ECONOMIC CONCEPTS FOR AN INTERNATIONAL MARKETER Explain the relationship between international...
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![Page 1: ECONOMIC CONCEPTS FOR AN INTERNATIONAL MARKETER Explain the relationship between international marketing and economics. Understand that economic choice.](https://reader036.fdocuments.net/reader036/viewer/2022081519/56649ef15503460f94c033d1/html5/thumbnails/1.jpg)
ECONOMIC CONCEPTS FOR AN
INTERNATIONAL MARKETER
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• Explain the relationship between international marketing and economics.
• Understand that economic choice is a result of unlimited needs and wants combined with limited resources.
• Discuss the importance of specialization, comparative advantage, and opportunity costs in world trade.
• Interpret a production possibilities curve.
• Define several economic indicators and understand how to use to evaluate the strength and stability of a nation’s economy.
YOU WILL LEARN TO….
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WHY STUDY ECONOMICS?
• Global marketing is all about economics!
• Economics is the study of how societies make choices among unlimited wants and needs when the resources to satisfy them are limited.
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UNLIMITED WANTS AND NEEDS
• Human needs and wants are UNLIMITED!
• Basic needs: food, shelter and clothing
• Wants: goods and services people would like to have but could do without.
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BUT I WANT IT!
• There are no limits to what people may want.
• When you satisfy a need or want, something else is always wanted.
• What people need and want and the choices they make to satisfy those needs and wants is the heart of economics.
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LIMITED RESOURCES
• A person can’t have everything they want.
• Resources are those things used to satisfy human needs and wants.
• Factors of Production: Land, labor, capital and entrepreneurship
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FACTORS OF PRODUCTION (RESOURCES)
• Land – minerals, space, soil and productive capacity of a given area
• Labor- mental and physical abilities available in a work force
• Capital – buildings, equipment, factories capable of producing what is desired
• Entrepreneurship – the person who organizes the business and assumes the risks of operation
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SCARCITY AND CHOICE
• Unlimited needs and wants combined with limited resources lead to scarcity.
• How much is wanted vs. how much is available
• Choice is the act of selecting among alternatives.
• Economics is about making choices.
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WHY DO PEOPLE TRADE?
•Each society must evaluate resources and make decisions on how to use those that are limited.
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SPECIALIZATION• Specialization is the key
to satisfying human needs and wants in a global trading environment.
• Specialization means trading partners use their resources to produce items they can best produce. Then they trade for items they cannot produce as well.
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COMPARATIVE ADVANTAGE VS. ABSOLUTE ADVANTAGE
• Absolute advantage means a country can produce a good or service more efficiently than any other country.
• Comparative advantage is the principle that a country should specialize in producing the goods or services at which it is relatively most efficient.
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THE LAW OF COMPARATIVE ADVANTAGE
• When each nation produces what it is best suited to produce and trades for what it is less suited to produce, the total amount of world trade rises.
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TRADE-OFFS AND OPPORTUNITY COST
• With every decision a nation makes, there is a trade-off.
• Trade-Offs: what a person, business or nation has to give up to get something else.
• Opportunity Cost: the value of the alternative that is not chosen when a decision is made about allocating available resources.
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PRODUCTION AND RESOURCES
• Production Possibilities Curve – a graphic illustration of the combination of output that can be produced if all resources are used efficiently.
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ECONOMIC INDICATORS
• Economic indicators are measures that chart the progress of a nation’s economy.
• When evaluating the economies of potential trading partners, it is helpful to analyze these economic indicators.
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GROSS NATIONAL PRODUCT AND GROSS DOMESTIC PRODUCT
• GNP (Gross National Product)– The total market value of all final goods and services produced by a nation in one year.
• GDP (Gross Domestic Product)– All production within a nation’s border - regardless of which nation owns the companies.
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PER CAPITA GDP
• The amount of product produced within a nation’s borders, per person in a year is the per capita GDP.
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BUSINESS CYCLES
• A Business Cycle is the pattern of up-and-down motion in the total economic output of a nation. • Business Peak• Economic Contraction
• Business Trough• Economic Expansion
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BUSINESS PEAK• High levels of economic activity
• High employment• Healthy sales of goods and services
• Successful Period• The late 1920’s & 1990’s
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ECONOMIC CONTRACTION AND A BUSINESS TROUGH
• Contraction leads to a business trough
• Business slows down• Low levels of
economic activity• High unemployment• Slow sales of goods and services• Recession• Depression
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ECONOMIC EXPANSION
• Leads out of the trough to the peak
• Cycle repeats itself
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RECESSION VS. DEPRESSION
• Recession – GNP or GDP declines for six to eighteen months.• Temporary economic decline
• Depression – A sharp decline in economic activity for a long time (more than two years).
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WORLD EXPORT/IMPORT GROWTH
International Trade
100,000.00200,000.00300,000.00400,000.00500,000.00
Expo
rts Japan
Othe
rIm
ports Jap
anOt
her
Countries
Dolla
rs
1995 $ millions
1996
1997
1998
1999
2000
• There has been rapid growth in exports and imports in the last 40 years.
• Countries are more interdependent.
• Economic slowdown in one country causes economic slowdowns in other countries.
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• Economists must look at a number of figures to measure the economic health of a nation.
• Composite indexes of economic indictors are made up of several different measures of a nation’s economy.
COMPOSITE INDEXES OF ECONOMIC INDICATORS
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• Leading indicators dictate the future of the economy.•Average workweek of production workers• Initial claims for state unemployment compensation
•New manufacture orders•Building permits for new private-housing•Common stock prices
LEADING INDICATORS