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How Does Weather Affect the Supply Chain? What Is the Economic Growth of Lingerie Stores? Examples of the Interdependence of Markets

by Christian Fisher 
As goods, services and capital investments are exchanged domestically and internationally, changes in the market demand or supply in one region can impact the market demand or supply in other regions. Understanding the interdependence of markets as it affects your particular business allows you to devise appropriate strategies to serve your customers.

Waves of Trade

Economic growth or recession overseas can impact the domestic economy, and vice-versa. For example, as one country’s economy grows, it imports more goods and services from trade partners. Increased demand for exports impacts American manufacturers that get boosts in sales. Similarly, when the domestic economy grows, more imports are purchased from developing countries, which bumps up local economies and employers.

Big Business and Small Business

Small and large businesses are interdependent for a variety of goods and services, such as investments, materials and research. For example, in 2011, Intel spent $3 billion buying products and services from small businesses, according to the company. As of March 2012, Intel relied on approximately 2,200 American small businesses as suppliers.Small businesses thrive with help from large businesses in areas such as product distribution or customer reach, while large businesses thrive by partnering with small businesses in areas such as new technology development and specialty niches.

Powering the Earth

Different markets are interdependent based on changes in the price of goods. For example, a rise in oil prices can cause food prices to go up because of the higher cost of oil use for farming equipment to manage crops and vehicles to transport food. Similarly, changes in the amount of corn that farmers decide to plant each year affects the production and consumption of biofuels such as ethanol.

Financial Contagion

Market interdependence also is evident in financial crises. Lending across borders gives banks plenty of opportunity to benefit financially from emerging markets in developing countries. It also puts lenders at risk of consequences from crises that might emerge across those borders. For example, if a country slips into economic crisis, borrowers default on loans and the value of the currency in that country might drop. Banks with a lot invested internationally begin calling in their loans from different developing countries to make up for their losses. This puts the other countries under extra financial pressure, which can slide them into crisis mode as well.



