Global Marketing Management A European Perspective Economic Environment

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 2 The World Economy - Overview zWorld Economy has changed profoundly during the last 50 years yEmergence of global markets yIntegration of world economy

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 3 Economic Systems zThree types of economic systems yCapitalist ySocialist yMixed zClassification based on dominant method of resource allocation yMarket allocation yCommand or central plan allocation yMixed allocation

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 4 Economic Systems – Market Allocation zRelies upon consumers to allocate resources: “Economic Democracy” zRole of state yPromote competition yEnsure customer protection zExamples of predominately market economies yWestern European Countries, United States, Japan

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 5 Economic Systems – Command Allocation zState has broad powers to serve public interest yDecides which products to make yDecides how to make them zElements of marketing mix are not used as strategic variables zExamples of countries that relied upon command allocation systems for decades yChina, former USSR, India

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 6 Economic Systems – Mixed Systems zThere are in reality no pure market or command allocation systems among the world’s economies zVariables to determine degree of economic freedom yTrade policy yTaxation policy yGovernment consumption of economic output yMonetary policy yCapital flows yForeign investment yBanking policy yWage and price controls yProperty rights yEtc.

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 7 Stages of Market Development zGlobal country markets are at different stages of development zGNP per capita provides a useful way of grouping countries into different categories zCategories are a useful basis for yGlobal segmentation yTarget marketing

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 8 Stages of Market Development – High Income Countries zGNP per capita above € 7,960 (E.g., Japan, Sweden) z“Post-Industrial Countries” zOrientation toward the future zImportance of interpersonal relationships

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 9 Stages of Market Development – Upper Middle Income Countries zGNP per capita between € 2,575 and € 7,960 (E.g., Malaysia) zCharacteristics yRising wages yHigh rates of literacy yAdvanced education zUpper middle income countries yExperience rapidly, export-driven economic growth yBecome formidable competitors

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 10 Stages of Market Development – Lower Middle Income Countries zGNP per capita between € 650 and € 2,575 (E.g., Indonesia) zCharacteristics yEarly stages of industrialization yExpanding consumer markets zMajor competitive advantage in the production of mature, standardized, labour-intensive products

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 11 Stages of Market Development – Low Income Countries zGNP per capita less than € 650 (E.g., Bangladesh) zCharacteristics yLimited industrialization yHigh birth rates yLow literacy rates yHeavy reliance on foreign aid yPolitical instability

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 12 Income and Purchasing Power (1) zIncome ySingle most important indicator of market potential zPurchasing Power Parities yComparison of goods and services that can be bought with local currency in different countries zGross National Product (GNP) ySum of the money values of all final goods and services produced during a year

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 13 Income and Purchasing Power (2) zTop 10 Nations ranked by GNP/Capita (1997) 1.Luxembourg 2.Switzerland 3.Japan 4.Norway 5.Denmark 6.Singapore 7.Germany 8.Austria 9.United States 10.Belgium

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 14 Income and Purchasing Power (3) zTop 10 Nations ranked by GNP/Capita adjusted for Purchasing Power (PPP) 1.Luxembourg 2.United States 3.Switzerland 4.Kuwait 5.Hong Kong 6.Singapore 7.Japan 8.Norway 9.Belgium 10.Canada

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 15 The Location of Population zAbout 74% of world income is concentrated in the Triad (North America, Japan, Western Europe) CountryPopulationGNP/Capita% World (thousands)(thousands)GNP yChina1,231, yIndia 965, yUnited States 267,000 23, yIndonesia 199, yBrazil 164,000 3,

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 16 Marketing And Economic Development zDoes marketing play an important role in the economic development of a country? zIs marketing only relevant to conditions that apply in affluent, industrialized countries? The marketing process of focusing an organization’s resources on environmental opportunities is a process of universal relevance

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 17 Regionalisation of Markets (1) zMany different forms of economic co-operation between countries yFree trade areas yCustoms unions zWorld Trade Organisation (WTO) yActs as mediator in global trade disputes yEnsures that trade flows are as smooth, predictable and as free as possible yCommon markets yEconomic unions

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 2/ 18 Regionalisation of Markets (2) zEuropean Union (EU) y27+ European member countries yMarket of million people zNorth American Free Trade Agreement (NAFTA) yUnited States, Canada, Mexico yMarket of 405 million people zAssociation of Southeast Asian Countries (ASEAN) y10 member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam)