Section 2 - A Global Marketer's Economics and Trade Perspective Flashcards
A Country’s Economic Structure
- Type of economy (agriculture, transition, developing or an advanced industrial country)
- Democracy (single party (false), two-party, multiple)
- Monarchy
- Dictatorship
- Trade Policies
- Logistics Infrastructure
- Education Systems
- Legal Systems
- Financial Markets
Different types of economic structures: Market driven capitalism
America, Canada, U.K., etc. Western society. The business owner decides the 4Ps, and all of their big decisions are made privately. There are always some govt. rules but generally they are free to run their business how they want.
Government-managed capitalism
You get to own the company; but the govt. tells you how to run it and what to make and who to sell to and how to sell it and how much you’re gonna charge. Russia and China have now evolved to this. You must share all of your secrets with the govt. here.
Market-driven Socialism
You don’t get to own your business. The govt. either outright owns it or has a majority share in it. You run the day to day operations still but they take a substantial percentage of your profits.
Government-managed socialism
USSR, China up to 30 years ago. The government owned the businesses and told you how to run it as well. They tell you how to do everything in your business. The government controls everything here. Huge problems can develop here. No room for innovation and big room for corruption.
Economic freedom
The freedom to prosper within a country without intervention from a government or economic authority. Individuals are free to secure and protect human resources, labour, and private property. Based on tax, trade and banking policies, property rights, the legal system, foreign investment, tolerance of a. black market.
Mistaken Assumptions about the Poor (Bottom of Pyramid)
The poor have no money; they won’t waste money on non-essential goods, entering developing markets cannot be profitable because products will need to be made too cheap (think of the small lotions); people in BOP don’t have basic knowledge to learn how to use technology.
Groups that promote economic stability and prosperity
G7 (US, Japan, Germany, France, Britain, Canada, Italy and used to be Russia);
G20, OECD (Organization for Economic Cooperation and Development, 36 nations)
International Finance: Devaluation, Mercantilism or Competitive-Currency Politics, Revaluation
Devaluation: the reduction of a nation’s currency against other currencies.
Mercantilism: countries that do not allow their currency to fluctuate.
Revaluation: a nation allows its currency to strengthen (usually after getting pressure from its trading partners in regard to artificially depressing its currency to gain an economic advantage).
Supply and Demand
When a country sells more goods/services than it buys, there is a greater demand for the currency. Their currency will appreciate in value (reflected as ‘confidence’ in the currency’s value).
GATT vs. WTO
GATT: General Agreement on Tariffs and Trade: designed to handle trade disputes and promote trade among member nations. Replaced by World Trade Organization in 1995, as it lacked enforcement power and was nicknamed General Agreement to Talk and Talk.
The WTO is an institution now, not an agreement like GATT. It serves as a dispute mediator and has enforcement power. It establishes rule governing trade and decisions are binding. It seems to help the bigger wealthier countries get what they want in terms of trade.
Hierarchy of Preferential Trade Agreements (PTAs)
Free Trade Agreement (FTA): Abolish Tariff Barriers
Customs Union: Abolish tariffs and common external tariffs (CET)
Common Market: Abolish tariffs + CET + factor movement (this includes human resources; working in other countries)
Economic Union: Abolish tariffs + CET + factor movement + economic and political coordination and harmonization. This is like the EU but it doesn’t have full political harmonization.
Canada’s brand or image globally?
Generally speaking we aren’t a big player in the world market. However in America there is a willingness to buy, some pride to own, a desire for closer links, and even a desire to visit Canada.
Canada does have a “bank of good-will” waiting to be capitalized upon by innovative Canadian international marketers, and unlike American reputations, this attitude is found in many countries scattered around the world. Generally the world doesn’t know much about us or what we make, but they like us and they think we’re big and developed and they’d be willing to buy your products.
‘Staples’ Theory of Canadian Economic Development
While Canada possesses vast quantities of natural resources, it lacks the ability to convert them into high value-added finished goods, and so we export them and buy them back as finished products. We export cod, fur, minerals, and agricultural and lumber products. Canadians forfeited the capability of developing a robust, dynamic internal market with entrepreneurs who were willing and able to take risks.
Canada became increasingly dependent on the economies that received its imports and supplied its manufactured goods. This primarily benefits the interests of other nations and it is not improving here in Canada. We must build things here, even if it costs more, and take risks to help the market. But this is the hard thing to do.
