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International Business : The Challenge of Global Competition, 8/e
Donald Ball
Wendell H. McCulloch, California State University Long Beach
Paul L. Frantz, California State University Long Beach
Michael Geringer, California Polytechnic State University
Michael S. Minor, University of Texas Pan American
Economic and Socioeconomic Forces

E Learning Session

  1. Can Indians afford cars and TV sets? PowerPoint (32.0K)
    1. The chapter begins with a simple economic analysis
    2. Economic analysis represents the most uncontrollable forces affecting international business
    3. Data for World bank and IMF is not as timely as business would like
    4. Private economic data is also available
    5. Purpose of economic analysis to appraise the overall outlook of the economy and to assess changes on the firm
  2. International Economic Analysis
    1. Entering overseas markets make analysis more complex because of the need to assess two environment-foreign and international
    2. International environment includes regional groupings and international organizations
    3. International analysis should provide economic data on actual and prospective markets PowerPoint (33.0K)
    4. Dimension of the Economy and their relevance for business people
      • Economic dimension (concept check Among the more important indicators of economic environment are all but (a) exchange rates (b) unit labor costs (c) interest rates (d) purchase rates (d) inflation rates) Concept Check
        1. Among the more important indicators are
          1. Gross National Product (GNP)
          2. Distribution of income
          3. Private consumption expenditures
          4. Personal ownership of goods
          5. Private investment
          6. Unit labor cots
          7. Exchange rates
          8. Inflation rates
          9. Interest rates
        2. GNP PowerPoint (33.0K)
          1. Total of final goods and services produced
          2. Gross Domestic Product (GDP) is GNP less new foreign factor incomes (Concept Check The Gross Domestic product (GDP) is (a) exactly the same as the GNP (b) GNP less new foreign factor incomes (c) GNP plus new foreign factor incomes (d) GNP less new foreign incomes and local factor incomes (e) None of the above) Concept Check
        3. GNP/Capita and GDP/capita
          1. Compares purchasing power but may be misleading
          2. Divides the economic factor by population
          3. Since income is distributed unequally the simple math creates a false impression
        4. Income distribution
          1. World Bank gathers data on income distribution
          2. World Bank economists prefer consumption expenditures as better indicators of living standards
          3. Some income distribution studies are weakened by inconsistencies in measurement practices and variations in sampling
          4. Produces some useful conclusions
            • Confirms the belief that income is more equally distributed in advanced nations
            • Time comparisons suggest that change is slow making older data almost as useful as new
            • Time comparisons suggest that income inequality increases early in development
        5. Private consumption
          1. Of interest is how consumers allocate disposable income
          2. Discretionary income (that left over after essentials are removed) provides indication of potential markets for non essential goods and services
          3. Purchase Price Parity (PPP)
            • Provides more realistic comparison
            • Percentage expenditures on more basic needs are greater in developing countries
          4. Other important indictors are (1) ownership of goods and (2) consumption of key materials
            • Developed countries are high in these characteristics
        6. Gross domestic investment
          1. Private investment that contributes to increasing a country's productive capacity
          2. A record of such investment suggests a country's favorable climate to investment
        7. Private and government consumption
          1. The increase of private investment with a decrease in government spending is positive to potential business investors
        8. Unit labor costs
          1. Favorable to investment when unit labor costs can be obtain that are less than the firm currently experiences
          2. Slowly increasing unit labor costs are attractive for firms want to lower production costs
          3. These labor markets may provide competition with an edge
          4. Reasons for changes in labor costs include
            • Changes in compensation rates
            • Increase or decrease in productivity
            • Changes in exchange rates (Concept Check Reasons for changes in labor costs include all of the following except (a) changes in purchase rates (b) changes in exchange rates (c) changes in compensation rates (d) increase or decrease in productivity (e) All of the above are correct) Concept Check
      • Other Economic dimensions
        1. Many are already mentioned in Chapter 6 Financial Forces
        2. Interest Rates
          1. High interest rates discourage borrowing for investment
          2. Drives inflation
        3. International debt
          1. Paying off debt reduces resources for economic development
          2. Affects foreign exchange rates
          3. Possibility of government intervention including price controls, reduction of government spending, imposition of wage controls
          4. Possible solution is debt for equity swaps to reduce indebtedness
      • Socioeconomic dimensions
        1. Total population
          1. Most general indicator of market size
          2. It is a poor indicator of market size
          3. If GNP grows faster than population, generally it indicates growing market potential
          4. This statistic combined with others provides insight into population consumption characteristics
        2. Age distribution
          1. It's important to determine the segmentation of a market for product appeal
          2. Distribution of ages in world populations varies widely
          3. World trends suggest an aging population.
          4. Governments and private organizations have been working to curb population growth resulting in aging populations
          5. Product categories will change with modified age distribution
        3. Concern in developed nations
          1. Graying populations in developed countries means shift in product need
          2. Services for aged are becoming more important than services for young
          3. Shift in population ages puts strain on social welfare systems
        4. Population density and distribution PowerPoint (32.0K)
          1. Two aspects of concern to management
          2. Densely populated countries tend to make product distribution easier and less costly
          3. Highly concentrated population such as Canada or Brazil that facilitate marketing
          4. The shift from rural to urban populations affects population distribution and density
      • Other socioeconomic dimensions
        1. Increase in number of working women
        2. Such change affects product offering, packaging, and promotion included the promotion mix, own markets are communicated to
  3. National Economic Plans
    1. Published by governments
      • Annual five-year plans (budgets) used for production control in planned economy countries (Concept Check Budgets, published as a part of a National Economic Plan, can be (a) a small bird closely related to the parrot. (b) five-year plans used for "net gain mapping" in large countries. (c) five-year plans used or production control in planned economy countries. (d) lists of increases in GNP during a five-year period. (e) none of the above Concept Check
      • Indicative plans for other countries suggesting future direction
    2. Industry dimensions
      1. Made by a firm's economists or by industry groups
      2. Provide data relevant to specific industry or product group
      3. Industry reports are important not only for the industry of the firm but the industries of the firm's suppliers or product user.




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