Competency 51: Analyze Evolving Economic Systems
Competency 52: Describe Impact of Global Marketing
on Business in America
Knowledge Required to Conduct Analysis:
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Understanding of the types of economic
systems
Advantages and disadvantages of each
type
Understand definition of global marketing
Understand impact of economic
interdependence among nations
resulting from evolving economies
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What to produce?
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How to produce?
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For Whom to produce?
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Land- natural resources
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Labor- available work force;
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Capital- money,
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Entrepreneurship-creativity;
education level
(skilled/unskilled)
infrastructure,
equipment/production facilities
inventiveness
Market Economy
 Mixed Economy
 Command Economy
 Custom-based Economy
Economic systems are developed by each
nation based on resources of the country and
how the nation wants to answer three basic
questions in how to use those limited resources
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The market (consumers and businesses) answers the
three basic economic questions:
What will be Produced- through purchases in marketplace
How products will be Produced- businesses decide this;
competition spurs businesses to be efficient and produce to
be price competitive
For Whom to produce- produce for whoever has money to
purchase
In a Pure Market Economy There is No Government Intervention
Government answers the basic economic
questions:
What will be Produced- one person; dictator of group of
government officials based on what they believe is
important
How products produced- government owns all property
and therefor controls how goods and services produced
For Whom to produce- government decides this; in
principle wealth is shared equally to meet basic needs
The individual/companies have no input
Traditions and rituals answer
the three basic economic questions:
What will be Produced- based on the traditions- no
choice in what to produce Ex: farming community that
has farmed for generations
How products produced- bound by tradition- uses
practices from generations
For Whom to produce- Tradition regulates who buys
and sells and where and how exchange takes place
Cultural and religious practices passed down from one
generation to another is basis for decisions
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No economy is purely traditional, market, or
command
Every economy has influences that make it
somewhat mixed
Meaningful classification of economic systems
is made based on how much a government
interferes with free market
Three political philosophies shape world
economies: Capitalism, Socialism, and
Communism
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Marketplace competition
Private ownership of business
Embraces principles of free enterprise (Private
ownership, Risk, Profit, and Competition)
Government is concerned about people and
cares for those who cannot care for themselves
Number of social services does not match that of
a socialist country
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Government controls factors of
production
No private ownership of property or
capital
Theory is that goods owned in common
(by government representing the
community as a whole) are available to
all as needed and that society is classless
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Originally referred to a system on its way to the
communist ideal of a classless society
Most socialist countries today have democratic political
institutions
Differ in capitalist nations in the increased amount of
government involvement in the economy
Main goal is to meet basic needs for all and to provide
employment for many
Characteristics include: more social services for everyone; free or
low cost medical care; high taxes for business and individuals to pay
for this. Government runs key industries
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Used interchangeably with terms capitalism
and market economy
Type of system in United States
Four characteristics:
Private Ownership of Property & Business
Risk
Profit
Competition
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Divide in to groups of 2-3 people per group
Using the Internet, conduct basic research and
complete the Comparing Types of Economies
assignment.
Each member of the group must turn in this
assignment separately, however, students will
share laptops and collaborate in completing the
activity.
Due end of class. 50 Points
Comparing Types of Economies
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Economy
Market Economy
Command Economy
Mixed Economy
Traditional Economy
Factors of Production
3 Economic Questions
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Quiz Next Class- 50 Points
Socialism
Communism
Capitalism
Free Enterprise
Characteristics of
Free Enterprise
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Changing from centrally planned (government)
economy to market economy
Undergo economic liberalization (market forces
set prices rather than government)
Socialist countries moving towards
privatization with selling off of state-run
businesses to help balance their budgets
Developing countries that are mostly poor with
little industrialization trying to become more
prosperous and develop infrastructure and
improve education levels of their work force
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Marketing on world-wide scale
Exporting
Franchising
Provide valuable products, solutions and
services to customers locally, nationally,
internationally and worldwide
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Benefits and Challenges of Global Marketing
Impact of Increasing Competition on American
businesses
Resources of U.S. versus those of our foreign
competitors
BENEFITS
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Larger marketspotential for more
markets
Lower costs for
production and
distribution
New supplier/vendor
relationships
Brand prestige
CHALLENGES
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Different strategies for
cultural, religious, and
language barriers
Increased expenses
Loss of domestic
production/jobs
Risks
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Compete with low cost producers (foreign
production)
Mass market retailers (Walmart, Sears, Target,
Costco, Best Buy) ability for volume purchases
of low cost foreign products- results in
American businesses going out of business
Pricing and Distribution create more difficult
environments in which to compete (Internet)
Resources of US
 Abundance of natural
resources- land mass
and coastlines for
shipping
 Entrepreneurship and
Labor Diversity
 Skilled Labor
Foreign Resources
 Only Canada and
Australia has similar
resource
 Low cost producers
often have unskilled
labor