Chapter 2: The Global Economic Environment
Learning Objectives
• Summarize significant historical changes in the global economic environment
• Identify trends in the world economy that affect global marketing decisions
• Describe how economic measures of freedom help drive or hinder global business
expansion and growth
• Describe the stages of market development
• Explain how global income distribution and population patters affect marketing
decisions
• Discuss the balance of payments and global trade patterns
Chapter Overview
The economic environment is a major determinant of global market potential and
opportunity. Global marketers should factor into their marketing strategies the profound
changes in the world economy and understand that global competition is now a feature of
almost every national market. Centers of economic activity are shifting dramatically
across the globe and across regions due to demographic changes, economic liberation,
technological developments, and, over the next decade, an estimated one billion new
consumers in emerging markets demanding products and services. Today, with the
exception of North Korea, almost all countries have mixed economic systems with a
major reliance on market allocation.
Lecture Outline
I. The World Economy – An Overview (p. 38)
II. The World Economy: Important Trends (p. 39)
a. Economic Activity Will Shift From West to East
b. Aging Worldwide Population Will Demand Increasing Levels of
Productivity and Efficiency
c. Changing Industry Structures and Emerging New Models of Corporate
Organization Will be Characteristic of Growing Global Competition
d. The Demand for Natural Resources Will Continue to Grow, Resulting in
Growing Pressure on an Already Strained Global, Natural Environment
e. Scrutiny of Global Firms’ Worldwide Practices Will Increase as the Reach
and Scale of Global Firms Expand; Increasing Regulation Will Shape the
Structure and Conduct of Whole Industries
f. The Economics of Information Will be Transformed as the Ubiquitous
Nature of Information Expands
g. Talent Pools Have Become Global in Nature; Assimilating Talent into the
Leadership Structure of a Global Company Will be a Competitive
Advantage
III. The Market State: Varying Degrees of Economic Freedom (p. 46)
IV. Stages of Market Development (p. 49)
a. Low-Income Countries
b. Lower-Middle-Income Countries
c. Upper-Middle-Income Countries
d. High-Income Countries
V. Income and Purchasing Power Parity Around the Globe (p. 57)
VI. International Comparison Program (ICP) of the World Bank (p. 61)
VII. Actual Individual Consumption (p. 62)
VIII. The Location of Population (p. 63)
IX. Global Trade and Investment (p. 64)
a. The Balance of Payments
X. Global Trade Patterns (p. 65)
XI. Exchange Rates (p. 67)
XII. Degrees of Economic Cooperation (p. 69)
a. Free Trade Area
b. Customs Union
c. Common Market
d. EU (European Union)
e. Asia-Pacific Economic Cooperation (APEC)
f. Commonwealth of Independent States (CIS)
g. MERCOSUR (SCCM)
h. North American Free Trade Agreement (NAFTA)
i. Association of Southeast Asian Nations (ASEAN)
XIII. Summary
Tables and Figures
Table 2-1 Index of Economic Freedom World Rankings (p. 48)
Table 2-2 World Bank List of Country Income Groups (p. 50)
Table 2-3 Countries Classified by Income – 2011 (p. 51)
Table 2-4 Stages of Economic Development (p. 59)
Table 2-5 GNP and PPP Per Capita, Top 10 Countries (p. 60)
Table 2-6 Richest Countries in the World GDP (PPP) (p. 60)
Figure 2-1 Rank Shift in GDP 2010 vs. 2020 (p. 61)
Table 2-7 Actual Individual Consumption per Capita (p. 62)
Table 2-8 Top 10 Highest Populated Countries (p. 63)
Table 2-9 Estimated 2010 Current Account Balances (p. 64)
Figure 2-2 Average PPP Consumption Across 146 Countries (p. 66)
Figure 2-3 Growth in Volume of World Merchandise Trade and GDP (p. 66)
Figure 2-4 GDP and Merchandise Trade by Region (p. 67)
Figure 2-5 Big Mac Index (p. 68)
Table 2-10 Degrees of International Economic Integration (p. 69)
Sidebars
Sidebar 1 20 Major Economies of the G20 (p. 58)
Sidebar 2 Bunfight (p. 68)