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MITB 25

Economics in Global Scenarios


Alejandro Moreno
2019
Interlaced economy
Growth of World Merchandise Trade
and GDP, 07-16
 The net result of these factors?

• Increased interdependence of countries/economies

• Increased competitiveness

• Need for firms to keep a constant watch on the


international economic environment.
World economy trends
Globalization
Why is it happening?

7
Brief economic history

Post – WW II

• Bretton Woods Agreement (1944)


• IMF, WB, GATT ( WTO)

• US Foreign Investment

• End of Gold Standard fixed exchange rate (1971)


• Move to floating rate of exchange (1971)

• Shift to neoliberal economic policies (1980s)


• Remove government from economy
World Trade Organization

 The WTO is the only international organization that deals


with the global rules of trade between nations. It is built on
WTO agreements signed by the majority of the world's
trading nations

 Its main function is to help producers of goods and


services, exporters and importers better protect and
manage their businesses

 The WTO dispute settlement mechanism is faster, more


automatic, and less susceptible to blockages than the old
GATT system
International Monetary Fund

 International organization created for the purpose of


standardizing global financial relations and exchange rates

 The IMF monitors the global economy, and its core goal is
to economically strengthen its member
countries. Specifically, the IMF was created with the
intention of:

• Promoting global monetary and exchange stability


• Facilitating the expansion and balanced growth of
international trade
• Assisting in the establishment of a multilateral system
of payments for current transactions
World Bank

 International organization dedicated to providing


financing, advice and research to developing nations

 It was created out of the Bretton Woods agreement as a


result of many European and Asian countries needing
financing to fund reconstruction efforts

 The World Bank was established in 1944, is


headquartered in Washington D.C., and has more than
10,000 employees in over 120 offices worldwide
Increase of
international trade
Economies by size of trade 2016

US$ Billion
The Markets
The markets

Supply Many Few One

Demand

Many Free Supply Supply


Competition Oligopoly Monopoly

Few Demand Bilateral Limited


Oligopoly Oligopoly Supply
Monopoly

One Demand Limited Bilateral


Monopoly Demand Monopoly
Monopoly
Pricing and equilibrium in perfect
competition
Price

S
100

80

60 Equilibrium

40

20

diference D
2,000 4,000 6,000 8,000 10,000

Quantity
Pricing and equilibrium in perfect
competition
Price

surplus
S
100

80

60 Equilibrium

40

20

2,000 4,000 6,000 8,000 10,000

Quantity
OPEP 1973

price
S2
S1

P2*

P1*

Y2* Y1*
Product
Economic indicators
Economic indicators

• Predicting the business cycle is tricky. Often


the economy does not do what economists
expect. Looking at lots of indicators give
them a feel for what is going on and an idea
of how to prepare for the future.
• These are predictors of where the economy is
going next: Expansion or contraction.

• GDP, unemployment rate, inflation rate,


interest rate.
GDP

• GDP or gross domestic


product is the market
value of all final goods
and services produced
in a country in a given
time period.

• This definition has four


parts:
 Market value
 Final goods and
services
 Produced within a
country
 In a given time
period
GDP

GDP Spain
GDP

GDP European countries


Unemployment

• Unemployment Rate: def. the percentage of the labor force


unemployed and actively looking for work (remember, we
don’t count people not looking for work, “hidden
unemployment”).

Source: EUROSTAT 2016


Inflation

 Inflation is the rate of change in the price level


 If the price level in the current year is ‘P1’ & in
the previous year is ‘Po’, then inflation for the
current year is

(P1 – Po)/ Po x 100


Inflation

Source: Eurostat 2016


Interest rate
Market differences
Market differences

• Customers around the world are different for the


following reasons:

• Economic
• Culture, religion
• Language
• Legal: regulations, taxes, etc.
• Consuption habits
• Distribution channels

SEGMENTATION
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Segmentation Scenarios

 Universal or global segments


 Regional segments
 Unique (diverse) segments
Segmentation examples

 Created in 1971. International expansion 1996 (Japan).


Present in 62 countries
 Japanese did not know coffee until the 70’s. Now
consumption is among the highest in the world
 Strategic alliance with Sazaby to understand the market
 Young professionals
 These consumers are concerned about the environment (LED
lights and ethical sourcing of coffee)
Segmentation examples

https://es.slideshare.net/kmeshtiaque/m
arketing-plan-for-nespresso
Segmentation examples

 Vans: “We are not just a


shoe company”

 Global segment: Global


youth, extreme sports
(skate, surf, etc.)

 Positioning: Stylish, casual


and comfortable
Segmentation examples

 Red Bull target customer segment represent busy individuals


who are overly active in their personal and professional lives
and who have are fascinated by extreme sports
 https://research-methodology.net/red-bull-segmentation-
targeting-positioning/
Segmentation examples

 Younger consumers, couples who decide to move in together.


 These consumers have a low budget and are concerned
about the environment
Alejandro.moreno@esic.edu
Alejandro Moreno Mustieles