Falling GDP usually means falling purchasing power. According to (Euromonitor International, 2009), two or more consecutive quarters of negative real GDP growth indicate a recession. Appendix A shows that US Real GDP had been experiencing persistent negative growth since 2007. 2. 3 Unemployment: Higher unemployment will act as a hurdle to Tata’s Nano’s success in US by reducing disposable income and therefore demand. Slow down in the housing sector has slowed down the construction industry and led to Job cuts. With 82000 Job cuts in the construction industry alone in November 2008, the US unemployment rate stood at . % which is the highest in 16 years (Euromonitor International, 2009). 2. 4 Fiscal Policies: To boost America’s ailing economy, the government has introduced the American Recovery and Reinvestment Act of 2009. According to Euromonitor International (2009), this stimulus package is the biggest ever in US history including tax breaks and ambitious spending. The breakdown of the fiscal package is given in Appendix B. This is of great interest to Tata’s marketers since it promotes demand, growth and consumer confidence and will improve the market for Tata’s Nano. The US consumer market is the world’s largest.
This is attractive to marketers since it implies a significant market for products. However, according to Euromonitor International (2008), consumer expenditure has fallen sharply since the last quarter of 2007 with consumer confidence at ‘a 16 year low. Falling consumer confidence reduces consumer expenditure and the demand for products like Tata’s Nano. 2. 6 Income, Expenditure and Savings: Harsh credit and employment conditions meant incomes were no longer enough to cover expenditures. Consequently Americans had to draw on their savings which repercussions, as Americans may not have adequate savings to purchase the Nano in he future.
Appendix C illustrates the relationship between income, expenditure and savings between 2001 and 2007. 2. 7 Income distribution: Income is mainly distributed between three major groups in the US. According to Euromonitor International (2008), Baby Boomers, aged 45-59 years, are the highest earning consumer segment earning between USD 48000-84000 annually, with a ‘refuse to age’ attitude. Spending often on children and grand children they would be a lucrative market for Tata’s Nano. The second biggest demographic segment is approximately 36 years in age, earns about USD 60000 annually and accounts for a arge proportion of the population.
Third is the age-group 24-32, which accounts for 15% of the total population and is important for its size, though not for its income. A breakdown of income distribution is given in Appendix D. 2. 8 BOP: The persistently deficit US current account reached its peak of USD 901,878 million in 2008 (Euromonitor International, 2009). This is a drawback especially for companies like Tata planning to export to the US since it increases the likelihood of a sudden depreciation of the dollar to reduce the BOP deficit. Foreign companies with investments in the US will buy less foreign dominated currencies.
Exporting companies will experience a fall in demand for their goods as the products become more expensive for US consumers with the depreciation of the dollar. 3. 0 Cultural Environment: This section analyzes the consumers’ perceptions and behaviour towards their environment. A countrys culture encompasses “knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society’ (Nakata & Huang as cited in Yaprak, 2008). Geert Hofstede first introduced cultural dimensions into contemporary business literature.
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