Changes in Economic Environment

In my Marketing Principles class, I teach my students that the economic environment is one of the uncontrollable variables that businesses must monitor and – to the extent they can – manage their reactions to changes in it.  As an example, Friday’s Wall Street Journal had an article on how international airlines were now restricting ticket sales in Venezuela.

The airlines are doing this for several reasons.  First of all, the value of the Venezuelan bolivar is dropping (yet again).  Second, Venezuela has laws restricting how these airlines can move their profits out of the country.  Currently about $3.34 billion (US dollar equivalent) of the airlines profits is sitting in Venezuela – according to the WSJ, they could lose up to 45% of this just in currency devaluation.  Third, there is a large black market for currency exchanges where people pay much more than the government rate in bolivars for obtaining harder currencies such as the dollar.  So visitors to Venezuela were taking advantage of this, converting their home currency to bolivars, then stocking up on airline tickets.

And these are problems associated with doing business in just one country.  Imagine the complexities of doing business with most of the countries in the world.