4 economic

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4 economic

  1. 1. ECONOMIC ENVIRONMENT<br />
  2. 2. Why its important<br />The understanding of economic environments of the countries can help company predict how trends and events in environments might affects the business future performance<br />
  3. 3. Criteria of Economic Systems<br />Types of property ownership<br />Method of resources allocation and control<br />
  4. 4. Classification of Economic Systems*<br />Market Economy / Capitalist Economy<br />Centrally Planned Economy / Socialist Economy<br />Mixed Economy<br />
  5. 5. Key Economic Indicators<br />Consists of:-<br />Per Capita Income<br />Quality of Life<br />Purchasing Power<br />Structure of Production<br />
  6. 6. Per Capita Income<br />Countries are classified into different economic categories according to per capita Gross National Product (GNP)<br />Most of world’s wealth is in the high-income countries<br />Classification of per capita income are high income, middle income and low income<br />Key Economic Indicators<br />
  7. 7. Quality Of Life<br />Human happiness, life expectancy, educational standards, individual purchasing power, health, sanitation treatment of women.<br />The objective of measuring (capability poverty measure) is to get countries to look at all factors that might effect a country’s future and not focus strictly on income growth<br />Key Economic Indicators<br />
  8. 8. Purchasing Power<br />Purchasing Power is differ because of countries currencies<br />Purchasing Power Parity (PPP) identify the number of units of a country’s currency required to buy the same amounts of goods and services in the domestic market.<br />Ex. Big Mac in Tokyo is costly than Big Mac in U.S.A. So, yen is not able to buy as the dollar can buy in U.S.A. means that purchasing power of Yen is lower.<br />Key Economic Indicators<br />
  9. 9. Structure of Production<br />Refers to the % of Gross Domestic Product (GDP) generated by agriculture, industry, manufacturing and services.<br />Key Economic Indicators<br />Foot note:<br />GNP – The market value of final goods & services newly produced by domestic factors of production whether at home or abroad<br />GDP – Value of production that occurs within a country’s border whether done by domestic or foreign factors of production.<br />
  10. 10. Key Macroeconomic Issues<br />Economic growth<br />Inflation<br />External Debt<br />Deficits<br />Privatization<br />
  11. 11. Economic Growth<br />Increase economic level of output<br />Means country able to increase the revenue<br />Economic growth increase can cause company:-<br /> - Have stable politics<br /> - Low inflation rate<br /> - High real growth rate<br />Key Macroeconomic Issues<br />
  12. 12. Inflation<br />Inflation is a reduction in the purchasing power of a unit of money<br />Occur when an increase in consumer price index<br />Effect on interest rate, exchange rate, cost of living, political & economy system<br />High inflation will cause country difficult to deal each others to run profitable operations<br />Inflation coz politic stabilization bcoz government reduce wages & population income will decrease<br />It all coz eco. Deteriorate if gov not take action to overcome the inflation<br />Key Macroeconomic Issues<br />
  13. 13. External Debt<br />Borrowing is one of the way to finance an expenditure especially for development<br />ED begin to grow when one country (especially developing country) request from foreign private or government inst to finance an imports & other products necessary for development<br />4 ways to measure ED:<br />Key Macroeconomic Issues<br />
  14. 14. External Debt<br />4 ways to measure ED:<br />ED as a % of GNP helps keep size of debt<br />ED as a % of expenses of goods & services, Relates to the size of debt to the capacity of the company to generate foreign exchange to pay off the debt<br />Debt-service ratio (ratio of interest payments + principal amortization to exports)<br />The actual amount<br />Key Macroeconomic Issues<br />
  15. 15. Deficits<br />Occur when total EXPENDITURE (expenses) higher than total REVENUE<br />Use % of GDP & GNP to measure deficits<br />Way to prevent deficits are:<br /> - Rightsizing government<br /> - Setting spending priorities<br /> - Expenditure control & budget management<br /> - Improving tax policy & administration<br /> - Service should be decentralize<br />Key Macroeconomic Issues<br />

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