• Economic Environment

• Economic Environment

The international marketer must study each country's economy. Two economic factors reflect the country's attractiveness a.s a market: the country's industrial structure and its income distribution.

The country's industrial structure shapes its product and service needs, income levels and employment levels. Four types of industrial structure should be considered:

1. Subsistence economies. In a subsistence economy, the vast majority of people engage in simple agriculture. They consume most of their output and barter the rest for simple goods and services. They offer few market opportunities.

2. Raw­rnaterial­exporting economies. These economies are rich in one or more natural resources, but poor in other ways. Much of their revenue comes from exporting these resources. Examples are Chile (tin and copper), Zaire (copper, cobalt and coffee) and Saudi Arabia (oil). These countries are good markets for large equipment, tools and supplies, and trucks. If there

are many foreign residents and a wealthy upper class, they are also a market for luxury goods.

3. Industrializing economies. In an industrializing economy, manufacturing accounts for 10—20 per cent of the country's economy. Examples include China, the Philippines, India and Brazil. As manufacturing increases, the country needs more imports of raw textile materials, steel and heavy machinery, and fewer imports of finished textiles, paper products and motor vehicles. Industrialization typically creates a new rich class and a small but growing middle class, both demanding new types of imported goods. In China, for example, people with rising disposable income want to spend on items such as fashion, video recorders, CD players and instant coffee.

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4. Industrial economies. Industrial economies are large exporters of manufactured goods and investment funds. They trade goods among themselves and also export them to other types of economy for raw

materials and semi­finished goods. The varied manufacturing aetivities of these industrial nations and their large middle class make them rich

markets for all sorts of goods. Asia's newly industrialized economies, such as Taiwan, Singapore, South Korea and Malaysia, fall into this

eategory. The second economic factor is the country's income distribution. The inter­

national marketer might find countries with one of five different income distribu­ tion patterns: (1) very low family incomes; (2) mostly low family incomes; (3) very low/very high family incomes; (4) low/medium/high family incomes; and (5) mostly medium family incomes.

However, even people in low­income countries may find ways to buy products that are important to them, or sheer population numbers can counter low average incomes. Also, in many cases, poorer countries may have small but wealthy segments of upper­income consumers:

In the US the first satellite dishes sprang up in the poorest parts of Appalachia .., The poorest slums of Calcutta are home to 70,000 VCRs.

In Mexico, homes with colour televisions outnumber those with running water. Remember also that low average­income figures may conceal a

lively luxury market. In Warsaw (average income: 02,500) well­dressed shoppers flock to elegant boutiques stocked with Christian Dior perfume and Valentino shoes ... In China, where per capita income is less than S600, the Swiss company Rado is selling thousands of its 81,000 watches."

Thus, international marketers face many challenges in understanding how the economic environment will affect decisions about which global markets to enter and how.