ch03 Economic Environ 6sept06 n35

Information about ch03 Economic Environ 6sept06 n35

Published on April 9, 2008

Author: Reva

Source: authorstream.com

Content

Scan, Analyze & Respond to The Macroeconomic Environment:  Scan, Analyze & Respond to The Macroeconomic Environment Needs Consumer Wants Product Price Promotion Distr. Personnel Production Finance Economics Political Legal Technology Social Culture Subsistence Indusrial economy economy Acctg Business Cycle:  Business Cycle Prosperity Recession Depression Recovery Macroeconomic trends Influence the Company’s Marketing Mix Stagflation - a combination of prosperity & recession (affluence and low incomes) The Business Cycle :  The Business Cycle The U.S. economy created 2.2 million jobs in 2004, reversing the 2.3 million jobs lost from Dec. 2000 to Dec. 2002. Business Cycle, a pattern of economic fluctuations:  Business Cycle, a pattern of economic fluctuations Willingness to buy (Spend) – is influenced by expected product satisfaction, the ability to buy and numerous psychological and social forces such as expectations based on general economic conditions: Employment security, family size, mobility, education, .… Slide5:  ECONOMIC ENVIRONMENT (Prosperity…..Recession) ORGANIZATIONAL MARKETING STRATEGY Product, Price Promotion Phys. Distr.. MARKETING MANAGER DECISIONS - Risk Level - Capital Expenditures - New Product Creation CONSUMER EXPECTATIONS Purchasing power & patterns Job Security, Product Prices Consumer Confidence Index (Expectations, A Lag Effect Variable):  Consumer Confidence Index (Expectations, A Lag Effect Variable) 1 Source: WSJ, 16Oct.2002,pg.A17 (Conference Board) American Customer Satisfaction Index:  American Customer Satisfaction Index Source: “American Customer Satisfaction Index, “ University of Michigan Business School, Nov. 2003, http://www.theacsi.com/April 2004. Economic Trends Top Nations BY GNP (GDP):  Economic Trends Top Nations BY GNP (GDP) *US GDP $12,487 trillion (31Dec2005) = 11,134 Trillion in 2000 $. (bea.gov xxxx accessed15july06) Slide9:  U.K. Canada E.U.-3 Japan Euro Zone Changes the World Market:  % of World % of World Stock Market Population GDP Trade Capitalization* Euro-11 290 million 19% 19% $4 trillion …………………………………………………….. U.S. 270 million 20% 17% $11 trillion *1998 estimates Euro Zone Changes the World Market Income Varies by States (2005 dollars):  Income Varies by States (2005 dollars) Median Family Income 1 Connecticut $75,541 2 New Jersey $75,311 21 Pennsylvania $55,904 50 Mississippi $37,791 United States $55,832 Median Household Income 1 New Jersey $61,672 2 Maryland $61,592 25 Pennsylvania $44,537 50 Mississippi $32,938 United States $46,242 Median Household Income Varies by Counties (2005):  Median Household Income Varies by Counties (2005) #1 Loudon County, Va. $98,500 Fairfax County, Va. $94,600 Howard County, Md. $91,200 Somerset County, NJ $88,500 #5 Morris County, NJ $84,000 Orleans Parish, La. $30,700 Bronx County, NY $29,200 Hildago County, Tx $24,500 Sales & Marketing Management, produces Effective Buying Income data by metro-area (county/city) Top 5 Bottom 3 Consumer Income:  Consumer Income Gross National Product (all) (GDP – USA only) - Depreciation = Net Nat’l Product - Soc.Sec., Corp.taxes,etc. = Personal Income - direct taxes = Disposable Income - “essential expenses” 1973- $1100 Conn. ave, $300 College Park, Md. = Discretionary Income Civilian Labor Force: 146.5 mil., 2005 & 6.9% unempl Purchasing Power:  Purchasing Power Buying power.…All resources (money, goods and services) that can be traded (exchanged) for “products” Inflation ....Decrease in buying power due to decrease in “real” income (deflation) Real income ....% change in income relative to % change in cost of goods & services “HIGH COST OF LIVING” or “COST OF LIVING HIGH” ? Borrowed Time:  Borrowed Time (In Trillions) Clements, Jonathan. “Getting Going.” WSJ, June 6, 2003 Growth in Consumer Credit:  Growth in Consumer Credit The Macro Economic Environment:  Hyper competition --- mergers and acquisitions to acquire economies of scale (manufacturing, Distr.., Promotion, etc.) Equitable income distribution – rich/poor & income mobility The Macro Economic Environment Wealth- access to all assets, income ,credit,etc. Consumer purchases – 75% income, 25% wealth effect (1999) Top20%=50% of income, bottom 60%= 28% of income 2005 Controversy Over the Cost of Filling Up Nominal (actual price) vs. real (inflation-adjusted) average annual prices per gallon:  Controversy Over the Cost of Filling Up Nominal (actual price) vs. real (inflation-adjusted) average annual prices per gallon 1.50 1.00 0.50 0 1960 ‘65 ‘70 ‘75 ‘80 ‘85 ‘90 ‘95 (Nominal) (Real Income) 2.00 Consumer Price Indexes:  Consumer Price Indexes (1982-1984 = 100) Index ALL items (3/31/01) 176.2 Minus food & energy 185.3 New York 186.4 Boston 190 Dallas Food and beverages 172 Medical Care 270 Housing 175 Entertainment 104 Apparel 132 Transportation 154 Education ? WSJ,18April01,A2 U.S. Standard of Living:  U.S. Standard of Living 1978 1997 Households with 7+ rooms 22% 29% with 4 rooms 35% 30% Central Air Midwest 25% 51% South 37% 70% Microwave 8% 83% Dishwasher 35% 50% Clothes Dryer 59% 71% Licensed Driver Avg. Travel mi. 9,700 13,000 The Macroenvironment:  The Macroenvironment Key Economic Trends U.S. income distribution is skewed. Upper class, middle class, working class, underclass Rich: getting richer Middle class: shrinking Underclass: still poor Consumer spending patterns are changing. Wal-Mart Region Enjoys Boom, but Not All Benefit, (WSJ,10Feb05):  Wal-Mart Region Enjoys Boom, but Not All Benefit, (WSJ,10Feb05) Household Income & Taxes :  Household Income & Taxes TOP Federal Taxes Total Income 1% .1% Bottom 50% 19% 36.9% 17.4% 9.1% 5% Top 50% 3.3% 57.1% 86.6% 33.4% 96.7% 96.7% IRS 2006 data in WSJ, 2-3Sept2006,A8 USA: Boom and Bust:  USA: Boom and Bust Clements, Jonathan. “Getting Going.” WSJ, D1, July 9, 2003 Wealth Vs.Income America’s Wealth...A More Even Scale:  Wealth Vs.Income America’s Wealth...A More Even Scale “Wealth effect” -- as stocks gain, spending increases (w/less savings) Japanese Savers, U.S. Spenders:  Japanese Savers, U.S. Spenders Net household saving rates Source: Commerce Dept.’s Bureau of Economic Analysis Spenders and Savers as a Percentage of Total Population 1965 to 2025:  LO3 Spenders and Savers as a Percentage of Total Population 1965 to 2025 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Year Percent 40 35 30 25 20 15 Spenders ( Age 20 to 44) Savers ( Age 45 to 64) SOURCE: Based on data from U.S. Bureau of the Census, Population Paper Listings PPL. 41, Current Population Reports P25-1130, U.S. Census of Population (1970), volume 1, Part B, Census of Population (1980) volume 1, part B. Dual Wage Earners and Their Effect on Hours Spent Shopping:  Dual Wage Earners and Their Effect on Hours Spent Shopping 1965 1980 1995 Year 200% 100% 12 8 4 0 Families with Dual Incomes (1965 - 100%) Shopping Hours per Month Dual incomes rose ... … and shopping hours dropped SOURCE: Vision for the New Millennium . . .(Atlanta: Kurt Salmon Associates, 1997). Used with permission ENGEL’S LAW(S) (General Propositions):  ENGEL’S LAW(S) (General Propositions) As Family income increases, the proportion spent on food decreases As family income increases, the proportion spent on clothing remains nearly the same. Context: Changes in income must be related to TIME. Marketing Implication: There are patterns to consumer expenditures. Patterns do not change much over time. Your Financial Game Plan:  Your Financial Game Plan Housing 25-40% Food 10-29% Transportation 10-20% Clothing & upkeep 7-13% Saving & Insurance 8-20% Gifts & contribution 1-6% Medical & dental 1-6% Recreation, vacation 3-10% Miscellaneous 1-10% Changing Purchasing Habits of American Households:  Changing Purchasing Habits of American Households 25 20 15 10 5 0 1970 1980 1990 2004 Year Percent Medical Recreation Food Clothing SOURCE: Vision for the New Millennium . . .(Atlanta: Kurt Salmon Associates, 1997). Used with permission Manufacturing Jobs:  Manufacturing Jobs Ansberry, Clare. “Why U.S. Manufacturing Won’t Die.” WSJ, B1, July 3, 2003 Applied Economics Manufacturing :  Manufacturing Of 17 million jobs left in the US manufacturing sector, 52% are involved in the actual production of goods. *A decade ago, 68% of mfgr. jobs were involved in the actual production (factory floor). Pros: Making a good generally has a greater impact on the economy than providing a service. Cons: An indirect risk is less innovation caused by manufacturing sector morphing into the service sector. * Manufacturing led to innovations in software, cancer screening, as well as Teflon and drip coffee makers. Slide35:  Average Manufacturing Sector Wages in U.S. Dollars Rhoads, Christopher. “Burden of History.” WSJ, A1, December 6, 2002

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