8. Assessing Economic and Global Conditions

8/19/2019 8. Assessing Economic and Global Conditions

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Assessing Economic and Global

Conditions

Jef Madura, 4th Edition, Introductionto Business. South Western


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Impact of Economic Growth on BusinessPerformance

Econo ic gro!th re"resents the change in the generalle#el o$ econo ic acti#it%.When the econo ic gro!th is stronger than nor al, thetotal inco e le#el o$ all !or&ers is relati#el% high, sothere is a higher #olu e o$ s"ending on "roducts and

ser#ices.Since the de and $or "roducts and ser#ices is high,'r s that sell "roducts and ser#ices should generatehigher re#enue.(ood Econo % )igher Inco es )igher *e ands$or Products+Ser#ices More Pro'ts $or o "anies Increase Production a"acities More Jobs reated -ational Econo % (ro!s More E "orts+I "orts/cti#ities (lobal Econo % (ro!s



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Consider the Alternative…

Whereas strong econo ic gro!th enhances a'r s re#enue, slo! econo ic gro!th results inlo! de and $or "roducts and ser#ices, !hich canreduce a 'r s re#enue.E#en 'r s that "ro#ide basic "roducts or ser#icesare ad#ersel% afected b% a !ea& econo %because custo ers tend to reduce their de and.(ross *o estic Product 1(*P is the total ar&et#alue o$ all 'nal "roducts and ser#ices "roducedb% do estic and $oreign 'r s in a countr%./n alternati#e indicator o$ econo ic gro!th is theune "lo% ent le#el.



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How Market Prices are Determined

3he "er$or ance o$ 'r s is afected b% changesin the "rices the% charge $or "roducts 1!hichin uence their re#enue and the "rices the% "a%$or su""lies and aterials 1!hich in uence theiro"erating e "enses .

3he ar&et "rice o$ a "roduct is in uenced b%the total de and $or that "roduct b% allcusto ers.

It is also afected b% the su""l% o$ that "roduct"roduced b% 'r s. 3he interaction bet!een de and and su""l%deter ines the "rice.



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Interaction between Supply and Demand



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The Effect of hi



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The Effect of hi



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Factors t hat Inuence Market Prices

onsu er Inco eonsu er Pre$erencesProduction E "enses



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Motives for Going International

Motivesonducting

Barriersharacteristic

sE change5ate

Foreign Demand

Technology

Resources

Diversifcation

Combination o Motives


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Importing & Exporting

Moti#esConductingBarriers

haracteristicsE change5ate

Exporting

Importing

Tari

!uota

Internet


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Balance of Trade




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Reasons for Direct Foreign Investment



6o!er osts

3echnolog%Barriers

3rans"ortation


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Strategic Alliances



"trategic #lliances $shared resources%

&oint 'enture $pro(ect based%

International)icensing $ oreignproducer%


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*rotection

Trade Barrie

Moti#esonducting

+arriersharacteristic

sE change5ate

*unishment


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Foreign Characteristics

Moti#esonducting

BarriersCharacteristicsE change5ate

Culture


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Economic Systems

Moti#esonducting

BarriersCharacteristicsE change5ate

Capitalism$private o,nership%

Communism$public o,nership%

"ocialism

$mix both%


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Value of

Moti#esonducting

Barriersharacteristic

sExchangeRate

"tronger#ppreciate

-ea.erDepreciate

Documents

8. Assessing Economic and Global Conditions