Global Economic Environment and Marketing
A. Project question
A major multinational corporation has appointed you as an economic advisor. You are requested to
compile a report regarding the macroeconomic environment in two countries where the firm operates and
explain how it might affect the company�s economic activity.
B. Project specifications
- You may choose to focus your analysis on any existing multinational firm.
- The two countries must be chosen from section C below as follows: one country from List 1 and one
country from List 2.
- Your report must include:
a. A brief description of the company.
b. A comparative analysis of all major macroeconomic indicators (see section D below, excluding 5 and 7)
for the two countries and their overall impact on firm�s economic activity.
c. An analysis of the market structure in which your company operates for the two countries.
d. An analysis of the monetary and fiscal policy for the two countries andtheir impact on the firm�s
economic activity.
e. An analysis of the foreign trade policy (international trade agreements)for the two countries and its
impact on firm�s economic activit
GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
With the increasing globalization, it is important for a business organization to
understand all the macroeconomic factors that may affect their business operations in different
nations. Understanding the macroeconomic environment of the nation in which a business
operates is important for the organization to develop marketing and business strategies that will
work successfully. Marketing strategy should either be standardized or localized to suit the
specific market in which a business operates. There are different factors that may affect how a
business operates such as interest rates, inflation rates, GDP and the level of unemployment. This
paper will provide a detailed analysis of the macroeconomic environment of Canada and India
and how these factors might affect Wal-Mart economic activities in these two nations.
Wal-Mart Company Overview
Wal-Mart Company is an American Multinational retail store founded in the year 1962
by Sam Walton. The company runs a chain of warehouse stores and discount department stores
in different countries. The company headquarters is in Bentonville, United States. Walmart was
incorporated in the year 1969 and began selling its shares to the public in 1972. The company
operates in three trade sections Wal-Mart US, Sam’s Club, and Wal-Mart Superstores. The
company has over 11,000 outlets in 28 different nations.
The Fortune Global 500 rated Wal-Mart stores to be the world largest company in terms
of revenue and similarly it is rated the biggest private employer in the globe having about 2.2
million workers. Wal-Mart marketing strategy is selling quality products at low prices to
improve the lives of their clients and both the clients and the community to save money and live
a better live.
GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
Wal-Mart Stores Inc. supply diverse assortment of products, services and brands in the
market. Some of the products the company offers include beverages, dry and wet grocery, food,
clothes, electronic accessories, furniture, clothes among others. The corporation offers a great
selection of high-quality merchandise, welcoming services under their “Everyday Low prices”
strategy. The industry in which Wal-Mart Stores operate is the retailing industry. In the retailing
industry, companies offer merchandise and products for sale at a fixed location such as a store,
online, or by mail.
Comparative analysis of major macroeconomic indicators in Canada and India
Canada is positioned as the 11nth major in the globe in terms of Nominal GDP and the
14nth largest when it comes to Purchasing Power Parity economy in the globe. Canada is part of
Group of Seven (G7) as well as the Organization for Economic Co-operation and Development
(OECD) and is among the globe wealthiest countries (Nicoletta et al., 2010). The Canada is a
developed economy chiefly controlled by the service, logging and oil industry. The company
also tops in the seafood and fishing industry as well as entertainment and software industry.
On the other hand, India is positioned as the seventh in when using Nominal GDP and
14nth in relation to Purchasing Power Parity (PPP) (Ahluwalia, 2012). India is among the newly
industrialized countries. It is a member of BRICS having an average growth rate of 7% for the
last twenty years. India economy is rated among the fastest growing major economies in the
world after China economy. India boasts of a young population, healthy savings and investment
rates, low dependency ratio and high globalization rate. The primary source of revenue in India
is the service sector. In fact, India is the major exporter of BPO services, software services, and
other IT services followed by agricultural and industry sector.
GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
GDP Growth Rate: This economic metric measure the rate at which the nation’s Gross
Domestic Product over a period of one year. In Canada, the GDP annual Growth rate has
increased by 1% in the second quarter of 2015 as compared to the previous year (IMF, 2015).
Ranging from 1962 to 2015, the GDP annual growth rate in Canada averaged 3.24%. The GDP
highest value was 8.80% attained in 1962 and a record of -3.98% in the year 1982. Statistics
indicates that the wholesale trade dropped by 0.4% and the retail sector increased by 0.7%. This
poses a mixed impact for Wal-Mart as it engages in both wholesale and retail trade. Therefore,
Wal-Mart should concentrate more on the retail sector in Canada. The average GDP from 1998
to 2015 is 1.6% with an unsurpassed high of 5.30% in 2009 and a record low of -1.70% in at the
beginning of 2009.
In India, the GDP annual growth rate has also increased but at a rate of 2.06 in the second
quarter of 2015 as compared to the previous year. The retail industry has been enjoying a high
growth rate in India paltry because of the high population consisting of young people and
working population (Mohan & Chitradevi, 2014). Therefore, India is a favorable market for Wal-
Mart as most of its operations are in the retail sector of the economy.
GDP per capita at constant prices: This metric refers to the measure of the total output of
a nation computed by dividing the Gross Domestic Product (GDP) with the sum of all the people
in the country. This metric is paramount for indicating the relative performance of different
countries. It is imperative to note that an increase in per capita GDP indicates positive economic
growth.
According to International Monetary Fund, the value of GDP per capita at constant prices
was 38184.62 Canadian Dollar in the year 2009(IMF, 2015). Canada GDP per capita income has
GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
been on the rise since 2009. Projections indicate that the GDP per capita income is expected to
be 41765.85 by the end of 2015 which is an improvement by about 6,000 Canadian Dollar. This
positive outlook indicates an increase in economic growth in real terms and, therefore, may
present more opportunities for Wal-Mart because the people purchasing power has increased.
On the other hand, International Monetary Fund reported the GDP per capita at constant
prices in India to be at 31464.97 Indian Rupee in the year 2009. International Monetary Fund
project that this value will increase to 46723.21 by the end of 2015. This indicates that Indian
economy is growing at a faster rate as compared to Canada. Therefore, Wal-Mart should
concentrate on increasing its operation activities in India as compared to Canada.
Inflation Rate: inflation refers to the continued and persistent increase in the common
level of prices of commodities and services in an economy. Inflation is felt greatly in the retail
industry because an increase in inflation results in the decrease in purchasing power of the
currency circulating in the economy. The inflation rate in Canada has been increasing gradually
over the years. The consumer prices in Canada increase by 1.3% in the year that ended in August
- The inflation rate in Canada values at 3.19% in the period between 1915 and 2015. The
highest inflation rate ever felt in 1920 which hit an unsurpassedhigh of 21.60% in 1920 and a
record low of -17.80% in the year 1921 (Beers & Nadeau, 2014). This macroeconomic metric
indicates that the cost of goods in Canada has been increasing over the years, and thus it is not
favorable for Wal-Mart Supermarket. This trend is because of an increase in inflation rate results
in the decrease in purchasing power of consumers.
The inflation rate increased by 3.66 percent year-on-year as at August 2015, a slight
decrease from 3.69% increase in July this concurred with the market expectations. In fact, the
GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
inflation rate hit a record low this year in August; the current inflation rate is below the set target
of the central bank that is 6%. This is a good indicator of a thriving economy and good news for
the retail sector because decreasing inflation rate results in an increase in the purchasing power
of the consumers.
From the above comparison, it is evident that India is favorable as compared to Canada in
terms of the inflation rate. The inflation rate in Canada is on the rise while the inflation rate in
India has been dropping significantly. Therefore, Wal-Mart should expand its operation in India
to take advantage of the decreasing inflation rate and increasing the purchasing power of
consumers living in India.
Unemployment rate: Unemployment rate also has an impact on the economy
performance especially on the retail sector. Unemployment rate determines the consumption
level in a country and marketers should understand the trends in their market before making an
investment decision. The rate of unemployment in Canada increased from 6.80% to 7% between
August and July 2015. The unemployment rate had an average of 7.73% over the last ten years
with an unsurpassed value of 13.10% in December 1982 and a record low value of 2.90% in June
- This indicates that the changes in the level of unemployment is fairly balanced and does
not fluctuate.
Consequently, the rate of unemployment in India has been declining over the last five
years. The unemployment rate in India declined from 5.20% in 2012 to 4.90% in 2013 (Mohan
& Chitradevi, 2014). The unemployment rate in India averaged 7.32 percent in the last 30 years
with an unsurpassed value of 9.40% in 2009 and a record low of 4.90% in the year 2013. This
trend indicates that the Indian economy can create employment opportunities annually to absorb
GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
the vibrant new workforce to the economy. Therefore, the purchasing power of individuals in
India is high. As such, Wal-Mart should utilize these investment opportunities and invest in the
Indian market as compared to the Canadian market.
Interest Rates: Interest rates refer to the cost of using an asset. That is the sum charged by
a lender to a borrower for the exploitation of an asset. An interest rate is often expressed as a
percentage of the principal value (Mohan & Chitradevi, 2014). Interest rates have different
effects that ultimately reflect in consumption and investment in an economy. High-interest rates
increase the cost of borrowing and thus may limit the expansion of Wal-Mart through the use of
credit facilities. On the same note, the interest rate has an impact on consumption, an increase in
interest rates result in a fall in consumption. Therefore, it may affect the volume sold by Wal-
Mart in the Respective economies.
In Canada, the general interest rate is at 0.5% as at September 2015. This value is lower
than the average interest rate of Canada which is 5.98%. This indicates that the cost of borrowing
is low, and Wal-Mart can utilize the resource to expand their operations in the Canadian market.
The consumption level is also high, and this may result in increasing demand for Wal-Mart
goods and services in Canada.
On the other hand, the interest rate in India has been decreasing over the years the current
interest rate is 6.75% as at September 2015.This value is slightly higher than the value of the
average interest rate that is 6.71 in the period between 200 and 2009. The slight increase may be
felt in the decrease in consumption level as the cost of borrowing has slightly increased and may
result in fall in the general consumption in the Indian economy.
GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
In terms of the General Government Structural Balance, the potential GDP in Canada was
reported to be -2.04% of the potential GDP in the year 2009 (Beers & Nadeau, 2014). The
International Monetary Fund projects that the General Government Structural Balance of the
potential GDP to be 0.05%. The value of the general government structural balance comprises of
asset prices movements, temporary financial sector, and expenditure items. The metric evaluates
the government cyclically adjusted balance from nonstructural elements beyond the economic
scope. On the other hand, the Indian government experienced a budget deficit of 4.50% of the
GDP indicating that the government has to allocate more money for financing government
activities in the country (Mohan & Chitradevi, 2014).
The Balance of Payments: refers to a financial metric that is sued to summarize a nation’s
transaction with other nations. The balance of payment looks into the transactions between a
nation’s residents and non-residents in terms of transfer of goods, services, income and financial
claims. In Canada, the have a current account of -17398 CAD Million in the second quarter of
- This indicates that Canada is experiencing a current account deficit. However, the average
value of the current account was valued at -1808.71 indicating that the nation current account has
been improving. Canada international policies encourage foreign trade and foreign direct
investment of multinationals in their region. These policies may prove beneficial, and Wal-Mart
should seize the opportunity to invest in Canada.
Exchange rates also have effects on firms that export goods and import raw materials. A
devaluation of currency is beneficial to multinational firms as it will reduce the exporting rates
while an appreciation in exchange rates increases the cost of export. The Canadian Dollar has
been trading at 1.30654 against the US Dollar. This indicates a moderate gain against the euro as
the industrial production gained as a result of QE program. On the other hand, the Indian Rupee
GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
trades at 65.049 against the US Dollar indicating that the value of Canadian Dollar is higher
compared to the Indian Rupee.
Recommendations and Conclusion
From the extensive research on the macroeconomic indicators in Canada and India, it is
worth noting that investing in India is more profitable as compared to Canada. This notion is
because India is categorized as one of the newly industrialized countries and one of the world’s
fastest economies (Mohan & Chitradevi, 2014). Macroeconomic metrics indicates a moderate
long-term economic growth prospective because of the Indian young population, low
dependency ratio, decreasing interest rates and a positive GDP growth rate as compared to
Canada.
The unemployment rate has been declining in India indicating an increase in Per Capita
income. This trend is good as it will result in a rise in the general level of consumption as people
purchasing power will increase. This is contrary to the Canadian unemployment rate that
increasing over the years. The population is also low and thus the market share in the retail
industry is lower as compared to India.
Therefore, Wal-Mart should focus on increasing its business operations to take advantage
of the positive economic outlook for the Indian economy. The company has a potential of
increasing its market share because of the high population in India. This population will provide
market for the Wal-Mart goods and services and on the same note provide cheap labor and hence
cut down cost of production.
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GLOBAL ECONOMIC ENVIRONMENT AND MARKETING
References
IMF. (2015, April). Canada: Financial Sector Assessment Program-Crisis Management and Bank
Resolution Framework-Technical Note.
