global marketing - global economic environment

Copyright (c) 2007 John Wiley & Sons, Inc. 1

Global Marketing Management

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Global Economic Environment


Chapter Overview

1. Intertwined World Economy2. Country Competitiveness3. Evolution of Cooperative Global Trade

Agreements4. U.S. Position in Foreign Direct Investment

and Trade5. Information Technology and the Changing

Nature of Competition6. Regional Economic Arrangements7. Multinational Corporations

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Long-term trends in value and volume of merchandise exports, 1950-2010

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Introduction

The net result of increasing world trade is the increased interdependence of countries/ economies and increased competitiveness and the concomitant need for firms to keep a constant watch on the international economic environment.

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1. Intertwined World Economy

The larger the country’s domestic economy, the less dependent it tends to be on exports and imports relative to its GDP.

Individuals (consumers and companies ) in US and Japan tend to be able to find domestic sources for their needs as a result of diversified and large economies

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How can Pakistan Increase FDI inflows?

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Balance of Trade

Bilateral Trade Deficit

13

Portfolio Investment

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The higher the per capita trade, the more closely intertwined the country’s economy is with the rest of the world.

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All nations with even partially convertible currencies are exposed to the fluctuations in the currency markets.

A rise in the value of local currencies make exports more expensive; deters foreign investment in a country and may encourage outflow of investment.

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2. Country Competitiveness

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3. Emerging Economies

Over the next two decades, the big emerging markets (BEMs) will hold the greatest potential for U.S. exports

The largest BEMs include the Chinese economic area (including China, Hong Kong region, and Taiwan), India, C.I.S. (Russia, Central Asia, and the Caucasus states), South Korea, Mexico, Brazil, and Argentina

B.R.I.C.S- Brazil, Russia, India, China, South Africa

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3. Emerging Economies

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4. Evolution of Cooperative Global Trade Agreements Free Trade: https://www.youtube.com/watch?v=nvgZcc43w

fg

WTO (World Trade Organization Trade): The eighth and last round of GATT talks – called the

“Uruguay Round” (1986-1994) established an international body called the WTO which took effect on January 1, 1995.

As of February 16, 2005, WTO had 148 member countries.

WTO has statutory powers to adjudicate trade disputes among nations and has its own secretariat.

WTO is the new legal and institutional foundation for a multilateral trading system.

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https://www.youtube.com/watch?v=nvgZcc43wfg

https://www.youtube.com/watch?v=nvgZcc43wfg


4. Evolution of Cooperative Global Trade Agreements

WTO’s ninth round---called the “Doha Development Agenda” (Doha Round) was launched in Doha, Qatar in November 2001

The Doha Round of 2001 facilitated the way for China and Taiwan to get full membership in the WTO.

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4. Evolution of Cooperative Global Trade Agreements Major issues and agendas of WTO:

Dispute Settlement Mechanism Trade in Financial Services TRIPS Global Agreements

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6. Regional Economic Arrangements

An evolving trend in international economic activity is the formation of multinational trading blocs.

There are over 120 regional free trade areas worldwide.

Market groups take different levels of integration among the participating countries.

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6. Regional Economic Arrangements Types of Regional Economic

Arrangements: https://www.youtube.com/watch?v=YD

Uq0DINhYk Free Trade Areas: Reduce/ eliminate

customs duties and nontariff barriers. Examples: NAFTA, MERCOSUR, CAFTA-DR & FTAA (proposed and currently stalled)

Customs Union: Addition of common external tariffs to the provisions of free trade agreements. Example: ASEAN.Chapter 2

https://www.youtube.com/watch?v=YDUq0DINhYk

https://www.youtube.com/watch?v=YDUq0DINhYk


6. Regional Economic Arrangements

Common Market: Eliminates all tariffs and other barriers, adopts a common set of external tariffs on nonmembers, and remove all restrictions on the flow of capital and labor among member nations. Example: .

Monetary Union: Represents the fourth level of integration with a single currency among politically independent countries. Example: EU and the euro.

Political Union: Highest level of integration resulting in a political union. Sometimes, countries come together in a loose political union for historical reasons, as in the case of the British Commonwealth which exists as a forum for discussion and common historical ties.

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7. Multinational Corporations The U.S. government defines a

multinational (MNC) for statistical purposes as corporations a company that owns or controls 10 percent or more of the voting securities, or the equivalent, of at least one foreign business enterprise.

MNCs have At present, there are 70,000 MNCs

with 690,000 affiliates in foreign countries.

MNCs’ total sales exceed $19 trillion.Chapter 2


7. Multinational Corporations One third of multinational companies’ trade

is accounted for by intra-firm activities. Two-thirds of of world trade in goods and

services is controlled by multinational companies.

Of the 100 largest economies in the world, 51 are corporations.

The sovereignty of nations will perhaps continue to weaken due to multinationals and the increasing integration of economies.

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global marketing - global economic environment

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