This document discusses key economic indicators and concepts that managers should consider when assessing a country's economic environment. It covers topics such as gross domestic product, inflation, unemployment, income distribution, poverty, debt, and balance of payments. Economic systems such as market economies, command economies, and mixed economies are also profiled. The document emphasizes that economic environments differ globally and it is important for managers to understand economic changes, connections, and consequences in different country contexts.
08 Cross-National Cooperation and AgreementsBrent Weeks
To identify the major characteristics and challenges of the World Trade Organization
To discuss the pros and cons of global, bilateral, and regional integration
To describe the static and dynamic impact of trade agreements on trade and investment flows
To define different forms of regional economic integration
To compare and contrast different regional trading groups
To describe other forms of global cooperation such as the United Nations and OPEC
To explain the rationales for governmental policies that enhance and restrict trade
To show the effects of pressure groups on trade policies
To describe the potential and actual effects of governmental intervention on the free flow of trade
To illustrate the major means by which trade is restricted and regulated
To demonstrate the business uncertainties and business opportunities created by governmental trade policies
04 The Economic Environments Facing BusinessBrent Weeks
To communicate the importance of economic analysis
To discuss the idea of economic freedom
To profile the characteristics of the types of economic systems
To introduce the notion of state capitalism
To profile indicators of economic development, performance, and potential
06 International Trade and Factor MobilityBrent Weeks
To understand theories of international trade
To explain how free trade improves global efficiency
To identify factors affecting national trade patterns
To explain why a country’s export capabilities are dynamic
To understand why production factors, especially labor and capital, move internationally
To explain the relationship between foreign trade and international factor mobility
01 Globalization and International BusinessBrent Weeks
To define globalization and international business and show how they affect each other
To understand why companies engage in international business and why international business growth has accelerated
To discuss globalization’s future and the major criticisms of globalization
To become familiar with different ways in which a company can accomplish its global objectives
To apply social science disciplines to understanding the differences between international and domestic business
08 Cross-National Cooperation and AgreementsBrent Weeks
To identify the major characteristics and challenges of the World Trade Organization
To discuss the pros and cons of global, bilateral, and regional integration
To describe the static and dynamic impact of trade agreements on trade and investment flows
To define different forms of regional economic integration
To compare and contrast different regional trading groups
To describe other forms of global cooperation such as the United Nations and OPEC
To explain the rationales for governmental policies that enhance and restrict trade
To show the effects of pressure groups on trade policies
To describe the potential and actual effects of governmental intervention on the free flow of trade
To illustrate the major means by which trade is restricted and regulated
To demonstrate the business uncertainties and business opportunities created by governmental trade policies
04 The Economic Environments Facing BusinessBrent Weeks
To communicate the importance of economic analysis
To discuss the idea of economic freedom
To profile the characteristics of the types of economic systems
To introduce the notion of state capitalism
To profile indicators of economic development, performance, and potential
06 International Trade and Factor MobilityBrent Weeks
To understand theories of international trade
To explain how free trade improves global efficiency
To identify factors affecting national trade patterns
To explain why a country’s export capabilities are dynamic
To understand why production factors, especially labor and capital, move internationally
To explain the relationship between foreign trade and international factor mobility
01 Globalization and International BusinessBrent Weeks
To define globalization and international business and show how they affect each other
To understand why companies engage in international business and why international business growth has accelerated
To discuss globalization’s future and the major criticisms of globalization
To become familiar with different ways in which a company can accomplish its global objectives
To apply social science disciplines to understanding the differences between international and domestic business
To examine the broad foundation of ethical behavior
To demonstrate the cultural and legal foundations of ethical behavior
To discuss the importance of social responsibility when operating internationally, especially in the areas of sustainability
To discuss some key issues in the social activities and consequences of globalized business
To examine corporate responses to globalization in the form of codes of conduct, among other things
Introduction, DEFINITION OF INTERNATIONAL BUSINESS, Important, Why Companies Engage in International Business, Scope of International Business, Modes of entry into International Business, SPECIAL DIFFICULTIES IN INTERNATIONAL BUSINESS, BENEFITS OF INTERNATIONAL BUSINESS and Internationalization process and managerial implications.
Introduction,Why MNCs are exist in International Business? , Alternative Methods of Foreign Investment by MNCs, There are three main modes of foreign investment, Role of Multinational Corporations in the Indian Economy, Disadvantages of Multinational Corporations,
Study of International Business Articles.
Part 1: Essential of International Business.
Part 2: Theories applied to International Business.
Part 3: Bargaining Approach and Resources.
Part 4: International Business Phenomena.
Part 5: Internalization.
Part 6: Competitive advantages.
To examine the broad foundation of ethical behavior
To demonstrate the cultural and legal foundations of ethical behavior
To discuss the importance of social responsibility when operating internationally, especially in the areas of sustainability
To discuss some key issues in the social activities and consequences of globalized business
To examine corporate responses to globalization in the form of codes of conduct, among other things
Introduction, DEFINITION OF INTERNATIONAL BUSINESS, Important, Why Companies Engage in International Business, Scope of International Business, Modes of entry into International Business, SPECIAL DIFFICULTIES IN INTERNATIONAL BUSINESS, BENEFITS OF INTERNATIONAL BUSINESS and Internationalization process and managerial implications.
Introduction,Why MNCs are exist in International Business? , Alternative Methods of Foreign Investment by MNCs, There are three main modes of foreign investment, Role of Multinational Corporations in the Indian Economy, Disadvantages of Multinational Corporations,
Study of International Business Articles.
Part 1: Essential of International Business.
Part 2: Theories applied to International Business.
Part 3: Bargaining Approach and Resources.
Part 4: International Business Phenomena.
Part 5: Internalization.
Part 6: Competitive advantages.
its a complete HomeBusinessBusiness Environment5 Reasons why study of Business Environment is Important
5 Reasons why study of Business Environment is Important
Table of Contents [show]
Importance of the Study of Business Environment
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Importance of the Study of Business Environment
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3. Managers assess a country’s economic
environment knowing
Countries differ in different ways
Economic and political changes alter market
circumstances
It is important to understand connections,
change, and consequence
The challenges
Choices of citizens, policymakers, and
institutions
4. International
Economic Analysis
A universal assessment of economic
environments is difficult because
it is difficult to stipulate a definitive set of
indicators to estimate the performance and
potential of a country’s economy
today’s set of perfect measures may prove
imperfect tomorrow
interdependencies complicate interpreting the
relationship among elements of the economic
environment
6. Economic Freedom
Economic freedom – people have the
right to work, produce, consume, save,
and invest the way they prefer
Business and investment freedom
monetary freedom
fiscal freedom
freedom
freedom from corruption
property rights
labor freedom
7. Why is economic freedom
important?
Countries with economic freedom typically
have
higher per capita income
standards of living
social stability
as compared to less free countries.
8. Notice that the most free countries include US, Hong Kong, Singapore, Australia, and Canada.
North Korea, Cuba, and Venezuela are among the least free economies.
Economic Freedom
Global Distribution of Economic Freedom
9. Types of Economic Systems
Learning Objective 3:
To profile the characteristics of the types
of economic systems
10. Types of Economic Systems
An economic system refers to the
mechanism that deals with the production,
distribution, and consumption of goods
and services
Types
Market economy
Command economy
Mixed economy
12. Market Economy
In a market economy individuals rather
than governments make most economic
decisions
Capitalism
private ownership of capital
Laissez-faire
governmental noninterference in economic
affairs
13. Command Economy
In a command economy the visible hand
of the state supersedes the invisible hand
of individuals
Government
owns and controls resources
determines prices
Communism
14. Mixed Economy
Most economies are mixed economies
fall between market and command economies
both government and private enterprise
influence production, consumption, and
savings.
Socialism
regulate economic activity with a focus on
social equality and a fair distribution of wealth
16. Economic Development,
Performance, and Potential
Broad classes of countries include
developing countries
largest number of countries
low per capita income
emerging economies
fast growing, relatively prosperous
BRICs
developed countries
high per capita income and standard of living
like the U.S., Japan, France, Australia
17. Gross National Income
Gross national product (GNP)
the total value of all final goods and services
produced in a particular year by Saudi abroad but
minus foreign in Saudi Arabia
Gross domestic product (GDP)
the total market value of goods and services
produced by workers and capital within a nation’s
borders
19. GDP Calculation
GDP = C + I + E + G
C = Consumer Spending
I = Investment
E = Exports - Imports
G = Government Spending
20. Example
If John is a US citizen and opens a Tyre
factory in China and earns a lot of cash;
that cash/income will be considered
America gross national product.
But because John is hiring Chinese
workers to make tyres to sell in China,
then the income of his company will be
part of China's GDP, not USA's GDP
21. Suzuki of Japan produces car in Saudi
Arabia
Suzuki production in Saudi Arabia is a part
of ……………………… but……………..of Japan
GDP- GNP
22. Broader Conceptions of
Performance and Potential
Green economics
gauge economic performance in terms of the
effect of current choices on long-term
sustainability
Sustainable development
meet the needs of the present without
compromising the ability of future generations
to meet their own needs
Happynomics
importance of emotional prosperity in addition
to financial prosperity
Degree of Human Development
HDI- UN- Longevity, knowledge, standard of living
24. Features of an Economy
Managers should also consider
Inflation
Unemployment
Debt
Income distribution
Poverty
Balance of payments
25. Inflation
Inflation
a measure of the increase in the cost of living
Rising prices make it more difficult for consumers to buy
products unless their incomes rise at the same or faster
pace.
Implications of Chronic Inflation.
No long term planning-Turkmenistan
Among other things, high inflation results in
governments’ setting higher interest rates, price
controls, and imposing trade policies and currency
controls.
Deflation
when prices for products go down not up
30. Unemployment
Unemployment rate
share of unemployed workers seeking
employment for pay relative to the total civilian
labor force
Different ways to measure- U3 and U6
France and Germany unemployment protection-
Jordan, China and Kenya no support
Misery index
the sum of a country’s inflation and
unemployment rates
41. Income Distribution
Income distribution
estimates the proportion of the population that
earns various levels of income
Gini coefficient
measures the extent to which the distribution
of resources deviates from a perfectly equal
distribution
42.
43. Poverty
Poverty the state of having little or no
money and few or no material possessions
extreme poverty
less than $1.25 per day
moderate poverty
less than $2.00 per day
According to World Bank, world population
80% poor, 10% middle income, and 10% rich
49. Balance of Payments
Balance of payments
reports a country’s trade and financial
transactions with the rest of the world
Current account
tracks merchandise trade
Capital account
tracks loans given to foreigners and loans
received by citizens
International Business Environments and Operations 14e by Daniels, Radebaugh, and Sullivan
Learning Objective 1: To communicate the importance of economic analysis.
Managers study economic environments to estimate how market trends and government policy influence the performance of their companies. A country’s economic policies are a leading indicator of a government’s goals and its planned use of economic tools and market reforms. Managers should study a country’s economic environment to assess its development, explain its performance, and estimate its potential. Managers do this knowing countries differ in different ways, economic and political changes alter market circumstances, that it’s critical to make connections between events and predict the consequences of changes, the challenges of the comeback, and choices of citizens, policymakers, and institutions.
Determining which countries warrant investment is not easy. It’s very difficult to assess the potential of a country because any type of assessment relies on behavioral assumptions as well as more scientific principles.
There are some 208 discrete economic environments in the world today. Managers need to narrow them down and identify exactly which countries offer the greatest potential return for the least risk.
Learning Objective 2: To discuss the idea of economic freedom.
So, it’s important for managers to monitor a range of economic issues, but perhaps most important is an assessment of economic freedom, or what a manager has the freedom to do. Economic freedom reflects the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty.
In some countries these freedoms are taken for granted, while in others they are rare.
Economic freedom advanced in 2011. As you might expect, it tends to be higher in Western countries and lower in Eastern countries.
This Map profiles economic freedom around the world.
Learning Objective 3: To profile the characteristics of the types of economic systems.
Managers can explore a country’s economic system to understand how the host government regulates the economy, protects property rights, sets fiscal and monetary policies, and enforces antitrust regulation.
There are three main types of economic systems: market, command, and mixed economies.
This Figure shows the different types of economic systems.
In market economies private interests own resources, and prices determine supply and demand. While there is generally an attitude of laissez-faire the invisible hand does become more visible at times because of the need to provide public goods and protect society. Market economies maximize economic freedom.
In a command economy, governments plan what goods and services will be produced, the quantity in which they are produced, and the price at which they are sold. Command economies constrain economic freedom.
In a mixed economy, both government and private enterprise influence production, consumption, and savings. This type of economy supports socialism and the notion that the partly visible hand of the government commands and controls some factors of production. Therefore, economic freedom in a mixed economy is regulated.
Learning Objective 5: To profile indicators of economic development, performance, and potential.
Managers need to assess a country’s level of economic development, performance, and potential. Countries can be classified as developing countries, emerging economies, and developed countries.
Brazil, Russia, India, and China
One way managers can assess markets is by looking at gross national income or GNI which measures the value of all production in the domestic economy together with the income the country receives from other countries, less similar payments it has made to other countries.
Managers can also look at gross national product or GNP. Conceptually, world GNI and world GNP are the same.
Gross domestic product or GDP allows managers to assess countries in which the output of multinationals represents a significant share of activity.
In addition to looking at GNI, GNP, and GDP, managers also need to consider sustainability and stability.
Green economics allows managers to consider the social and ecological costs of their decisions. The goal should be to create an enabling environment for people to enjoy long, healthy, and happy lives.
There is growing criticism of traditional GNI figures as a measure of performance. Research shows that people in rich countries are not significantly happier than people in poor countries. Happynomics focuses on the importance of emotional happiness as a measure of a country’s performance and potential.
Managers can also study other features of an economy including inflation, unemployment, debt, income distribution, poverty, and its balance of payments.
Chronic inflation usually plagues countries where prices have been rising for prolonged periods of time.
Deflation occurs when the general price level of goods and services falls. It’s often caused by a reduction in the money supply or a reduction in credit.
The unemployment rate measures the number of workers who want to work but do not have jobs. High unemployment is a warning sign for managers because it symbolizes a government’s ineptitude in managing domestic affairs.
Underemployment occurs when people work fewer hours per day than they would prefer or when they work below the level for which they have been trained.
Managers can look at a country’s debt to gauge how much a country borrows from its citizens, foreign organizations, foreign governments, and international institutions. When total debt is high the more uncertain an economy’s performance and potential.
Managers should also look at income distribution to better understand a market’s performance and potential. One trend that is affecting markets across the globe is the growing gap between rich and poor. Managers can estimate inequalities in income distribution using a Gini coefficient. A score of one indicates that one person has all the income. Most countries range between 25 and 60 percent.
Poverty shapes economic environments. While the number of people in extreme poverty in the world has fallen, this figure is misleading because much of the drop has been in a single country, China. Poverty continues to be a problem with as many as 1.2 billion people in poverty.
The growth of business and economic progress is dependent on ending poverty. Keep in mind though, that despite being poor, there may still be a market for goods. Some 80 percent of Indians live on less than $2 per day for example, yet there are 700 million cell phone subscribers in the country.
The Base of the Pyramid is the largest, but poorest, socioeconomic group in the world who live on less than $2.50 per day. This group may in fact be the future of the global economy prompting the development of frugal engineering which focuses on the needs of poor consumers as a starting point for developing functional, economic products.
A country’s balance of payments is a system of monitoring all of a country’s economic transactions with the rest of the world.
It reports the country’s trade and financial transactions with the rest of the world. A current account surplus occurs when exports exceed imports, while a current account deficit occurs when imports exceed exports.
This Table shows the various components of each account in the balance of payments.
This Table shows the countries with the largest current account surpluses and those with the largest current account deficits.