global marketing management a european perspective
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Global Marketing Management A European Perspective. Economic Environment. Warren J. Keegan Bodo B. Schlegelmilch. Overview. The World Economy – An Overview Economic Systems Stages of Market Development Income and Purchasing Power Parity Regionalisation of Markets Summary. - PowerPoint PPT PresentationTRANSCRIPT
Global MarketingManagementA European Perspective
Warren J. Keegan
Bodo B. Schlegelmilch
Economic Environment
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Overview
The World Economy – An OverviewEconomic SystemsStages of Market Development Income and Purchasing Power ParityRegionalisation of MarketsSummary
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Learning Objectives
Understanding the main differences between economic systems found around the world
Learning ways of classifying countries by their market development
Understanding consumption patterns in different countries
Knowing the main regional economic co-operation agreements
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The World Economy - Overview
World Economy has changed profoundly during the last 50 years Emergence of global markets Integration of world economy
Capital movements are driving force of world economyProduction is “uncoupled” from employmentMacroeconomics of individual countries no longer
control economic outcomes
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Economic Systems
Three types of economic systems Capitalist Socialist Mixed
Classification based on dominant method of resource allocation Market allocation Command or central plan allocation Mixed allocation
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Economic Systems – Market Allocation
Relies upon consumers to allocate resources: “Economic Democracy”
Role of state Promote competition Ensure customer protection
Examples of predominately market economies Western European Countries, United States, Japan
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Economic Systems – Command Allocation
State has broad powers to serve public interest Decides which products to make Decides how to make them
Elements of marketing mix are not used as strategic variables
Examples of countries that relied upon command allocation systems for decades China, former USSR, India
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Economic Systems – Mixed Systems
There are in reality no pure market or command allocation systems among the world’s economies
Variables to determine degree of economic freedom Trade policy Taxation policy Government consumption
of economic output Monetary policy Capital flows
Foreign investment Banking policy Wage and price controls Property rights Etc.
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Economic Systems
Index of Economic Freedom (Source: Heritage Foundation)
Free: E.g., Hong Kong, Singapore, US, Japan, UK, Taiwan, Bahrain
Mostly Free E.g., Canada, Germany, Austria, Estonia, France, Sweden, Hungary
Mostly Unfree E.g., Turkey, Mexico, Israel, Malta, Russia, Bulgaria, Philippines
Repressed E.g., North Korea, Haiti, Moldova, Angola, Cuba
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Stages of Market Development
Global country markets are at different stages of development
GNP per capita provides a useful way of grouping countries into 5 categories
Categories are a useful basis for Global segmentation Target marketing
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Stages of Market Development – High Income Countries
GNP per capita above € 7,960 (E.g., Japan, Sweden)“Post-Industrial Countries”Ascendancy
Of knowledge over capital as key strategic resource Of intellectual technology over machine technology Of scientists and professionals over engineers and
semiskilled workers
Orientation toward the future Importance of interpersonal relationships
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Stages of Market Development – Upper Middle Income Countries
GNP per capita between € 2,575 and € 7,960 (E.g., Malaysia)
Characteristics Rising wages High rates of literacy Advanced education
Upper middle income countries Experience rapidly, export-driven economic growth Become formidable competitors
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Stages of Market Development – Lower Middle Income Countries
GNP per capita between € 650 and € 2,575 (E.g., Indonesia)
Characteristics Early stages of industrialization Expanding consumer markets
Major competitive advantage in the production of mature, standardized, labour-intensive products
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Stages of Market Development – Low Income Countries
GNP per capita less than € 650 (E.g., Bangladesh)
Characteristics Limited industrialization High birth rates Low literacy rates Heavy reliance on foreign aid Political instability
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Income and Purchasing Power (1)
Income Single most important indicator of market potential
Purchasing Power Parities Comparison of goods and services that can be bought with
local currency in different countries
Gross National Product (GNP) Sum of the money values of all final goods and services
produced during a year
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Income and Purchasing Power (2)
Top 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
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Income and Purchasing Power (3)
Top 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
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The Location of Population
About 74% of world income is concentrated in the Triad (North America, Japan, Western Europe)
Country Population GNP/Capita % World(thousands) (thousands) GNP
China 1,231,000 613 3.2 India 965,000 309 1.3 United States 267,000 23,530 26.7 Indonesia 199,000 246 0.8 Brazil 164,000 3,046 2.1
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Marketing And Economic Development
Does marketing play an important role in the economic development of a country?
Is 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
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Balance of Payments
A record of all economic transactions between residents of a country and the rest of the world
Capital Account records Long-term direct investment, Portfolio investment, Other
short- and long-term capital flows
Current Account records Trade in merchandise and service, Private gifts, Public aid
transactions between countries
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Regionalisation of Markets (1)
Many different forms of economic co-operation between countries
Free trade areas Customs unions
World Trade Organisation (WTO) Acts as mediator in global trade disputes Ensures that trade flows are as smooth, predictable and as
free as possible
Common markets Economic unions
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Regionalisation of Markets (2)
European Union (EU) 15 European member countries Market of 379 million people
North American Free Trade Agreement (NAFTA) United States, Canada, Mexico Market of 381 million people
Association of Southeast Asian Countries (ASEAN) 10 member countries (Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam)
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Summary
Economic environment is major determinant of global market potential and opportunity
World economies can be categorized into market allocation systems, command allocation systems, and mixed systems
For many products, most important indicator of market potential is income
There is a strong interest among nations in forming economic co-operations