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The Global Economic Environment

The Global Economic Environment. Chapter 2 Global Marketing. Changes in the World Economy. Emergence of global markets Integration of world economy Increased volume of capital movements End of the Cold War Diminishing importance of national boundaries due to technological advancements.

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The Global Economic Environment

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  1. The Global Economic Environment Chapter 2 Global Marketing

  2. Changes in the World Economy • Emergence of global markets • Integration of world economy • Increased volume of capital movements • End of the Cold War • Diminishing importance of national boundaries due to technological advancements Keegan and Green, Chapter 2

  3. Economic Systems • Market capitalism • Centrally planned socialism • Centrally planned capitalism • Market socialism Keegan and Green, Chapter 2

  4. Economic Systems Resource Allocation Market Command Centrally Planned Capitalism Private Resource Ownership State Market Capitalism Centrally Planned Socialism Market Socialism Keegan and Green, Chapter 2

  5. Market Capitalism • Economic system in which individuals and firms allocate resources: • Production resources are privately owned • Consumers decide what goods are desired and firms determine what and how much to produce • Role of state is to promote competition and protect consumers Keegan and Green, Chapter 2

  6. 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 Keegan and Green, Chapter 2

  7. Centrally Planned Capitalism • Economic system in which command resource allocation is used extensively in an environment of private resource ownership • Examples: • Sweden • Japan Keegan and Green, Chapter 2

  8. Market Socialism • Economic system in which market allocation policies are permitted within an overall environment of state ownership • Examples: • China • India Keegan and Green, Chapter 2

  9. 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 Degrees of Economic Freedom Keegan and Green, Chapter 2

  10. China India Indonesia South Korea Brazil Mexico Argentina South Africa Poland Turkey BEMs: Big Emerging Markets Keegan and Green, Chapter 2

  11. 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 Keegan and Green, Chapter 2

  12. 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 Keegan and Green, Chapter 2

  13. 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 Keegan and Green, Chapter 2

  14. 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 Keegan and Green, Chapter 2

  15. G-7 Countries • Leaders from these high income countries work to establish prosperity and ensure monetary stability • United States • Japan • Germany • France • Britain • Canada • Italy Keegan and Green, Chapter 2

  16. The Triad • Dominant economic centers of the world • Japan • Western Europe • United States • Expanded Triad • Pacific Region • North America • European Union Keegan and Green, Chapter 2

  17. Exporters United States Germany Japan China France United Kingdom Canada Italy Importers United States Germany United Kingdom France Japan Netherlands Canada Italy Leading Exporters and Importers Keegan and Green, Chapter 2

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