Name : Michelle Kaunang

Class : 6A/IBA
SIN : 18061102166

GLOBAL MARKETING
QUESTION
1. Explain how market capitalism, centrally planned capitalism, centrally planned socialism, and
market socialism differ. Give an example of a country that illustrates each type of system.
2. The seven criteria for describing a nation’s economy introduced at the beginning of this
chapter can be combined in a number of different ways. For example, the United States can be
characterized as follows:
 Type of economy: Advanced industrial state
 Type of government: Democracy with a multiparty system
 Trade and capital flows: Incomplete free trade and part of a trading bloc
 The commanding heights: Mix of state and private ownership
 Services provided by the state and funded through taxes: Pensions and education, but not
health care
 Institutions: Transparency, standards, no corruption, a free press, and strong courts
 Markets: Free market system characterized by high-risk/high-reward entrepreneurial
dynamism
Use the seven criteria found on pp. 40–41 to develop a profile of one of the BRIC nations, or
any other country that interests you. What implications does this profile have for marketing
opportunities in the country?
3. Why are Brazil, Russia, India, and China (BRIC) highlighted in this chapter? Identify the
current stage of economic development for each BRIC nation.
4. Turn to the Index of Economic Freedom (Table 2-3) and identify where the BRIC nations are
ranked. How should global marketers use the Index as a guide to global market opportunities?
5. The Heritage Foundation’s Index of Economic Freedom is not the only ranking that assesses
countries in terms of successful economic policies. For example, the World Economic Forum
(WEF; www.weforum.org) publishes an annual Global Competitiveness Report; in the 2010–
2011 report, the United States ranks fourth, according to the WEF’s metrics. By contrast,
Sweden is in second place. According to the Index of Economic Freedom’s rankings, the United
States and Sweden are in 9th and 22nd place, respectively. Why are the rankings so different?
What criteria does each index consider?
6. When the first edition of this textbook was published in 1996, the World Bank defined “low-
income country” as one with per capita income of less than $501. In 2003, when the third edition
of Global Marketing appeared, “low income” was defined as $785 or less in per capita income.
As shown in Table 2-4 of this chapter, $995 is the current “low-income” threshold. The other
stages of development have been revised upwards in a similar manner. How do you explain the
upward trend in the definition of income categories during the past 15 years?
7. A manufacturer of satellite dishes is assessing the world market potential for his products. He
asks you if he should consider developing countries as potential markets. How would you advise
him?
8. A friend is distressed to learn that America’s merchandise trade deficit hit $646 billion in
2010. You want to cheer your friend up by demonstrating that the trade picture is not as bleak as
it sounds. What do you say?

ANSWER

1.
- Market capitalism is an economic system in which individuals and firms allocate
resources and production resources are privately owned. Simply put, consumers
decide what goods they desire and firms determine what and how much to produce;
the role of the state in market capitalism is topromote competition among firms and to
ensure consumer protection. Today, market capitalism iswidely practiced around the
world, most notably in North America and the EUA
- Centrally planned economy, also known as a command economy, is an economic
system in which a central authority, such as a government, makes economic decisions
regarding the manufacturing and the distribution of products. Centrally planned
economies are different from market economies, in which such decisions are
traditionally made by businesses and consumers. Centrally planned is found in
Sweden
- At the opposite end of the spectrum from market capitalism is Centrally planned
socialism. In this type of economic system, the state has broad powers to serve the
public interest as it sees fit. State planners make “top-down” decisions about what
goods and services are produced an in what quantities; consumers can spend their
money on what is available. Government ownership of entire industries as well as
individual enterprises is characteristic of centrally planned socialism. For decades, the
economies of China, the former Soviet Union, and India functioned according to the
tenets of centrally planned socialism.
- Market socialism, is also possible. In such a system, market allocation policies are
permitted within an overall environment of state ownership. In Sweden, for example,
where the government controls two-thirds of all expenditures, resource allocation is
more “voter” oriented than “market” oriented.

2. BRAZIL
 Type of economy: Industrializing or developing country
 Type of government: federal presidential constitutional republic
 Trade and capital flows: Incomplete free trade
 The commanding heights: federal republic
 Services provided by the state and funded through taxes: public healthcare, SUS,
education
 Institutions: Transparency, freedom of expression , ect
 Markets: free market system
3. Experts predict that the BRIC nations will be key players in global trade even as their
track records on human rights, environmental protections and other issues come under
closer scrutiny by their trading partners.
India is in the Low-Income category. China and Brazil fall within the Lower-Middle-
Income category. Russia is the only BRIC nation to be in the Upper-Middle-Income
category.
4. All four BRIC countries fall within the "Mostly Unfree" category. This indicates that,
while the index and what it stands for are certainly important to marketers, they are not
willing to forego the business opportunities presented by these countries.
5. The Heritage foundation measures trade policy, taxation policy, government consumption
of economic output, monetary policy, capital flows and foreign investment, banking
policy, wage and price controls, property rights, regulations, and the black market. It does
take a very conventional and conservative approach to classifying economies. On the
other hand, the World Economic Forum, according to their website, states: “The World
Economic Forum is an independent, international organization incorporated as a Swiss
not-for-profit foundation. We are striving towards a world-class corporate governance
system where values are as important a basis as rules. Our motto is ‘entrepreneurship in
the global public interest’. We believe that economic progress without social
development is not sustainable, while social development without economic progress is
not feasible. Our vision for the World Economic Forum is threefold. It aims to be: the
foremost organization which builds and energizes leading global communities; the
creative force shaping global, regional and industry strategies; the catalyst of choice for
its communities when undertaking global initiatives to improve the state the world”
Clearly, the WEF assigns a great deal of value to measuring the values and social
developments, and opportunities of a country. This strong belief system influences the
WEF’s country ranking – not by what is current possess but what it should be doing.
6. The economic systems of countries are constantly developing and changes happen
rapidly. The percentage of the world's GNI for low-income countries is now at a record
low of 3.23 percent as compared to the lower-middle-income countries, and the upper-
middle-income countries. This suggests great gains in income per person and income
distribution for those living in the low-income companies. As countries in the low-
income begin to tackle their economic, social, and political problems, more opportunities
present themselves for the people living in those countries.
7. Developing markets should prove attractive on the basis of current low product saturation
levels. High rates of growth in many developing countries suggest that some segments of
 the population save enough money to afford expensive electronics equipment such as a
satellite dish.
A satellite entrepreneur might invite neighbors to his home and charge them for the
privilege of watching programming that would not otherwise be available. These
neighbors might not be able to afford a satellite and related equipment, but they could
afford to watch an occasional movie.
8. The overall trade balance reflects merchandise as well as services trade as reported in
official balance of payments figures. The U.S. typically runs a trade surplus in services,
which serves to offset the merchandise trade deficit. The United States is a major service
trader. As shown in Table 2-5, U.S. services exports in 2010 totaled approximately $424
billion. This represented slightly less than one-third of total U.S. exports. The U.S.
services surplus stood at $80billion. This surplus partially offset the U.S. merchandise
trade deficit, which reached a record $838 billion in 2010.