Economic Environment of IB

"Understanding the economic environments of foreign countries and markets can help managers predict how trends and events in those environments might effect their companies' future performance there." Daniels

Significance of Studying Economic Environment:

The purpose, or reason, for developing an economic analysis of a region or specific country, is directly related to the ability to subsequently make managements decisions about whether to do, or not do certain business things in that country or with that country. A country’s economic policies are a leading indicator of government’s goals and its planned use of economic tools and market reforms.

Company managers study economic environments to :

• Estimate how trends affect their performance.
•  Critically analyse developments in international trade, finance and labour markets from an economic and political viewpoint;
• Outline significant events in the different spheres of business and link them to broader patterns of economic and political change;
•  Analyze current business case studies from an economic and political viewpoint.

Elements of the Economic Environment

The domestic economic environment in each country is highly integrated with, and influenced by the economic environment in other countries.

   

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.

Other features of an economy:

Inflation

Unemployment

Debt

Income distribution

Poverty

Labor costs

Productivity

Balance of payments

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

N.B:Nouriel Roubini's web site contains lectures on macroeconomics and is an excellent source of information for the Asian crisis and connected issues.
http://www.stern.nyu.edu/~nroubini/asia/asiahomepage.html