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Lecture 4

GMS 522 Lecture Notes - Lecture 4: Big Mac Index, World Economy, Infant Mortality

Global Management Studies
Course Code
GMS 522
Helene Moore

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GMS 522
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GMS 522
Week 4
Chapter 4: The Economic Environment
Market Screening
Assessing a foreign market
The evaluation of economic variables that relate to the actual size and nature of the market(s)
Initial screening should be done efficiently but should also be very thorough
The analysis should utilize a wide range of economic criteria
The Global Economy
Major developing debtor nations: Argentina, Brazil, Colombia, Egypt, Peru, etc.
Group of five: United States, Britain, France, Germany, Japan
Big emerging markets: China, India, Mexico, Indonesia, etc.
GDP (Gross Domestic Product): the market value of all officially recognized final goods and services
produces within a country in a given period
Purchasing Power Parity
Goods and services in different countries have to be valued consistently if the differences are to
reflect real differences in the volume of goods produced
PPP shows how many units of a certain currency are needed in a specific country in order to buy
the amount of goods and services that one unit of currency will buy in another country
Big Mac Index
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The availability and quality of infrastructure is key when evaluating marketing operations abroad
When operating abroad, marketers will have to rely on services provided by the local market for
transportation, communication and energy as well as an organizations facilitating market
Social Development
The Physical Quality of Life Index (PQLI)
This is one of the few social indicators that allow a comparison of the progress through time in
all countries
Some of its key components are: life expectancy, infant mortality, and adult literacy
Forms of Economic Integration in Regional Markets
Political Union: economic union, plus political harmonization
Economic Union: common market, plus harmonization of economic policies
Common Market: common union, plus factor mobility (labour, capital and technology)
Customs Union: free trade area, plus common external trade policy.
Free Trade Area: free trade among members, all barriers removed