IAF 605 - International Business Management




The Economic Environments
Facing Businesses

                             ...
Reminder




Jun 23rd - mid-term exam
    chapters 1 - 4, 6 and 7

    cases

    class discussions




               ...
Agenda




                Week 3 - review

           Chapter 4 – The Economic
         Environments Facing Businesses

 ...
Chapter Objectives




    •   To understand the importance of economic analysis of
        foreign markets
    •   To ide...
Economic Factors Affecting International Business Operations
(p136)
Importance of Economic Environments




                  Company managers study economic
                  environments t...
Elements of the Economic Environment
GNI per capita (Map 4.2 page 139)




   China
                                           GNI




                        ...
Group Exercise - Other features of an economy



                                                               2.
       ...
Definition of Economic System




                                • Market economy
   A mechanism that             • Comma...
Economic Systems - the role of government in the economy



   Market economy      Command economy         Mixed economy

...
The Economic Freedom Index




       freedom          protect   Countries with
                                  the free...
The Economic Freedom Index -
http://www.youtube.com/watch?v=8ZuIC_HHHHA
Expanding Role of the State -
http://www.youtube.com/watch?v=jl6yKKdcQ0Q
Transition to a Market Economy




                                      Establishing
   Liberalizing          Reforming
 ...
Who are the BRICs


            The BRIC countries, Brazil, Russia, India and China, while much larger
               in s...
The BRIC Situation


                                                       endemic problem of
                  on the ve...
Mixing

                               Bilateral and
                               Multilateral
                         ...
Challenges


                                                                Political    The emergence
                  ...
Conditions for a market economy to grow consistently

 Sound macroeconomic policies and a solid macroeconomic background, ...
Meet the BRICs



    Map the proposed
  sequence of evolution
   of the economies of           What are the
     the BRIC...
Meet the BRICs



                            How might managers
    Do you think the
                           interpret...
Meet the BRICs



                              Compare and contrast
  In the event that one
                             ...
Homework




           24
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IAF605 Week 4

  1. 1. IAF 605 - International Business Management The Economic Environments Facing Businesses Week 4
  2. 2. Reminder Jun 23rd - mid-term exam  chapters 1 - 4, 6 and 7  cases  class discussions 2
  3. 3. Agenda Week 3 - review Chapter 4 – The Economic Environments Facing Businesses Meet the BRICs Case Discussion
  4. 4. Chapter Objectives • To understand the importance of economic analysis of foreign markets • To identify the major dimensions of international economic analysis • To compare and contrast macroeconomic indicators • To profile the characteristics of the types of economic systems • To discuss the idea of economic freedom • To profile the causes and consequences of economic change
  5. 5. Economic Factors Affecting International Business Operations (p136)
  6. 6. Importance of Economic Environments Company managers study economic environments to estimate how trends affect their performance A country’s economic policies are a leading indicator of government’s goals and its planned use of economic tools and market reforms. Economic development directly impacts citizens, managers, policymakers, and institutions.
  7. 7. Elements of the Economic Environment
  8. 8. GNI per capita (Map 4.2 page 139) China GNI GNI per capita
  9. 9. Group Exercise - Other features of an economy 2. 1. Inflation Unemployment 4. Income 3. Debt distribution 5. Poverty 5. Labor costs 6. Balance of 6. Productivity payments Image source: http://www.flickr.com/photos/nics_events/
  10. 10. Definition of Economic System • Market economy A mechanism that • Command deals with the economy production, • Mixed economy distribution, and consumption of goods and services Types:
  11. 11. Economic Systems - the role of government in the economy Market economy Command economy Mixed economy • laissez-faire • centrally-planned • command + • free market • gov’t owns and market • capitalism controls resources • socialist or state capitalism
  12. 12. The Economic Freedom Index freedom protect Countries with the freest economies have had the highest annual growth and a greater degree of wealth creation.
  13. 13. The Economic Freedom Index - http://www.youtube.com/watch?v=8ZuIC_HHHHA
  14. 14. Expanding Role of the State - http://www.youtube.com/watch?v=jl6yKKdcQ0Q
  15. 15. Transition to a Market Economy Establishing Liberalizing Reforming legal and economic business institutional activity activity frameworks
  16. 16. Who are the BRICs The BRIC countries, Brazil, Russia, India and China, while much larger in scale and scope than other emerging markets, symbolically represent trends that are developing throughout the world Over the next few decades BRIC will become a larger, powerful force in the world economy China and India will be the dominant global suppliers of manufactured goods and services, while Brazil and Russia will become the principal suppliers of raw materials. Collectively, they will become the largest entity on the global stage Image source: http://www.flickr.com/photos/nickobec/
  17. 17. The BRIC Situation endemic problem of on the verge of rapid “recency bias,” which is growth in consumer the dubious expectation products that the current trend will continue into the future face futures of widespread poverty and distorted income distributions Image source: http://www.flickr.com/photos/seier/
  18. 18. Mixing Bilateral and Multilateral cooperation between BRIC countries Strengthening ties to Declining role of the ease distrust and U.S. dollar boost trade
  19. 19. Challenges Political The emergence uncertainties of the BRICs will and social challenge the assumptions in well-being and each country sustainability of limit their the global potential environment Image source: http://www.flickr.com/photos/donaldmacleod/
  20. 20. Conditions for a market economy to grow consistently Sound macroeconomic policies and a solid macroeconomic background, as seen in low inflation, prudent public finances, and supportive government policy Strong political institutions that endorse transparency, fairness, and the rule of law Openness to trade, capital flows, and foreign direct investment High levels of education at both the primary and secondary levels
  21. 21. Meet the BRICs Map the proposed sequence of evolution of the economies of What are the the BRICs. What implications of the indicators might emergence of the companies monitor to BRICs for careers and guide their investments companies in Canada? and organize their local market operations?
  22. 22. Meet the BRICs How might managers Do you think the interpret the potential recency bias has led to for their product in a overestimating the market that is, in potential of the BRICs? absolute economic How would you, as a terms, large but, on a manager for a per capita basis, company assessing characterized by a these markets, try to majority of poor or control this bias? very poor consumers?
  23. 23. Meet the BRICs Compare and contrast In the event that one the merits of GNI per BRIC country, if not all, capita versus the idea fails to meet its of purchasing power projected performance, parity, human what would be some of development, and the implications for the green economics as economic environment indicators of economic of international potential in Brazil, business? Russia, China, and India
  24. 24. Homework 24

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