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    The Global Economic Environment: Powerpoint by Kristopher Blanchard North Central University

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    s.vijayarani
    Capital movements have replaced trade as the driving force of The World Economy. E-commerce diminishes the importance of national barriers and forces companies to reevaluate business models. The global economic environment plays a large role in the development of new markets.

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    The Global Economic Environment: Powerpoint by Kristopher Blanchard North Central University

    Uploaded by

    s.vijayarani
    44 views35 pages
    Capital movements have replaced trade as the driving force of The World Economy. E-commerce diminishes the importance of national barriers and forces companies to reevaluate business models. The global economic environment plays a large role in the development of new markets.

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    Keegan Gm4 Ch02

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    Capital movements have replaced trade as the driving force of The World Economy. E-commerce diminishes the importance of national barriers and forces companies to reevaluate business models. The global economic environment plays a large role in the development of new markets.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    44 views35 pages

    The Global Economic Environment: Powerpoint by Kristopher Blanchard North Central University

    Uploaded by

    s.vijayarani
    Capital movements have replaced trade as the driving force of The World Economy. E-commerce diminishes the importance of national barriers and forces companies to reevaluate business models. The global economic environment plays a large role in the development of new markets.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 35

    Chapter 2 The Global Economic Environment

    PowerPoint by Kristopher Blanchard North Central University

    2005 Prentice Hall

    2-1

    Introduction to Chapter
    Market definition People or organizations with needs and wants; both have the willingness and ability to buy or sell The global economic environment plays a large role in the development of new markets for organizations

    2005 Prentice Hall

    2-2

    The World Economy An Overview


    The new realities:
    Capital movements have replaced trade as the driving force of the world economy Production has become uncoupled from employment The world economy, not individual countries, is the dominating factor

    2005 Prentice Hall

    2-3

    The World Economy An Overview


    The new realities continued:
    75-year struggle between capitalism and socialism has almost ended E-Commerce diminishes the importance of national barriers and forces companies to reevaluate business models

    2005 Prentice Hall

    2-4

    Economic Systems
    4 main types of economic systems
    Market Capitalism Centrally planned socialism Centrally planned capitalism Market socialism

    2005 Prentice Hall

    2-5

    Economic Systems
    Resource Allocation

    Market
    Private Resource Ownership Market Capitalism

    Command
    Centrally Planned Capitalism

    State

    Market Socialism

    Centrally Planned Socialism

    2005 Prentice Hall

    2-6

    Economic Freedom
    Rankings of economic freedom among countries Ranges from free to repressed Variables considered include such things as: Trade policy Taxation policy Banking policy Wage and price controls Property rights
    2005 Prentice Hall 2-7

    Economic Freedom
    Free
    Hong Kong Singapore Ireland New Zealand United States United Kingdom Netherlands Australia Switzerland

    Repressed
    Bosnia Vietnam Laos Iran Cuba Iraq Libya North Korea Congo

    2005 Prentice Hall

    2-8

    Stages of Market Development


    World Bank has defined four categories of development
    High-income countries Upper-middle income countries Lower-middle income countries Low-income countries

    Based upon Gross National Product (GNP)

    2005 Prentice Hall

    2-9

    Stages of Market Development

    2005 Prentice Hall

    2-10

    Big Emerging Markets


    China India Indonesia South Korea Brazil Mexico Argentina South Africa Poland Turkey
    2005 Prentice Hall 2-11

    Marketing Opportunities in LDCs


    Characterized by a shortage of goods and services Long-term opportunities must be nurtured in these countries
    Look beyond per capita GNP Consider the LDCs collectively rather than individually Consider first mover advantage Set realistic Deadlines
    2005 Prentice Hall 2-12

    Influencing the World Economy


    Group of Seven (G-7) Organization for Economic Cooperation and Development The Triad

    2005 Prentice Hall

    2-13

    Marketing Implications of the Stages of Development


    Product Saturation Levels
    The percentage of potential buyers or households that own a particular product Graph shows that in India a private phone is owned by 1% of the population

    2005 Prentice Hall

    2-14

    Balance of Payments
    Record of all economic transactions between the residents of a country and the rest of the world
    Current account record of all recurring trade in merchandise and services, private gifts, and public aid between countries trade deficit trade surplus Capital account record of all long-term direct investment, portfolio investment, and capital flows
    2005 Prentice Hall 2-15

    Balance of Payments

    U.S. balance of payments statistics for the period 1999 to 2003

    2005 Prentice Hall

    2-16

    Overview of International Finance


    Foreign exchange makes it possible to do business across the boundary of a national currency Currency of various countries are traded for both immediate (spot) and future (forward) delivery Increases the risk to organizations that are involved in global marketing

    2005 Prentice Hall

    2-17

    Managed Dirty Float?


    Definitions
    Float refers to the system of fluctuating exchange rates Managed refers to the specific use of fiscal and monetary policy by governments to influence exchange rates
    Devaluation is a reduction in the value of the local currency against other currencies

    2005 Prentice Hall

    2-18

    Managed Dirty Float?


    Definitions
    Dirty refers to the fact that central banks, as well as currency traders, buy and sell currency to influence exchange rates

    2005 Prentice Hall

    2-19

    Foreign Exchange Market Dynamics


    Supply and Demand interaction
    Country sells more goods/services than it buys There is a greater demand for the currency The currency will appreciate in value

    2005 Prentice Hall

    2-20

    Purchasing Power Parity (PPP) The Big Mac Index

    Is a certain currency over/under- valued compared to another? Assumption is that the Big Mac in any country should equal the price of the Big Mac in the US after being converted to a dollar price
    2005 Prentice Hall 2-21

    Managing Economic Exposure


    Economic exposure refers to the impact of currency fluctuations on the present value of the companys future cash flows
    Transaction exposure is from sales/purchases Real operating exposure arises when currency fluctuations, together with price changes, alter a companys future revenues and costs

    2005 Prentice Hall

    2-22

    Managing Economic Exposure


    Numerous techniques and strategies have been developed to reduce exchange rate risk
    Hedging involves balancing the risk of loss in one currency with a corresponding gain in another currency Forward Contracts set the price of the exchange rate at some point in the future to eliminate some risk

    2005 Prentice Hall

    2-23

    Looking Ahead
    Chapter 3 The Global Trade Environment: Regional Market Characteristics and Preferential Trade Agreements

    2005 Prentice Hall

    2-24

    Market Capitalism
    Individuals and firms allocate resources Production resources are privately owned Driven by consumers Government should promote competition among firms and ensure consumer protection
    Return
    2005 Prentice Hall 2-25

    Centrally Planned Socialism


    Opposite of market capitalism State holds broad powers to serve the public interest; decides what goods and services are produced and in what quantities Consumers can spend on what is available Government owns entire industries Demand typically exceeds supply Little reliance on product differentiation, advertising, pricing strategy
    Return
    2005 Prentice Hall 2-26

    Centrally-Planned Capitalism
    Economic system in which command resource allocation is used extensively in an environment of private resource ownership Examples:
    Sweden Japan

    Return
    2005 Prentice Hall 2-27

    Market Socialism
    Economic system in which market allocation policies are permitted within an overall environment of state ownership Examples:
    China India

    Return
    2005 Prentice Hall 2-28

    Low-Income Countries
    GNP per capita of $785 or less Characteristics
    Limited industrialization High percentage of population involved in farming High birth rates Low literacy rates Heavy reliance on foreign aid Political instability and unrest

    Of these, only China and India are BEMs


    Return
    2005 Prentice Hall 2-29

    Lower-Middle-Income Countries
    GNP per capita between $786 and $3,125 Sometimes called less-developed countries (LDCs) Characteristics
    Early stages of industrialization Cheap labor markets Factories supply items such as clothing, tires, building materials, and packaged foods

    3 BEMs: Poland, Turkey, Indonesia


    Return
    2005 Prentice Hall 2-30

    Upper-Middle-Income Countries
    GNP per capita between $3,126 to $9,655 Characteristics Rapidly industrializing Rising wages High rates of literacy and advanced education Lower wage costs than advanced countries Sometimes called newly industrializing economies (NIEs) 3 BEMs: Argentina, Brazil, Mexico, South Africa

    Return
    2005 Prentice Hall 2-31

    High-Income Countries
    GNP per capita above $9,656 Sometimes referred to as post-industrial countries Characteristics
    Importance of service sector, information processing and exchange, and intellectual technology Knowledge as key strategic resource Orientation toward the future

    Return
    2005 Prentice Hall 2-32

    Group of Seven (G-7)


    Leaders from these high income countries work to establish prosperity and ensure monetary stability United States Japan Germany France Britain Canada Italy
    Return
    2005 Prentice Hall 2-33

    Organization for Economic Cooperation and Development


    30 nations each with market-allocation economic systems Mission: to enable its members to achieve the highest sustainable economic growth and improve the economic and social wellbeing of their populations www.oecd.org
    Return
    2005 Prentice Hall 2-34

    The Triad
    Dominant economic centers of the world
    Japan Western Europe United States

    Expanded Triad
    Pacific Region North America European Union
    Return
    2005 Prentice Hall 2-35

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