summary
• The political environment: Type of government.
Party system. Economic policy of the
government. Political stability.Political relations
between home and host countries
• The legal environment: The domestic laws of
your home country.The domestic laws of each of
your foreign markets.International law in general