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Foreign investment

Foreign companies, notably from Japan and the USA, have been encouraged to invest in EU countries in light of the lifting of trade restrictions implicit in the creation of the single European market. Leading US information technology companies such as Dell Computer Corporation, IBM, Intel and Hewlett Packard, have all established significant operations in Ireland. These investments have added to competitive rivalry within Europe.

Central and Eastern Europe

Another major economic change - besides the development of the single European market - that has far-reaching implications for marketing is the move away from centrally planned and towards market-driven economies by Central and Eastern European countries. The most obvious impli­cation is the opening up of vast potential markets. The population of Central and Eastern Europe including the former USSR- now the Confederation of Independent States (CIS) - is over 400 million, which exceeds that of the USA (220 million) and the EU (320 million). This opportunity needs to be viewed in the light, however, of the lower living standards, low or negative economic growth rates, and the political instability of some of these countries.

Nevertheless, with these Central and Eastern European countries accounting for around 15 per cent of world gross national product (GNP) and wage rates that are much lower than those of Spain, Portugal and Greece, the area represents not only an important market but also a major low-cost manufacturing opportunity. A perspective on the scale of the market opportunity is given by Xerox, which estimates that there were only 60,000 photocopiers in the former USSR in 1989; in a Western country with a population of the same size there would be 5 million.

A key marketing question is the relative attract­iveness of the former Eastern bloc countries. The countries can be divided into two groups. The first of these includes Hungary, the Czech Republic, Poland and Slovenia, which are adjusting more rapidly to a market economy and are the first countries in line to join an enlarged EU. They are also proving to be very attractive markets for outside investors, as shown in Marketing in Action 2.1. The second group contains countries like Slovakia, Bulgaria, Romania, the Baltic States (Estonia, Latvia and Lithuania), Croatia, Bosnia and Yugoslavia, which are encountering a range of difficulties and progressing at a slower pace.

Clearly the changes that are taking place in Eastern bloc countries are having a major effect on supply and demand conditions. For many companies, monitoring the opportunities and threats that result may be a critical factor in long-term corporate survival.

Social forces

There are four social forces, in particular, that have had implications for marketing. These are: changes in the demographic profile of the population; cultural differences within and between nations; social responsibility and marketing ethics; and the influence of the consumer movement. We will now examine each of these in turn.

2.1 Marketing in Action