Introduction to Global Marketing

1

The Global Economic Environment
Chapter 2 Global Marketing
2
Figure 2-1 Economic Systems
Resource Allocation
Market Command
Centrally Planned Capitalism
Private Resource Ownership State
Market Capitalism
Centrally Planned Socialism
Market Socialism
3
Market Capitalism

• Economic system in which individuals and firms
  allocate resources
• Production resources are privately owned
• Consumers decide what goods are desired
• Firms determine what and how much to produce

4
Centrally Planned Socialism

• Total opposite of market capitalism (ex North
  Korea)
• State plans and decides what goods and services
  are produced and in what quantities
• Consumers can spend on what is available

5
Centrally Planned Capitalism

• Economic system in which command resource
  allocation is used extensively in an environment
  of private resource ownership

6
Market Socialism

• Economic system in which market allocation
  policies are permitted within an overall
  environment of state ownership

7
Which system is the best one?

• Canada
• Government revenues rose from 29 to 43 percent of
  GDP between 1966 and 1996.
• This rise in revenues was almost entirely
  accounted for by a massive rise in personal
  income tax, from 9 to 20 percent of GDP
• Extensive social security network
• Spend-and-tax policy resulted in some loss of
  international competitiveness
• Source Fraser Institute

8
Index of Economic Freedom by the Heritage
Foundation, 2003

• Ranking of Economic Freedom (out of 161
  economies)
• 1 Hong Kong 1.45 (free)
• 2 Singapore 1.50
• 6 United States 1.80
• 11 Netherlands 1.90
• 18 Canada 2.05 (mostly free)
• 19 Belgium 2.10
• 20 Germany 2.10
• 35 Japan 2.50
• 40 France 2.55
• 44 Hungary 2.65
• 52 Korea 2.70
• 56 Mexico 2.80

9
OECD Organization for Economic Cooperation and
Development

• 29 nations each with market-allocation economic
  systems

10
G-8 (G-7 plus Russia)

• Leaders from these high income countries work to
  establish prosperity and ensure monetary
  stability
• United States
• Japan
• Germany
• France
• Britain
• Canada
• Italy

11
The Triad

• Dominant economic centers of the world
• Divisions in research or business organizations
• Japan
• Western Europe
• United States
• Expanded Triad
• Pacific Region
• European Union (EU)
• NAFTA

12
Balance of Payments (BOP)

• Recording 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 negative BOP
• trade surplus positive BOP (Canada)
• Capital account record of all long-term direct
  investment, portfolio investment, and capital
  flows