chapter four the economic environments facing businesses international business part two comparative...
TRANSCRIPT
Chapter Four
The Economic Environments Facing Businesses
International Business Part Two
Comparative Environmental Frameworks
4-2 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
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 idea, drivers, and constraints of
economic transition
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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.
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Elements of the Economic Environment
• Gross national income (GNI): the income generated both by total domestic production as well as the international production activities of national companies
• Gross domestic product (GDP): the total value of all goods and services produced within a nation’s borders over one year, no matter whether domestic or foreign-owned companies make the product.
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Adjustments to GNI
• Number of people in a country
• Growth rate
• Local cost of living
• Economic sustainability
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Other features of an economy
• Inflation• Unemployment• Debt• Income distribution• Poverty• Labor costs• Productivity• Balance of payments
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Definition of Economic System
• A mechanism that deals with the production, distribution, and consumption of goods and services
• Types: Market economy Command economy Mixed economy
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The Economic Freedom Index
• Approximates the extent to which a government intervenes in the areas of free choice, free enterprise, and market-driven prices for reasons that go beyond the basic need to protect property, liberty, citizen safety, and market efficiency
• Countries with the freest economies have had the highest annual growth and a greater degree of wealth creation.
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Dimensions of The Economic Freedom Index
• Business freedom• Trade freedom• Monetary freedom• Freedom from government• Fiscal freedom• Property rights• Investment freedom• Financial freedom• Freedom from corruption• Labor freedom
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Transition to a Market Economy
• Liberalizing economic activity• Reforming business activity• Establishing legal and institutional frameworks• Success is linked to how well the government
deals with: Privatization Deregulation Property right protection Fiscal and monetary reform Antitrust legislation