January 10th, 2018
The Impact of Greece Economic Crisis on International Marketing
The economic crisis in Greece may bear adverse effects on various aspects of international trade. Occurring at a time when countries are still battling the effects of global financial crisis, the Greece events could lead to the relapse of many European countries into a financial crisis. High foreign currency debts as the case has been in Greece have traditionally been associated with increased risk for a financial crisis (Bordo, Meissner & Stuckler, 2010). The possibility that the effects of the monetary policy the country has instituted such as increase in lending rates may be transmitted across the region; poses a challenge for the development of effective business strategies for multinational corporations. This paper focuses on the effects that the crisis could have on international marketing aspects.
The adverse effects of the Greece crisis on marketing mainly arise from the exchange rate destabilizing effect it will possibly generate. It has already been feared that the Greece crisis could spell doom to the Euro monetary union (Traynor, 2010). This would mean the Euro would become weaker as compared to other major world currencies thus affecting the way people trade across boarders. In countries where the Euro serves as the trading currency firms would find it increasingly becoming more costly to do business with their cross boarder partners. Such sudden changes in foreign exchange rates could thus decrease the value of the firm (Bartram, Dufey & Frenkel, 2005). As result the affected firms may cut back on expenditures on their marketing activities such as advertising. Such promotional activities have been argued to be essential sustaining the profitability of firms during financial crises (Köksal & Özgül, 2007). Budget cuts resulting from increased cost of doing business may thus adversely affect the effectiveness of the firms’ marketing strategies.
Secondly, the impacts of the crisis arise out of a reduced customer propensity to spend following the global financial crisis. With heightened insecurity in their employment, consumers shift their expenditure trends towards value rather than luxury (Köksal & Özgül, 2007). To safeguard against such consumer behavior companies must also adjust their marketing strategies accordingly. Ways such as withdraw of poor performing products and lowering their price levels are some of the strategic changes that companies have previously employed in times of economic adversity (Köksal & Özgül, 2007). For the Greece scenario however, the possibility of a decrease in the value of the Euro; would make it more hard for consumers in these countries to purchase products from other countries. Such would then mean that even with the change in the marketing strategies; companies might not achieve the desired effect envisioned by the strategic changes (Köksal & Özgül, 2007).
Withdraw of firms from markets directly affected by the crisis could also bring additional marketing challenges. Such withdraw would for instance reduce competition in these markets thus curtailing development of innovative marketing strategies. On economic recovery the lack of innovative marketing approaches could lead to the collapse of some firms as more firms re-enter the market.
Greece crisis’ impacts on international marketing thus stems out of its capacity to alter foreign exchange rates. Through such an effect firms would find it hard to sell their products in Europe due to relatively lower value of the Euro. As such the companies might be forced to alter their marketing strategies in a way that reduces their overall incomes. Similarly consumers would find it more expensive to purchase imported commodities. Being a main player in the international trade adverse effects of the crisis could spill over to many countries that relied on the trading block for their exports. For instance, emerging economies such as China whose exports have mainly been driven by a lower value currency in comparison to major currencies could experience a significant reduction in trade.
Bartram, S. M., Dufey, G. & Frenkel, M. R. (2005). A primer on the exposure of non-financial corporations to foreign exchange rate risk. Journal of Multinational Financial Management, 15(4/5), 394-413. DOI: 10.1016/j.mulfin.2005.04.001.
Bordo, M. D., Meissner, C. M. & Stuckler, D. (2010). Foreign currency debt, financial crises and economic growth: A long-run view. Journal of International Money and Finance, 29(4), 642-665. DOI: 10.1016/j.jimonfin.2010.01.002.
Köksal, M. H. & Özgül, E. (2007). The relationship between marketing strategies and performance in an economic crisis. Marketing Intelligence & Planning,25(4), 326-342. DOI: 10.1108/02634500710754574
Traynor, I. (2010, May 5). Crisis in Greece leaves EU future in balance, warns Angela Merkel. The Guardian, retrieved June 7, 2010, from http://www.guardian.co.uk/world/2010/may/05/greece-crisis-threatens-eu-future-merkel-germany