CHAPTER 2

INTERNATIONAL
ENVIRONMENT
VTHN
ngocvth@uel.edu.vn
CONTENTS

01 The impact of international

environmental factors

02 Global trends

03 Environmental Analysis
Model
“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)
 1.1 Overview

Need to understand
Pace of change increasing global trends & trends
within individual
Lack of familiarity with markets
international environment
Objective & experiential
Lack of knowledge about knowledge
foreign markets creates
uncertainty Constant scanning of
markets
 1.2 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
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
- restrict the shipment of
defense products, protect
the domestic economy from
a drain of scarce materials, &
enhance national security
- forms of protectionism or
trade barriers
License requirements
- requiring licenses that be
obtained before goods may
be exported/ imported to
regulate the nature of
external trading relationships
Tariffs
- protective tariffs are high
b/c it is designed to protect
domestic industry
- revenue tariffs are low
b/c it is designed to
generate maximum
revenue for the
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
• inflationary pressures
• special-interest privileges
• government control and political considerations in economic matters the
number of tariffs (they beget other tariffs)
weaken
• balance-of-payments positions
• supply-and-demand patterns
• international understanding (they can start trade wars)
restrict
• manufacturers’ supply sources
• choices available to consumers
• competition.
Government controls

Quotas Extra taxes Exchange controls

hạn ngạch tuyệt đối
- absolute quotas limit - type of value-added tax, - limit the amount of
absolutely the amount that but does not affect domestic foreign currency that an
can be imported (extreme case producers. importer pay for goods
is the zero quota/embargo) - restrict imports and thus purchased and an exporter
- tariff quotas permit HN thuế affect an exporter. receive & hold for goods
importation of limited sold to a foreign country.
quantities at low rates of
duty (excess subject to a
substantially higher rate)
- voluntary quotas to protect
domestic companies HN tự nguyện
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 - Natural Resources
- Growth rate - Taxation
- Inflation “Chinese consumers and
- Infrastructure: communications, energy, & transportation facilities. companies save too
much, while the West
saves too little”
Roach, cited on BBC, 2012
 Market development
WORLD BANK CLASSIFICATION Source - World Development Indicators 2018. World Bank
1. low-income economies (GNI per capita <US$955)
(Burundi, Tanzania, Rwanda, Chad)

2. lower middle-income economies (GNI per capita US$996 - US$3,895) (India, Egypt,
Nigeria, Vietnam)

3. upper middle-income economies (GNI per capita US$3,896 - US$12,055)

(Botswana, Bulgaria, Mexico, Romania, Thailand)

4. high-income economies (GNI per capita >US$ 12,055) (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 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)
“India is a bright spot among emerging markets”
(Moody’s, 2016)
 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
#1 World population reach 8.1 bn. by 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 (4.4 bill)”
(United Nations, 2016)
 2.2 Tech trends
# grow to 5.3 bn. Internet uses by 2023
# 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 will reach $2.8 trill. (Shopify, 2018)
“Facebook had 2.27 billion monthly active users”
(Facebook, 2018)

APPS Instagram YouTube Twitter

900 bn. hours > 1 bn. people use

using apps (USA YouTube, local versions
Today, 2017) in 88 countries (YouTube,
2016)
Instagram 800 317 million active
mill users, 50 Twitter users
mill active (Statista, 2016)
“The online FMCG market is set to grow by
17% between now and 2022” (Forrester, 2018)
3. Environmental Analysis Model
 3.1 SWOT analysis

Helpful Harmful

Internal Strengths Weaknesses

External Opportunities Threats

 3.2 PEST analysis
Political Technological

Economic Legal

Social Environemtal
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?
 Useful Websites

journalofworldbusiness.com unctad.org
wto.org Internetworldstats.com
worldbank.org globaltrends.com
oecd.org Mckinsey.com