Class project to describe a marketing concept. I chose economy evaluation

1. Country Market
Assessment
Evaluating the General Economic Environment

2. Reasoning for Economic Analysis
• More wealth = greater likelihood of people being able to buy the product
or service you want to offer
• One of the major factors to evaluate is the General Economic Environment
of the region you wish to enter

3. Level of Imports and Exports
• Trade deficits exist when a country imports more that it exports.
• This means there is greater competition from foreign companies.
• Increased competition can result in lower prices and which means lower
profits.

4. Level of Imports and Exports
• A trade surplus occurs when a country exports more than it imports.
• This turns into opportunities to enter other markets without the need to
physically locate there.
• Less competition means the company can charge more for their products
and generate higher profits.

5. Gauging market size
• A standardized metric must be used.
• The two most commonly used metrics are:
• Gross domestic product (GDP)
• Gross national income (GNI)

6. Gross domestic product (GDP)
• Used globally
• Market value of goods and services produced in a country in a year.
• Does not apply to imported goods
• Does not include money earned on products manufactured and sold in other
countries
• Does not include investment income earned in other countries

7. Gross national income (GNI)
• The GDP plus net income from investments outside of the country minus
payments made to nonresidents who contribute to the domestic economy
• How much money the country’s economy has available to spend

8. Comparing economies
• Different countries use different forms of currency. Knowing the value of
each compared to an accepted standard, such as the United States dollar,
helps to establish the price of a good or service you wish to sell.
• Purchasing power parity (PPP) provides easy to understand scenarios to
evaluate how currencies compare.

9. Purchasing power parity (PPP)
• If exchange rates are in equilibrium then a product will cost the same
regardless of the currency.
• For example, a tractor that costs $100,000 in the United States should be
able to be purchased in Japan by converting $100,000 United States dollars
into Yen.

10. Purchasing power parity (PPP)
• The Economist uses the Big Mac Index to illustrate PPP. McDonald’s exists
in nearly every country and includes its signature sandwich, the Big Mac,
on its menu. McDonald’s knows exactly what it can sell the Big Mac for to
make a profit and keep customers. Comparing the price across the
countries and converting it to whatever currency you want to use as the
base you can tell how that currency stacks up to the others.

11. Why is this
important?
• No one starts a for-profit business with the
intention of losing money. By comparing
economies the owners have a better
understanding of the risks involved in entering a
new market. Sometimes those risks outweigh
any reward.