Lnternational Marketing lnternational Marketing Chapter 3 The Global Economic Environment

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  lnternational Marketing
  
  Chapter 3
  The Global Economic Environment
  

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  The economic environment
  
  Regional economic
  
  
  

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  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.
  
  
  

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  Economic factors
  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.
  

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  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.
  
  

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

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  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.
  

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  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)
  
  
  
  

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  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.
  
  

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  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.
  

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  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
  

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  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 government-sponsored aspects.
  
  
  

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

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  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
  
  

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  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
  
  

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  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
  

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  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
  

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

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  CASE
  

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  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
  
  

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

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  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)
  

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  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
  

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

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  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.
  

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  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.
  
  
  

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  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)
  
  
  
  
  

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  CASE
  Exchange rate
  

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

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  Why appreciate?
  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.
  
  
  

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  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 high-quality high-end imported goods .Better for traveling overseas or studing abroad.
  
  
  
  
  

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  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.
  

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  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.
  
  
  
  

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  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'.
  

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

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  A. Asia & Oceania
  

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  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.
  

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  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.
  

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  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.
  

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  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.
  

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  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.
  

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  “China will firmly uphold regional peace and stability and help cement a foundation for a win-win 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.
  
  
  

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  Chinese Market
  
  
  

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  B.North America & Latin America
  

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  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
  
  
  
  

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  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?
  
  

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  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.
  
  
  

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  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.
  
  

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  C.Europe & North Africa
  

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  European Union
  

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  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.
  

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  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.
  

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  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.
  

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  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.
  

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  The European debt crisis
  

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  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)
  
  

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  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/
  
  
  
  
  
  
  
  
  
  
  
  

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  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
  
  

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