International Economic Environments

Music Electronics – Philips, Sony, GE Confections – Cadbury, Nestlé, M&M/Mars The World Economy Many markets are moving from domestic to global. Assessing the Economic Environment Start by determining a country’s level of economic development…

Levels of Economic Development Industrialized Countries – High GDP per head;  $17,500 and above; lucrative, but competitive Emerging Markets -- $5,000 to 17,500 GDP per head  South America, Asia, Eastern Europe  Includes BEGs – Big Emerging Markets: Examples : China, India South Korea Argentina, Brazil, Mexico Russia

What makes Big Emerging Markets attractive? Relative political stability Sound currency, low inflation Pro business, fiscally-conservative, transparent government policies Sound corporate law Work ethics and a culture of integrity

Levels of Economic Development Developing Countries – “Third World” GDP per head < US $5,000  Primarily agrarian  Asia and Sub-Saharan Africa  Often neglected or under-served by large multinationals  Represent potential niche markets

Market Characteristics People characteristics Infrastructure Geographical features Economic integration

“People” Characteristics Population: size, distribution, HH size Income: average, range & distribution Consumption Brazil: 170 million people:  100 million full market participants  40 million in lower margin of market  30 million below lower margin  unemployment (13%) is up  wages are down  credit card delinquency is slowing  consumer confidence seems stable

HMR* in Brazil Approx. 20% of pop. Make up HMR market Pizza most popular takeout food, but considered expensive; opportunity for frozen pizza Best potential for HMR and consumer-ready foods in main southeast cities. Consumers in rural areas have not been heavily influenced by convenience food. low disposable incomes relaxed way of life allows more time for food preparation; home cooking preferred. few HHs have microwaves * Home Meal Replacements Agri-Food Trade Service: Agriculture & Agri-Food Canada;

Infrastructure Characteristics Communication systems for marketing. Energy (electrical and fuel) consumption/availability. Rail traffic networks for distribution capabilities. …impact on transportation, population distribution, market access, etc. Geographic Characteristics

Level of Economic Integration Integration: countries in a region coordinate market, trade, tariff and economic regulations Free Trade Area: member countries enjoy unrestricted trade across borders (NAFTA) Customs Union: + agree on common restrictions on non-member countries ( Southern African Customs Union - South Africa, Botswana, Lesotho, Namibia and Swaziland); Common Market: + eliminate cross-border restrictions on transportation, labor, etc. ( Caribbean Community – Antigua, Belize, Trinidad…) Economic Union: + adopt common currency and political system (European Union) Least integrated Most integrated