International Marketing C2

Chapter 2
INTERNATIONAL ENVIRONMENT
Objectives
After completing this chapter, students can:
1. Understand the international environmental factors
2. Identify the global trends
3. Be able to apply the environmental analysis model
Content
1. The impact of international environmental factors
2. Global trends
3. Environmental Analysis Model
3
1.1 Overview
“For now, the world seems to be characterized by relatively strong
growth in the United States, disappointing but improving growth in
Europe and Japan, slowing growth in China and weakness in many
other emerging markets—the one big exception being India, where
growth is actually quite impressive” (Deloitte, 2016)
• Pace of change increasing • Need to understand global trends &
trends within individual markets
• Lack of familiarity with • Objective & experiential knowledge

international environment
• Lack of knowledge about foreign • Constant scanning of markets

markets creates uncertainty
1.2 Global environment
Global environment
- Russia - Ukraine (02/2022)
- Connected Africa
- Geo-political realignment
- US-China trade war
- Depopulation waves
- Xi-Putin relationship
- Power of global brands
- Growing transparency
- Cyber-insecurity
- Economic power shift – emerging markets
- Changing consumer demographics & expectations
1.3 Political forces
Political forces
The role of the government
1. those that promote (i.e., encourage or facilitate) IM marketing
transactions;
2. those that impede such transactions;
3. those that compete with or replace IM transactions by private

business firms.
Government controls
Export controls License requirements Tariffs
- restrict the shipment - requiring licenses that - protective tariffs are

of defense products, be obtained before high b/c it is designed to
protect the domestic goods may be exported/ protect domestic
economy from a drain of imported to regulate industry
scarce materials, & the nature of external
enhance national trading relationships - revenue tariffs are low
security b/c it is designed to
generate maximum
- forms of protectionism revenue for the
or trade barriers government
Government controls
• Protection logic and illogic
• protection of an infant industry
• protection of the home market
• need to keep money at home
• encouragement of capital accumulation
• maintenance of the standard of living and real wages
• conservation of natural resources
• industrialisation of a low-wage nation
• maintenance of employment and reduction of unemployment
• national defence
• increase in business size
• retaliation and bargaining
Government controls
Monetary barriers
- these place monetary restrictions on trade, e.g. availability of foreign exchange for
imports.
Market barriers
- barriers to trade imposed in an attempt to promote domestic industry.

Government controls
Tariffs is a tax imposed by a government on goods entering at its borders.
increase weaken restrict

•inflationary pressures •balance-of-payments •manufacturers’ supply
•special-interest positions sources
privileges •supply-and-demand •choices available to
•government control and patterns consumers
political considerations in •international •competition.
economic matters the understanding (they can
number of tariffs (they start trade wars)
beget other tariffs)
Government controls
Quotas Extra taxes Exchange controls
- absolute quotas limit

absolutely the amount that - type of value-added tax, - limit the amount of foreign
can be imported (extreme but does not affect domestic currency that an importer
case is the zero producers. pay for goods purchased and
quota/embargo) - restrict imports and thus an exporter receive & hold
- tariff quotas permit affect an exporter. for goods sold to a foreign
importation of limited country.
quantities at low rates of
duty (excess subject to a
substantially higher rate)
- voluntary quotas to protect
domestic companies
Promotional activities
Government export promotion programs, and programs for IM activities in general,

are designed to deal with the following major barriers:
1. lack of motivation , as IM is viewed as more time-consuming, costly, risky, and less

profitable than domestic business;
2. lack of adequate information ;
3. operational/resource-based limitations.
State trading
- government engagement in commercial operations, directly or through agencies

under its control, either in place of or in addition to private traders.
Action Against Government

- Civil War
- Terrorism
- Pressure Groups
- Strikes
1.4 Economic forces
Key Economic Variables
- Population characteristics: total population and location of the population within the country
(for example, degree of urbanization)
- Income distribution: determine purchasing power, ownership of consumer durable goods

- GNI per capita
- Growth rate
- Inflation
- Natural Resources
- Taxation
- Infrastructure: communications, energy, & transportation facilities.
“Chinese consumers and companies save too much, while the West saves too
little”
Roach, cited on BBC, 2012
Market development
•WORLD BANK CLASSIFICATION Source - World Development Indicators 2022. World Bank
•1. low-income economies (GNI per capita <US$1,135)
•(Burundi, Tanzania, Rwanda, Chad)
•2.lower middle-income economies (GNI per capita US$1,136 - US$4,465) (India, Egypt,
Nigeria, Vietnam)
•3.upper middle-income economies (GNI per capita US$4,466 - US$13,845) (Botswana,
Bulgaria, Mexico, Romania, Thailand)
•4.
high-income economies (GNI per capita >US$ 13,845) (Argentina, Croatia, Panama,
Bahrain, France, Israel, Japan)
•Developed countries Australia, New Zealand, Denmark, UK, US, Japan

•Developing countries Malaysia, Costa Rica, Egypt, Uruguay
Emerging markets
• Nations undergoing rapid economic growth and industrialization
• Significant secondary sector
• Rising affluence and education
• Emerging middle class
• Developing infrastructure
• Slowing EM economies
• BRICS to control 30 percent of world’s GDP
• BRICs with annual GDPs > US$1 trillion (Brazil, Russia, India, China, South Africa(2010)),
CIVETs (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa)
• E7 (China, Russia, India, Brazil, Turkey, Mexico, Indonesia)
• BEMs (China (PRC), India, Indonesia, South Korea, Brazil, Mexico, Argentina, South Africa,
Poland, and Turkey)
Some areas of change
- Asia are expanding trade, investment, and technology links by themselves, rather than
depending on Europe/ US in the past
- China is now the world’s largest exporter
- China and India are new ‘giants’ of the world
- The US, the EU, Hong Kong, Japan and South Korea are the five top major markets
- Latin America (Argentina, Chile, Mexico, Colombia, and Peru) – are growing rapidly and economic conditions
have improved significantly.
- Middle East and North African (MENA) region has lagged behind in economic growth and
globalization.
Infrastructure
• Transport (Road and rail networks)

Commercial (Banks, Distribution channels)
Communication (Technology, Media availability)
2.1 Population trends
Population trends
• #1 World population reach 8.1 bn. in 2025
#2 Aging populations
#3 Emerging global middle class
#4 Urban v rural divide
#5 Multi-cultural societies
#6 Rising life-expectancy
#7 Migration
#8 Talent gap
“Sixty per cent of the global population lives in Asia (4.7 bill)” (Statista, 2023)
Population trends
Population of the world and regions in 1950, 2000, 2050 and 2100, according to the
medium-variant projection
Source: based on United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects 2019
Population trends
2.2 Tech trends
Tech trends
• # 4.1 bn. Internet uses in 2019
# Take-up of tech products varies across countries
# Asia-Pacific region most growth in new internet users
# 2.5 bill smartphone users in 2019 (Statista, 2019)
# Use of social media
# Worldwide retail E-commerce sales reach 5.7 trill. (Statista, 2023)
Facebook had 3.03 billion monthly active users in 2023
Instagram
TikTok
YouTube
?
Twitter
“The online FMCG market is set to grow by 17% between now and
2022” (Forrester, 2018)
3. Environmental Analysis Model
SWOT analysis
Helpful Harmful
Internal Strengths Weaknesses
External Opportunities Threats

PESTLE analysis
Political Technological
Economic Legal
Social Environmental
PEST analysis vs SWOT analysis
Strengths Political
Weaknesses Economic
Opportunities Social
Threats Technological
International institutions
• WTO
• ASEAN
• AFTA
• APEC
• IMF
Summary
• General lack of familiarity with markets
• Every market different – don’t make assumptions
• A wide range of factors to take into consideration
• Fast changing global marketplace
• Importance of continuous monitoring of international markets to
identify changes
• Very difficult to eliminate risk, but can manage it
?
• What are today’s current issues potentially affecting international
marketing and what impact are they likely to have?
• Why are international marketers interested in the age distribution of

the population in a market?
Useful Websites
journalofworldbusiness.com
wto.org
worldbank.org
oecd.org
unctad.org
Internetworldstats.com
globaltrends.com
Mckinsey.com

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Chapter 2

• Lack of familiarity with • Objective & experiential knowledge

• Lack of knowledge about foreign • Constant scanning of markets

2. those that impede such transactions;

3. those that compete with or replace IM transactions by private

- restrict the shipment - requiring licenses that - protective tariffs are

- barriers to trade imposed in an attempt to promote domestic industry.

increase weaken restrict

- absolute quotas limit

Government export promotion programs, and programs for IM activities in general,

1. lack of motivation , as IM is viewed as more time-consuming, costly, risky, and less

2. lack of adequate information ;

- government engagement in commercial operations, directly or through agencies

Action Against Government

- Income distribution: determine purchasing power, ownership of consumer durable goods

•Developed countries Australia, New Zealand, Denmark, UK, US, Japan

- China is now the world’s largest exporter

- China and India are new ‘giants’ of the world

• Transport (Road and rail networks)

Internal Strengths Weaknesses

External Opportunities Threats

• Why are international marketers interested in the age distribution of

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