1. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 4 The Economic Environment

2. Major Industrialized countries around the world: The Group of Five: U.S.A, Britain, France, Germany, and Japan The Group of Seven: + Italy and Canada The Group of Ten: + Sweden, Netherlands, and Belgium NIC (Newly Industrialized Countries): Singapore, Taiwan, Korea, Hong Kong, Brazil, and Mexico

3. Major Industrialized Countries of the World

4. Market Characteristics Market Characteristics Population demographics  Age distribution, life expectancies, household size, urbanization. Income  Distribution of low, medium, and high incomes.  Gross domestic product per capita.  Purchasing power parity. Consumption patterns  Income spent on necessities and luxuries.  Product saturation or diffusion.  Product form differences.

5. Market Characteristics (continued) Market Characteristics (continued) Availability and quality of infrastructure  Rail, Air, Highway traffic networks for distribution capabilities.  Communication systems for marketing.  Energy (electrical and fuel) consumption. Foreign involvement in the economy  Degree of foreign direct investment in country or in a specific industry.  Rules governing foreign investment. Impact of the economic environment on social development  Urbanization, life expectancy, literacy rates, etc.  Physical Quality of Life Index (PQLI).

6. Purchasing Power Parities (PPP): Show how many units of currency are needed in one country to buy the amount of goods and services that one units of currency will buy in another country. Physical Quality of Life Index (PQLI): A composite measure of the level of welfare in a country. It has three components: life expectancy, infant mortality, and adult literacy rates.

7. Cross-border business has been driven by three main factors: Falling regulatory barriers to overseas investment Smaller costs in telecommunications and transportation Freer domestic and international capital market in which companies can be bought

8. Regional Economic Integration Levels of economic integration ◦ Free Trade Area  Least restrictive.  Goods and services are freely trades among all members. Each country maintains its own trade barriers for nonmembers. ◦ Customs Union  Members establish a common trade policy with respect to nonmembers. ◦ Common Market  Factors of production mobility is emphasized. A common external tariff is adopted. ◦ Economic Union  Integration and harmonization of economic and monetary policies is achieved leading to political union.

9. 2-9 Economic Freedom— 2014 Rankings Free 1.Hong Kong 2.Singapore 3.Australia 4.Switzerland 5.New Zealand 6.Canada 7.Chile 8.Mauritius 9.Ireland 10.Denmark Repressed 169. Republic of Congo 170. Timor-Leste 171.Turkmenistan 172.Dem. Rep. Congo 173.Iran 174. Eritrea 175.Venezuela 176.Zimbabwe 177.Cuba 178. North Korea Singapore - authoritarian state capitalism

10. Integrations North America Integration European Integration Integration in Latin America Integration in Asia

12. NAFTA  The North American Free Trade Agreement (NAFTA) created the world’s largest free market. ◦ 390 million U.S., Canadian, and Mexican consumers and a total output of $10 trillion.

13. Integration in Asia Association of Southeast Asian Nations (ASEAN) East Asia Economic Group Asia-Pacific Economic Cooperation (APEC) South Asian Association for Regional Cooperation (SAARC)