GOVERNMENTS CAUSING COMPETITIVENESS
 

 

 

 

 

 

 

 

 

 

 

 

The Indonesian government in the 1990s continued to incur huge budget deficits and kept on borrowing, making itself dangerously dependent on the inflows of foreign capital. As the new government took over in 1998, inflation was high and the country became vulnerable to capital flight, leaving no choice for the government but to devalue the rupiah. The weakened Indonesian economy, staggered by the deep devaluation of the rupiah, had strong reverberations for the United States, with hundreds of thousands of jobs and billions of dollars of export business lost. Marketing strategy is deeply affected by political perspectives. For example, government decisions have significantly affected the U.S. automotive industry. Stringent requirements, such as fuel efficiency standards, have burdened the industry in several ways. The marketing strategist needs to study both domestic and foreign political happenings, reviewing selected published information to keep in touch with political trends and interpret the information as it relates to the particular company. Governments around the world help their domestic industries strengthen their competitiveness through various fiscal and monetary measures. Political support can play a key role in an industry’s search for markets abroad.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Without it, an industry may face a difficult situation. For instance, the U.S. auto industry would benefit from a U.S. government concession favoring U.S. automotive exports. European countries rely on value-added taxes to help their industries. Value-added taxes are applied to all levels of manufacturing transactions up to and including the final sale to the end user. However, if the final sale is for export, the value-added tax is rebated, thus effectively reducing the price of European goods in international commerce. Japan imposes a commodity tax on selected lines of products, including automobiles. In the event of export, the commodity tax is waived. The United States has no corresponding arrangement. Thus, when a new automobile is shipped from the United States to Japan, its U.S. taxes upon export are not rebated and the auto also must bear the cost of the Japanese commodity tax (15 or 20 percent, depending on the size of the vehicle) when it is sold in Japan. This illustrates how political decisions affect marketing strategy. It is not unrealistic to say that all companies, small or large, that are engaged in strategic planning examine the economic environment. Relevant published information is usually gathered, analyzed, and interpreted for use in planning. In some corporations, the entire process of dealing with economic information may be manual and intuitive. The large corporations, however, not only buy specific and detailed economic information from private sources, over and above what may be available from government sources, but they analyze the information for meaningful conclusions by constructing econometric models. For example, one large corporation with nine divisions has developed 26 econometric models of its different businesses. The data used for these models are stored in a database and are regularly updated. The information is available online to all divisions for fur- ther analysis at any time. Other companies may occasionally buy information from outside and selectively undertake modeling.