The Economic Environment
Chapter 4
INTERNATIONAL MARKETING
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
Population demographics
Age distribution,life expectancies,
household size,urbanization
Income
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…
continued
Availability and quality of infrastructure
Rail traffic networks for distribution capabilities
Communication systems for marketing
Energy (electrical and fuel) consumption
Foreign involvement in the economy
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
Levels of economic integration
Free Trade Area
Goods and services are freely trades among all members,Each
country maintains its own trade barriers vis-à-vis nonmembers.
Customs Union
Members establish a common trade policy with respect to
nonmembers.
Common Market
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
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
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
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
has all the characteristics of a common market,
harmonizes taxation,
harmonizes government spending,and
harmonizes monetary policies,
establishes a common currency
Economic Integration in
Regional Markets
Free
Trade
Area
Economic Union
Customs Union
Common Market
Harmonization of
Economic Policies
Factor Mobility
Common External
Trade Policy
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
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
EU integration may result in increased
restrictions on trade and investment by outsiders,
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
Plants in Mexico that make goods and parts or
process food for export back to the U.S.
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
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
(FFTA)
An agreement to form a
regional trading zone
stretching from
Point Barrow,Alaska
to Patagonia,Argentina.
Integration in Asia
Asia-Pacific 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
Middle East
Economic Community of West
African States (ECOWAS)
Afro-Malagasy Economic Union
East Africa Customs Union
West African Economic
Community
Maghreb Economic Community
Gulf Cooperation Council (GCC)
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 long-term sustainable
competitive advantage
through expansion,
acquisitions and alliances.
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,
Chapter 4
INTERNATIONAL MARKETING
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
Population demographics
Age distribution,life expectancies,
household size,urbanization
Income
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…
continued
Availability and quality of infrastructure
Rail traffic networks for distribution capabilities
Communication systems for marketing
Energy (electrical and fuel) consumption
Foreign involvement in the economy
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
Levels of economic integration
Free Trade Area
Goods and services are freely trades among all members,Each
country maintains its own trade barriers vis-à-vis nonmembers.
Customs Union
Members establish a common trade policy with respect to
nonmembers.
Common Market
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
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
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
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
has all the characteristics of a common market,
harmonizes taxation,
harmonizes government spending,and
harmonizes monetary policies,
establishes a common currency
Economic Integration in
Regional Markets
Free
Trade
Area
Economic Union
Customs Union
Common Market
Harmonization of
Economic Policies
Factor Mobility
Common External
Trade Policy
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
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
EU integration may result in increased
restrictions on trade and investment by outsiders,
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
Plants in Mexico that make goods and parts or
process food for export back to the U.S.
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
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
(FFTA)
An agreement to form a
regional trading zone
stretching from
Point Barrow,Alaska
to Patagonia,Argentina.
Integration in Asia
Asia-Pacific 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
Middle East
Economic Community of West
African States (ECOWAS)
Afro-Malagasy Economic Union
East Africa Customs Union
West African Economic
Community
Maghreb Economic Community
Gulf Cooperation Council (GCC)
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 long-term sustainable
competitive advantage
through expansion,
acquisitions and alliances.
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,
