Gross Domestic Product (GDP)
A widely accepted measure of a country’s economic performance and overall economic activity is its GDP.
Disposable income
For consumer goods, per capita demand is most strongly influenced by a country’s real disposable income per capita.
Demographic factors
Market stratification by demographic characteristics helps identify significant changes in potential marketing opportunities over time.
Competitive & complementary products
The size and distribution of firms significantly influence competitive conditions within the relevant industry sector.
Industrialised vs developing countries
A company’s export marketing strategy depends on whether the target market is industrialised or developing.
Degree of government intervention
Export strategies will differ depending on whether the target market is free-market oriented or government-controlled.
International trade agreements
International trade bodies and agreements were established to address negative trade patterns and shape global trade practices.
Trading blocks
A group of countries can reduce trade restrictions among themselves while maintaining barriers against non-member countries
Surveys have shown that the economic environment tends to receive the greatest amount of attention from export planners. The primary concern in analysing the economic environment is to assess opportunities for marketing the company’s products abroad or possibly for locating some of the company’s production and distribution facilities outside of South Africa. Indeed, when striving to identify potential countries to focus on, one of the major differentiating factors will be the differences in the economic environments that exist between potential target countries.
Decisions about how much of a product people buy and which products they choose to buy are largely influenced by their purchasing power. If a large portion of a country’s population is poor, the market potential for many products maybe lower than it would be if they were reasonable prosperous. If a country is expected to enjoy rapid economic growth and large sectors of the population are expected to share in the increased wealth, sales prospects for many products would clearly be more promising than if the economy were stagnating.
Thus, if you are comparing potential countries to focus your export efforts on, you must consider factors such as the general economic outlook, employment levels, levels and distribution of income, growth trends, etc. It should be borne in mind, however, that when income levels drop, people will generally cut back on their purchases of luxury items before they cut back on necessities. Thus, poor countries which are allocating scarce foreign exchange reserves only to necessities (e.g. cheap clothing, simple agricultural tools, etc.) may prove to be more reliable markets than rich countries for certain export products.
Below are some of the economic factors which should be of interest to the exporter. To learn more about these factors, please follow the corresponding links:
- Gross domestic product (GDP)
- Disposable income
- Demographic factors
- Competitive and complementary products
- Industrialised vs developing countries
- Degree of government intervention
- International trade agreements
- Trading blocs