The Economic

Environments Facing
Business

Daniels Ch 4 Eco Environment

Introduction
Managers study Economic
environments to estimate how trends
affect their performance.
A countrys economic policies are a
leading indicator of Govts goals and
its planned use of economic tools
and market reforms.
Economic development directly
impacts citizens, mangers,Page: 143
policymakers and institutions.
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International Economic
Analysis

Page: 144
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Elements of Economic Environment

Gross National Income

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Elements of Economic Environment

(Contd.)
Rate of Change

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Page:

148-151

Other Proposed Indexes

Page: 152
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Green Measures of GNP

Measures depletion of natural resources and degradation of environments

Pg: 153/154

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Features of An Economy
Inflation

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Inflation
Inflation is the measure of the
increase in the cost of living.
It has influence on:

Interest rates
Exchange rates
Cost of living
General Economic confidence
Stability of the political system

Page: 154
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Inflation
Implications of Hyper Inflation

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Unemployment
Unemployment Rate is the number
of unemployed workers who are
seeking employment for pay divided
by the total civilian labour force.
Misery Index: Sum of a countrys
inflation and unemployment rates.
The higher the sum, the greater the
economic misery, and the more likely
the consumers and companies will
curtail spending and investment.
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155

11

Debt

Page: 156
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Income Distribution
Income Distribution is a description
of the fractions of a population that
are at various levels of income.
The Gini Coefficient:
Managers estimate income distribution
in a particular country by examining its
Gini Coefficient.
This measure assesses the degree of
inequality in the distribution of family
income in a country.
Page: 157
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Poverty
It is a condition in which a person or a
community is deprived off, or lacks the
essentials for a minimum standard of well
being & life.
These essentials can be life sustaining
materials such as food, safe drinking water,
education, health care, social status or the
opportunity to develop meaningful connections
with other people in the society.
There is a growing gap b/w the rich and the
poor in virtually every country in the world.
Page:
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158

14

Poverty according to World

Bank
Poverty
Poor

Middle Income

Rich

11%
11%

78%

Page: 158
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Labour Costs

Changing economic environments mean companies look at cost structures in current terms

Page: 159

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Productivity

Productivity measures the efficiency with which goods and servi

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160

17

The Balance of Payments

Also known as the

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Page: 160

18

Types of BoP
Current Account

Page: 161
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Importance of BoP

Managers use BoP to assess a countrys economic stability in the w

Economic Stability

Page: 161
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Economic Systems
An Economic system is a set of
structures and processes that guides
the allocation of resources and
shapes the conduct of business
activities in a country.
It is a mechanism that deals with the
production, distribution and
consumption of goods and services.
Page: 164
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Types
Capitalism
of Economic Systems

Types of Economic Systems

Page: 164 to 166

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Economic Freedom & Market

Transitions
Economic Freedom is defined absence
of Govt. coercion or constrains on the
production, distribution or consumption
of goods and services beyond the
extent necessary for citizens to protect
and maintain liberty itself.
Countries with the freest economies
have had the highest annual growth
and a greater degree of wealth creation.
Page: 167
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Economic Freedom Index

This index estimates the extent to which the
Govt of a country intervenes with the
principles of free choice & free enterprise for
reasons that go beyond the basic need to
protect property, liberty, citizen safety and
market efficiency.
It rates in terms of 50 independent indicators
that are organised into 10 dimensions.
Higher the score on a factor, lower the level
of Govt interference.
Page: 167
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Making Transition to a Market

Economy
The Economic Freedom Index has
straightforward implications to the
origins & causes of economic
development.
The countries ranking highest on the
economic freedom like Singapore &
UK tend to have the fastest
economic growth and highest living
standards.
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Means of Transition
Property
Deregulation
Privatization
Fiscal
Antitrust
& Monetary
Rights
Legislation
Protection
Reform

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Page: 173/17426

Privatization

Explanations

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Page: 172 to 174

27

Reference:International Business Environments &

Operations 12th Edition
Authors John D. Daniels, Lee H. Radebaugh, Daniel P.
Sullivan, Prashant Salwan
Publisher Pearson, Publishing Year 2010
Chapter 4 The Economic Environments facing Business

Inputs by Pratchi nanda, MIB II

sem Feb 2015

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