4.02 Exemplify the 4 types of economic systems, & the effects of economic integration on international marketing http://youtu.be/sO75ZsvMkc8 YouTube clip on history of EU The political economy refers to idea international business is influenced by economic & political/legal environments of countries Republic - country with democratic process which elects representatives to govern country Ex) the US, France, South Africa, Haiti https://www.cia.gov/library/publications/theworld-factbook/fields/2128.html#gm for listing of government types Economic systems Governs how country controls production, distribution, & consumption of goods & services. US-EU conflict activity http://www.ustr.gov/countries-regions/europe-middleeast/europe/european-union Review the link and list the points of contention in trade between the US and EU. Also how does each bloc benefit each other – Create in a PPT format and present to the class Economic systems (con’t) Market economy - free market answers 3 economic questions Private property & entrepreneurship are characteristics. Have little government involvement. Do not exist in pure form, considered theoretical. Economic systems (con’t) Mixed economy - system combines market economy characteristics with varying levels of government control. Most developed countries are mixed Ex) US, Canada, Germany, Japan, etc. Government control mostly to protect consumers & businesses. Socialism - strong form of mixed economy Sets strong rules & regulations to control businesses practices. Aims to protect all citizens. Economic systems (con’t) Planned or Command economy government acts a central planner and answers three economic questions. Former Soviet planned economies in Central and Eastern Europe collapsed. China has moved some products towards market-based; many large industries controlled by state. Ex) North Korea, Cuba, Vietnam, and Laos Economic systems (con’t) Traditional economy - customs, religious beliefs, & historical patterns determine answers to 3 economic questions. Ex) Amish, Aborigines, & Amazon tribes http://youtu.be/csYN5qBXZBU YouTube clip on types of economic systems International marketers need different sales strategies based on economic system Many companies cautious about selling in Chinese market due to weak government controls over patents & competitive practices. Chinese companies known to steal product designs & packaging. Minimal regulations on workers safety or environment. Allows for lower production costs. General trend Last 15 years has been toward marketbased or mixed market economic systems. Economic systems benefit from international marketers serving as key tool in meeting needs of country. Economic integration Refers to development of trading partnerships with elimination of trade restrictions. Free Trade Area (FTA)- all barriers removed Customs union - FTA with common trade policy to non-members. Ex) European Union & Turkey since 1996 Economic integration (con’t) FTA (con’t) – Common market - customs union that allows labor, capital & technology to move between members European Union, an economic union, coordinates economic policies between 27 member countries http://www.youtube.com/watch?v=VvIPSY_Sbfg US-EU conflict activity** http://www.ustr.gov/countries-regions/europe-middleeast/europe/european-union Review the link and list the points of contention in trade between the US and EU. Also how does each bloc benefit each other – Create in a PPT format and present to the class Regional trade agreements ASEAN - Association of Southeast Asian Nations COMESA - Common market for East & Southern Africa CACM - Central American Common Market CARICOM - Caribbean Community & Common Market Regional trade agreements (con’t) The more integrated the region, fewer variances needed in product development. A standardized set of rules & regulations brings down cost of product development & sales. BONUS ACTIVITY!! Find 3 interesting facts…dig deep!!! http://www.stoptheftaa.org/ http://www.globalexchange.org/campaigns/ftaa The Americas NAFTA - North American Free Trade Agreement with Canada, Mexico & US. Went into effect in 1994. Eliminated duties on ½ of all US goods shipped to Mexico. Set agreements to phase out all other tariffs in 2008. Protects patents, copyrights, & trademarks. Eases investments between three countries Set rules related to worker and environmental protections. Is controversial; is viewed as cause of job losses in US. The Americas (con’t) CAFTA - Central America Free Trade Agreement with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Dominican Republic & the US. Went into effect in 2005. 80 % of U.S. consumer & industrial goods exports no longer subject to tariffs. Tariffs on rest of products phased out over ten years by 2015. The Americas (con’t) FTAA - Free Trade Area of Americas will include all countries in Americas except Cuba Was to be enacted in 2005, but lacked support of proposed member governments & citizens http://www.youtube.com/watch?v=VmHiICjcp6g &playnext=1&list=PL0CFBDB0CCA8C4AC8 YouTube clip on FTAA