1. Chapter Four The Economic Environments Facing Businesses
International Business Part Two Comparative Environmental Frameworks
Chapter Four
The Economic Environments Facing Businesses

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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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3. 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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4. 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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6. Other features of an economy
Inflation
Unemployment
Debt
Income distribution
Poverty
Labor costs
Productivity
Balance of payments
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7. 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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8. 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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9. 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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10. 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
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