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Market Capitalism Market capitalism is an economic system in which individuals and firms allocate resources, and production resources are privately owned. It would be a gross oversimplification to assume that all market-orientated economies function in an identical manner. Centrally-Planned Socialism At the opposite end of the spectrum is Centrally-planned socialism.

Centrally-planned socialism gives the state broad powers to serve the public as it sees fit. Government ownership of industries and individual enterprises is characteristic. Demand exceeds supply, and there is little reliance on product differentiation, advertising, or promotion. For decades, the economies of China, the former Soviet Union, and India functioned according to the tenets of centrally planned socialism.

All three countries are now engaged in economic reforms characterized, in varying proportions, by increased reliance on market allocation and private ownership. Command and market resource allocation are practiced simultaneously, as are private and state resource ownership.

The role of government in modern market economies varies widely. Centrally-planned capitalism is an economic system in which command resource allocation is used extensively in an environment of private resource ownership e. Market socialism permits market allocation policies within an overall environment of state ownership. Market reforms and nascent capitalism in many parts of the world are creating opportunities for large-scale investments by global companies.

The Heritage Foundation, a conservative think tank, classifies economies according to the degree of economic freedom enjoyed. The World Bank has developed a four-category classification system that uses per capita gross national income GNI as a base. Although the income definition for each of the stages is arbitrary, countries within a given category generally have a number of characteristics in common.

Table Typically, these countries provided limited investment opportunities. The garment industry has enjoyed burgeoning exports. The newly independent countries of the former Soviet Union present an interesting situation: Incomes are low, and there is considerable economic hardship.

The potential for disruption is, therefore, high. The term is sometimes used to indicate a contrast with developing i. Consumer markets in these countries are expanding rapidly. Countries such as China, Indonesia and Thailand represent an increasing competitive threat as they mobilize their relatively cheap labor forces to serve target markets in the rest of the world.

The developing countries in the lower-middle-income category have a major competitive advantage in mature, standardized, labor-intensive light industry sectors such as footwear, textiles and toys. Brazil is the largest country in Latin America in terms of the size of its economy, population, and geographic territory.

During the same time period, nearly 50 million Brazilians have joined the middle class as incomes and living standards have risen. Lower-middle- and upper-middle-income countries that achieve the highest sustained rates of economic growth are sometimes referred to collectively as newly industrializing economies.

Overall, NIEs are characterized by greater industrial output than developing economies; heavy manufactures and refined products make up an increasing proportion of exports. Five of the N11 countries are considered NIEs. These include three lower-middle-income countries: Egypt, Indonesia, and the Philippines. The aggregate buying power of poor communities can be substantial.

In rural Bangladesh, for example, villagers spend considerable sums to use village phones operated by local entrepreneurs.

Mistaken assumption 3: The goods sold in developing markets are so inexpensive that there is no room for a new market entrant to make a profit. In reality, because the poor often pay higher prices for many goods, there is an opportunity for efficient competitors to realize attractive margins by offering quality and low prices.

Residents of rural areas can and do quickly learn to use cell phones, PCs, and similar devices. Mistaken assumption 5: Global companies that target BOP markets will be criticized for exploiting the poor. The informal economies in many poor countries are highly exploitative. He created a brand, developed several innovative products, and started a company to market them using an innovative business design. They were the needs of children whose parents could not afford to buy shoes.

He set up a shoe company, TOMS, with a unique business model and social mission. Each time a customer buys a pair of TOMS, the company donates a pair of shoes to a child in need.

Some believe marketing is relevant only in affluent, industrialized countries. The argument: In less-developed countries the major problem is the allocation of scarce resources toward obvious production needs. Efforts should focus on production and how to increase output, not on customer needs and wants. There is also an opportunity to help developing countries join the Internet economy. Global companies can also contribute to economic development by finding creative ways to preserve old-growth forests and other resources while creating economic opportunities for local inhabitants.

They have reached their present income level through sustained economic growth. Product and market opportunities in a postindustrial society are heavily dependent upon new products and innovations. Finance ministers, central bankers, and heads of state from the seven nations have worked together for more than a quarter of a century in an effort to steer the global economy in the direction of prosperity and to ensure monetary stability. Representatives from OECD member nations work together in committees to review economic and social policies that affect world trade.

The Triad The ascendancy of the global economy has been noted by many observers in recent years. In his book Triad Power, Ohmae argued that successful global companies had to be equally strong in the dominant economic centers of Japan, Western Europe, and the United States.

These three regions, called the Triad, represented the dominant centers of the world and the location of nearly 75 percent of world income, as measured by GNP. The expanded Triad includes the entire Pacific region, Canada and Mexico; and the boundary in Europe is moving eastward. Marketing Implications of the Stages of Development Product saturation levels or the percentage of potential buyers or households that own a particular product, can serve as a guide to marketers.

In China, product saturation levels of private motor vehicles and personal computers are quite low — 1 PC for every 6, people and 1 car for every 43, people. It is divided into the current and capital accounts.

The current account is a measure that includes trade in merchandise and services, plus certain categories of financial transfers such as humanitarian aid. A country with a negative current account balance has a trade deficit; that is, the outflow of money to pay for imports exceeds the inflows of money for sales of exports A country with a positive current account balance has a trade surplus.

The capital account is a record of all long-term direct investment, portfolio investment and other short- and long-term capital flows.

A country accumulates reserves when the net of its current and capital account transactions shows a surplus; it gives up reserves when the net shows a deficit. A close examination of Table reveals that the United States regularly posts deficits in both the current account and the trade balance in goods.

Overall, the U. In , China leapfrogged Germany in the global merchandise export rankings see Table Chinese exports to the United States have surged since China joined the World Trade Organization in ; in fact, policymakers in Washington are pressuring Beijing to boost the value of the yuan in an effort to stem the tide of imports.

The fastest-growing sector of world trade is trade in services. Services include travel and entertainment; education; business services, such as accounting, advertising, engineering, investment banking, and legal services; and royalties and license fees that represent payments for intellectual property. One of the major issues in trade relations between the high- and lowerincome countries is trade in services. As shown in Figure , U. This represents about one-third of total U.

To the extent that a country sells more goods and services abroad than it buys, there will be a greater demand for its currency and a tendency for it to appreciate in value—unless the government pursues foreign-exchange policies that do not allow the currency to fluctuate.

In international economics, such policies are called mercantilism or competitive-currency politics because they favor domestic industries at the expense of foreign competitors. The underlying assumption is that the price of a Big Mac in any world currency should, after being converted to dollars, equal the price of a Big Mac in the United States. Over the years, the search for ways of managing cash flows to eliminate or reduce exchange rate risks has resulted in the development of numerous techniques and financial strategies.

Hedging exchange rate exposure involves establishing an offsetting currency position such that the loss or gain of one currency position is offset by a corresponding gain or loss in some other currency. External hedging methods for managing both transaction and translation exposure require companies to participate in the foreign currency market. Specific hedging tools include forward contracts and currency options.

Internal hedging methods include price adjustment clauses and intra-corporate borrowing or lending in foreign currencies. The forward market is a mechanism for buying and selling currencies at a preset price for future delivery. For a foreign currency, option is best for such situations.

Conversely, a call option is the right, but not the obligation, to buy the foreign currency. In other words, the U. Thus, if the project is granted, the future foreign currency cash inflow has been hedged by means of the put option. If the project is not granted, the company can trade the put option in the options market without exercising it; remember: options are rights, not obligations.

Venezuela is a case in point. Chavez died in and by , with oil prices plummeting; Venezuela faced an economic crisis that deepened with every passing week. How do you explain this? Although student answers may vary, the above should be part of their answers. Student answers will vary. Can Venezuela afford to maintain its Petrocaribe program of subsidized oil exports?

Cargill is a truly global company: With operations in more than 60 countries, it markets food, agriculture, financial, and industrial products and services to customers worldwide. Gallaghers business unit works with customers to provide commodities hedges through swaps and structured products. The commodities in question are often agricultural commodities including grains like corn, wheat, and soybeans, as well as beef and other animal proteins.

Discussion Questions What knowledge and skills are required to be successful as a credit risk analyst? She these courses gave her a solid foundation in order to understand portfolio exposures, fee schedules, and financing options she utilizes everyday.

The most challenging part? Pearce and Jordan Mitchell, June Bartlett, HBS, Out-Of-Class Reading: Assign the following seminal article on marketing and ask students to apply the concepts presented to global marketing. This site offers a foreign exchange calculator that allows easy comparison of currency exchange rates. Students will select a few currencies such as the Thai baht, the Chinese yuan, the Malaysian ringed, and Indonesian rupee and compare exchange rates.

Activity: Either in groups or individually, students should begin preparing their Cultural and Economic Analysis and Marketing Plan as noted in Chapter 1. He explains how people in the Western world, India for example, weigh more heavily on advertisement than people in America do.

The presenter explains that cultural awareness and cultural knowledge are necessary prerequisites to be successful in a global market. At the end he gives advice to students including learning another language, and becoming informed of another culture, developing empathy, etc.

These traits will help you open up more to managing a global business. Books Enghold, Christopher. Finger, Michael J. Institutions and Trade Policy. Northampton, MA: Edward Elgar, Garten, Jeffrey E.

New York: BasicBooks, Isaak, Robert A. Managing World Economic Change. Kennedy, Paul. The Rise and Fall of Great Powers. New York: Random House, McCue, Sarah. Roberts, Paul C. The Capitalist Revolution in Latin America. Need an account? Click here to sign up. Download Free PDF. Global Marketing 9th Edition by. Ryan Wilson. A short summary of this paper. Download Download PDF. Translate PDF. Global Marketing 9th Edition by Warren J.

Keegan, Mark C. Green This Global Marketing 9th Edition book is not really ordinary book, you have it then the world is in your hands.