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International Economic Environments

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

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International Economic Environments

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  1. International Economic Environments

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

  3. 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

  4. 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

  5. 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

  6. Market Characteristics • People characteristics • Infrastructure • Geographical features • Economic integration

  7. “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

  8. HMR* in Brazil * Home Meal Replacements • 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 Agri-Food Trade Service: Agriculture & Agri-Food Canada; http://atn-riae.agr.ca/general/sitemap-e.htm

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

  10. 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);www.dfa.gov.za/for-relations/multilateral/sacu.htm • 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

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