International communication

QUESTION 1INTERNATIONAL MARKETING AND COMMUNICATION1.1 INTRODUCTIONIn this first part of my portfolio examination, we will deal with the theme of International marketing and communication. Under this theme, we will define and discuss the Economic, Demographic and Political environment and how it effects the economy. We will engage the economic environment by describing the overall economic state of South Africa by discussing issues of GDP, growth percentage, unemployment, exchange rate, consumer spending and available infrastructure. In our discussion of demographic environment, we will deal with issues of declining birth rate, marriage failure etcetera and how they affect business in South Africa. Then, we will describe the nature of the political environment and look at how labour or trade unions hurt business in South Africa. 1.2 Economic EnvironmentEconomic environment is a combination of various economic factors which have their effect on the working of the business. These factors influence the buying behaviour and spending patterns of consumers and institutions. Furthermore, the economic environment consists of the broader economy in a business market and the broader economy that can influence a business. Economic environment can be divided into the microeconomic environment, which affects business decision making- such as individual actions of firms and consumers – and the macroeconomic environment, which affects the entire economy and all its participants. Many economic factors act as external constraints on your business, which means that you have little, if any, control over them. Therefore, the economic environment of a business will play a pivotal role in determining the success or failure of a business.South Africa’s economy has, slowly but surely, been on the mend since last year’s short-lived recession, but a number of potential setbacks threaten its further recovery. On the heels of last year’s household spending – and net export-led fourth quarter, available first-quarter indicators have been downbeat; lower inflation has done little to boost retail sales, while declining business confidence and feeble manufacturing output hint at another round foregone outlays on machinery and equipment. The South African economy grew by 1.4% in the fourth quarter of 2018, contributing to an overall growth of 0.8% for the entire year. The latest set of gross domestic product (GDP) figures released by Stats SA provides an overview of economic performance in 2018. South Africa found itself in economic recession in 2018.South Africa’s unemployment rate decreased by 0,4 of a percentage point to 27,1% in the 4th quarter of 2018 compared to the 3rd quarter of 2018 according to the latest Quarterly Labour Force Survey released by Statistics South Africa. The working-age population increased by 149 000 or 0,4% in the 4th quarter of 2018 the third quarter of the same year. The biggest increase in employment was observed in the formal sector which saw 92 000 more people employed in the 4th quarter of 2018 compared to the 3rd quarter.Furthermore, household consumption slipped in the second quarter of 2018 as people adjusted their spending habits following the VAT hike and fuel price increases, according to the South African Reserve Bank’s quarterly bulletin released on Tuesday. The SARB noted that household spending was also suppressed by “diminishing wealth effects” in the first eight months of 2018, as the FTSE/JSE All-Share Price Index fell on a combination of negative sentiment towards emerging markets and domestic policy uncertainty, relating to how land expropriation without compensation would play out. Consumers have been hard hit by the VAT hike from 14% to 15%, effective from April 1 and five successive months of fuel price increases. The research note by the central bank painted a grim picture of the economy falling into recession in the second quarter of 2018, with negative gross domestic product growth in the first six months of the year and unemployment rising to 27.2% in April, May and June.However in contrast to falling consumer expenditure, state spending increased with government contributing positively to GDP figures in the second quarter of2018.The Reserve Bank reported that while the household credit market remained “very subdued” during the second quarter of 2018, growth in household credit extension continued to trend steadily upwards over this period. Loans to the private business sector remained subdued and increased at a slower pace.South Africa is seeking to accelerate her growth rate in order to provide greater social and economic benefits to a wider section of her population. The Accelerated Shared Growth Initiative for South Africa (Asgi-SA) document outlines six salient topics that need immediate address – one of which is investment in infrastructure. Targeting of infrastructure expenditure is crucial as one of the key constraints to growth given the fact that the relative logistics cost of South Africa (15% of GDP) versus those of its trading partners (8.5% of GDP). This puts South Africa at an immediate competitive disadvantage. The extensive capital expenditure program the government is currently undertaking is aimed at improving and increasing both the efficiency and network of country-wide infrastructure needs of the economy. In the same vein, the SA Cabinet has given its approval for Eskom and Transnet to undertake approximately R121-billion worth of investment by 2010 with a private sector target of R44-billion for both sectors — R23-billon for the energy system and an additional R21-billion for transport. It is estimated that approximately R107-billion would be needed between 2005 and 2009 to meet South Africa’s growing energy needs. Eskom plans to meet 70% of this requirement, implying an investment of R84-billion over the next five years with the balance reserved for possible Independent Power Producer (IPP) entrants. The planned rate of growth of the capital budget of government at between 15% and 20% per year is unprecedented in South African history. Thus, a rise in infrastructure capital raises the marginal productivity of private capital services so that, given the rental price of such services, a larger flow of private capital services and a larger stock of private assets producing them are demanded. The rise in the marginal product of capital increases private capital formation, raising private sector output further.The indirect effect of a rise in infrastructure capital on private output, however, is not necessarily positive. In fact, this effect can be negative if infrastructure and private capital are “substitutes””. This is characterised by two opposing forces. On the one hand

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