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International Economic Environment in Marketing: Definition & Factors

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  • 0:00 Intl. Economic…
  • 0:45 The Business Cycle
  • 1:25 Factors Affecting This…
  • 4:36 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Francis

Jennifer has a Masters Degree in Business Administration and pursuing a Doctoral degree. She has 14 years of experience as a classroom teacher, and several years in both retail and manufacturing.

In this lesson, we'll discuss the global economic environment while learning how it can affect international business operations. We'll also take a look at the business cycle.

International Economic Environment Defined

The international economic environment can be described as the global factors that are outside of the control of individual organizations but that can affect the way that businesses operate. These factors include unemployment rates, inflation rates, and labor costs. External factors found in the macroeconomic environment can also affect organizations' decision-making and performance activities. They include cultural and social influences, legal issues, demographics, and political considerations, as well as changes in the natural environment and technology.

The Business Cycle

To gain a good understanding of the international economic climate and how or why particular factors can affect it, it's important to have an understanding of the business cycle. The business cycle represents the four stages of economic growth followed by economic decline. The four stages consist of:

  • Peak/boom
  • Contraction/slump
  • Recession
  • Expansion

As the business cycle repeats itself on a continuous basis, the expansion stage would be followed by another peak. The following diagram is a pictorial representation of the business cycle.

Factors Affecting this Environment

There are various factors that can affect the global economy, and thus the economic cycle. These factors include, but are not limited to, currency exchange, interest and inflation rates, trade, and unemployment statistics. Let's examine a few of these factors, beginning with the unemployment rate.

Unemployment Rate

According to the United States Bureau of Labor Statistics, the national unemployment rate as of March 2015, stood at 5.5%, a decrease from 9.7% in February 2010, during what is now being called the Great Recession. The lower the national unemployment rate, the more money is generated into the economy, as consumers have more income and more money to spend.

According to the Conference Board in January 2015, Australia had a national unemployment rate of 6.4%, while 5.6% of the people in Canada were unemployed. The Conference Board also provided some seasonally regulated unemployment rates adjusted to reflect U.S. models. According to these statistics, from December 2014 to January 2015, Australia, Japan, Sweden, and the United States showed an increase in unemployment among the countries used in the comparison. During the same period, France, Germany, Italy, as well as Canada, showed a decrease in unemployment.

Why is this information important? Because, one country's unemployment rate can have a negative effect on its trading partners but not necessarily the global economy to any noticeable degree.

Trade

Across the globe, various trading blocs have put agreements in place to ensure that trade barriers, such as tariffs and embargoes, are removed. This makes the movement of goods in and out of countries less complicated.

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