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International Economic Environment in Marketing: Definition & Factors

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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. Updated: 10/08/2022

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.

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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 August 2022 stood at 3.7%. The lower the national unemployment rate, the more money is generated into the economy, as consumers have more income and more money to spend.

Many of the world's major nations also experienced low unemployment rates, per Trading Economics in the summer of 2022, as the world emerged from COVID-19 shutdowns and supply shortages. For example, many European countries reported low rates of joblessness in Germany (5.5%), France (7.4%), Italy (7.9%), and the U.K. (3.6%). Nor was this trend limited to the Western hemisphere - in Asia, rates were 2.6% in Japan and 3.5% in Australia.

The report showed that areas of high unemployment were common in Africa and the Middle East. Ethiopia (19.1%), Botswana (24.5%), and South Africa (33.9%) experienced high levels along with Jordan (22.6%).

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