UNDERSTANDING ECONOMICSADVANCED MARKETING

PART 1

Competency 51: Analyze Evolving Economic Systems

Competency 52: Describe Impact of Global Marketing on Business in America

Analyzing Evolving Economic Systems

Knowledge Required to Conduct Analysis: 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

Three Basic Economic Questions

What to produce?

How to produce?

For Whom to produce?

Factors of Production Land- natural resources

Labor- available work force; education level (skilled/unskilled)

Capital- money, infrastructure, equipment/production facilities

Entrepreneurship-creativity; inventiveness

Types of Economic Systems

Market Economy Mixed Economy Command Economy Custom-based EconomyEconomic 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

Market Economy

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 purchaseIn a Pure Market Economy There is No Government Intervention

Command Economy

Government answers the basic economic questions:

What will be Produced- one person; dictator of group of government officials based on what they

believe is importantHow products produced- government owns all property and therefor controls how goods and

services producedFor Whom to produce- government decides this; in

principle wealth is shared equally to meet basic needs

The individual/companies have no input

Traditional EconomyTraditions 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 generationsHow products produced- bound by tradition-

uses practices from generationsFor 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

Mixed Economy

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

Capitalism 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

Communisim

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

Socialism 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

Free Enterprise

Used interchangeably with terms capitalism and market economy

Type of system in United States Four characteristics:

Private Ownership of Property & Business

RiskProfitCompetition

Checkpoint!Economic Basics and Types of Economies

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 PointsComparing Types of Economies

Terms and Things to Know

Economy Market Economy Command Economy Mixed Economy Traditional Economy Factors of Production 3 Economic Questions

Socialism Communism Capitalism Free Enterprise Characteristics of

Free Enterprise

Quiz Next Class- 50 Points

Economies in Transition 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

What is Global Marketing?

Marketing on world-wide scale Exporting Franchising Provide valuable products, solutions and

services to customers locally, nationally, internationally and worldwide

Impact of Global Marketing on Business

Benefits and Challenges of Global Marketing

Impact of Increasing Competition on American businesses

Resources of U.S. versus those of our foreign competitors

Benefits and Challenges of Global Marketing to

American Businesses

BENEFITSCHALLENGES

Larger markets- potential for more markets

Lower costs for production and distribution

New supplier/vendor relationships

Brand prestige

Different strategies for cultural, religious, and language barriers

Increased expenses Loss of domestic

production/jobs Risks

Impact of Increasing Competition on American

Businesses 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 Versus Foreign Competitors

Foreign Resources Only Canada and

Australia has similar resource

Low cost producers often have unskilled labor

Resources of US Abundance of

natural resources- land mass and coastlines for shipping

Entrepreneurship and Labor Diversity

Skilled Labor