D270 Chapter 4
How many US jobs quality as low-paying?
1 in 4 jobs in the US qualify as low paying
World Competitiveness Index (WCI)
A economy's productivity, namely its efficiently in converting inputs into useful outputs, is a key determinant of its competitiveness
Genuine Progress Indicator (GPI)
A measurement of the economy that considers personal consumption, income distribution, levels of higher education, resource depletion, pollution, and the health of the population.
Happy Planet Index (HPI)
A utilitarian view which holds that people aspire to live long, healthy, ecologically sensitive lives
HDI in G7 Countries
All the G7 countries have high HDI's; they are literate, healthy, and have high income levels
Market Economy
Anchored by capitalism and its advocacy of the private ownership of factors of production. Pushes producers to make products that consumers will buy, which is how consumers affect the efficient allocation of resources and the optimal valuation of assets
Value of Economic Freedom
Average income in economically free countries is more than double the worldwide average and four times that found in mostly unfree and repressed economies
Key dimensions of economic analysis
Balance of payments, deflation, foreign direct investment, income distribution, inflation, misery index, poverty, public debt, and unemployment
BEM
Big emerging markets
Shadow Economy
Black market, parallel market, or informal economy
BRIC
Brazil, Russia, India, China. Many researchers predict that these emerging economies will dominate the global economy in coming years
Gross National Income (GNI)
Broadest measure of a country's economic performance and has four components: personal consumption, business consumption, government spending, and net exports of goods and services
How do managers improve economic analytics?
By adjusting fr the growth rate of the economy, number of people in a country, and local cost of living
Mixed Economy
Combins elements of the market and command economic systems; both government and private enterprise influence production, consumption, investment, and savings
Market Dynamism
Countries are constantly changing, along with their economic conditions
Economic freedom and its relationship with income
Countries in the free category (from the economic freedom index), as a group, have the highest average income
Emerging Economies (Economies in transition)
Countries with accelerating growth in productivity, manufacturing, exporting, and per capita income. Also exhibit improving productivity, rising income, and growth prosperity
Relationship between economic freedom, innovation, and competitiveness
Countries with higher degrees of economic freedom consistently show higher degrees of competitiveness and innovation. Countries that emphasize economic freedom, aiming to improve the efficiency of business activity and flexibility of individual choice, are more likely to develop environments that install systems that support productivity
Economic Freedom
Degree of economic freedom an individual has to use initiative, effort, and competencies to purse one's ambitions
Shadow economy in developed vs developing countries
Developed economies tend to have a smaller shadow economy than developing economies
Interdependence
Each country has relationships with other countries, and actions taken by one country can affect the economies of the other countries they have relationships with
Four factors that determine a nation's competitiveness
Economic performance, government efficiency, business efficiency, infrastructure
State Capitalism
Economic system whereby political officials shape how assets are valued and when and where they are used. Unlike market capitalism, it does not stipulate an ideological component
Where is it estimated that most of the economic growth will come from over the next few years?
Emerging markets and, to a lesser degree, secondary developing economies are estimated to see more than 70% of the world's growth in coming years. Some 400-midsize emerging-market cities will generate bout 40% of global growth over the next 15 years
Least Free Economies
Eritrea, Zimbabwe, Venezuela, Cuba, and North Korea
Human Development Index (HDI)
Estimates a country's degree of human development in terms of the physical, intellectual, and social standards that shape its overall quality of life
Global Innovation Index (GII)
Estimates a nation's capacity to imagine ideas, leverage them into pioneering products, and generate knowledge, competitiveness, and wealthy
Economic Freedom Index
Estimates economic freedom in a particular nation
System Complexity
Every country is different and they track their economies in very different ways
In what conditions would GDP be higher than GNI?
Foreign direct investment in the country is higher than domestic ownership of countries (contribution of local economy). I.e. Bahamas, Ireland, Puerto Rico.
Economic Freedom Index Groupings
Free, mostly free, moderately free, mostly unfree, and repressed
GDP in developing countries vs developed
GDP in many developing countries is rising at 2 to 5 times the rate of per capita growth in the world's richest countries
Green Measures
Gauge economic performance in terms of the effect of current choices on long-term sustainability
Developed Economies
Generally have high income levels, extensive industrialization, advanced technological infrastructure, and high standards of living. Also robust economies that are generally very globalized
Developing Economies
Generally have low income levels, slight industrialization, incomplete infrastructure, lower standards of living, and an uneven market environment
Black market's relationship with economic freedom
Generally, the less economic freedom a company has, the larger their black market will be
Economic Freedom Index findings
Global economic freedom has been increasing over the last two decades and economic freedom has dropped almost a full point over the last year
Wendy's Commercial
Government is shown as a command economy and Wendy's choices make them the free, market economy
Government Actions in State Capitalism
Government owns, either directly or indirectly, its national champions and use them to influence market activity. It also protects the local economy over foreign investments when there is turmoil
Development from 1970-2015
Gross world output increased nearly six fold. All countries expanded or prospered, just not equally
Where-to-be-Born Index (WTBBI)
Holds that how well a country provides for a healthy, sea, prosperous life helps to explain both its current and future economic environments. Evaluates using 11 indicators and smaller economies generally score higher
Freest Economies
Hong Kong, Singapore, New Zealand, Australia, and Switzerland
Happynomics/Welfare Economics
Incorporate elements of psychology, health, security, and sociology. Advocate redefining the traditional performance standards of wealth, income, or profit to reflect principles of well-being, quality of life, and life satisfaction
Why has Argentina's standard of living been decreasing?
Increased government involvement
Base of Pyramid
Interpretation of economic development that explains the largest group is also the poorest socioeconomic group in the world. It also represents a tremendous volume of consumption and is the next frontier for global development
Measuring economic performance
It's not clear or neat and there aren't readily available statistics. It is very difficult to measure economic performance at the country level
Commonalities of Big Emerging Markets
Large territory, big populations, significant economic policy strides (towards liberalization), massive infrastructure needs, aspirations of technological leadership, market growth spillovers within their region, and significant political influence all over the world
LDE
Less developed economies
Elements of developing economies
Less economic freedom, limited infrastructure, unstable institutions, sketchy technology, lower economic freedom, and also generally corruption, cronyism, and crime complicate efforts to regulate society consistently
What is power the emergence of emerging economies?
Low-cost resources, productive labor, expanding consumption, pro-business policies, and enterprising conglomerates
Market Basket
Made up of about 300 commonly purchased goods internationally and allows us to compare the purchasing power in every country
Effect of economic freedom on managers
Managers often don't take into account different levels of economic freedom when they globalize and often do not consider that not all consumers have the same economic freedom that we have at home
Population Size
Managers routinely adjust indicators by the number of people who I've in a country, this lets managers qualify a country's performance for its demographics
"Big Mac Indicator"
McDonald's has some version of a Big Mac in every country, and comparing the cost of those sandwiches in different countries shows PPP
Gross National Wellness Index (GNWI)
Measures a country's capacity to promote individual well-being in terms of mental, health, work, income, social relations, economic, retirement, political, and environmental standards
Rate of Economic Growth
Measures the annual % change in real GDP, helps managers identify promising business opportunities
Net National Product (NNP)
Measures the depletion of natural resources and degradation of the environment that result from making and consuming products
Cross-National Interdependencies
Moderate the forces of supply, demand, and their pricing signals
Estimators of economic progress toward improving happiness
Net National Product, the Genuine Progress Indicators, and the Human Development Index
G20-10
Newly emerging countries, use the same measures as G7 to show the potential for emerging countries
NIC
Newly industrialized countries
Economic System
Organizes the production, distribution, and consumption of goods and services
What shapes how a government interprets economic freedom and state intervention?
Political leadership, social agendas, and market circumstances
Universal Affluence
Presently impossible because the Earth lacks sufficient resources to support and sustain high consumption for 7.4 billion people
Purchasing Power Parity
Provides a method of measuring the relative purchasing power of different countries' currencies for the same basket of goods and services. Adjusted for differences int eh relative cost of living between countries
RDE
Rapidly developing economies
Prevalence of Economic Freedom
Recent performance data indicated that economic freedom improved in 97 countries, mostly emerging countries, has achieved higher scores in 32 countries, declined in 74 countries, and fell to the lowest level ever in 11 countries
Dimensions of Economic Freedom Index
Rule of law, limited government, regulatory efficiency, and open markets
Poverty
State of having little or no money, few or no material possessions, and limited access to education, health, and community
Global Competitiveness Index (GCI)
Summarizes the performance and relationship among 110 variables that compose 12 so-called "pillars of competitiveness" within a nation
Market Interdependence
The actions or conditions of one country can greatly influence the performance of another country
Complexity in Economic Analysis
The intricacy of the simplest economic system defies straightforward speculation. Expanding the data may make tasks harder, rather than improving analysis
What drove economic strength from Asia to the West in the late 1800's?
The power loom and the steam engine
Command Economy
The visible hand of the state supersedes the invisible hand of the market. State owns and controls the factors of production, capital, and entrepreneurship
Why do manager's study a country's economic environment?
To assess its development, explain its performance, and estimate its potential. This will help them choose which countries are good choices for investments
How do managers use monetary metrics?
To estimate productivity, income, and wealth. This allows them to augment analyses with measures of sustainability and stability
Data Overload
Too much information, it can be very difficult for managers to use and interpret an overload of information
When GDP is based on PPP valuation
Top countries are China, then the USA, and then India. Gives a more realistic picture of income
Gross Domestic Product (GDP)
Total market value of goods and services produced by workers and capital within a nation's borders and provides the truest measure of national economic activity
Gross National Product (GNP)
Total value of all the final goods and services produced within a nation in a particular year. Begins with estimated the market value of goods and services produced in a given year by the labor, assets, and capital supplied by the resident of a country
Four factors to evaluate countries by
Type of economic environment in terms of development, economic freedom managers have to make investments and run operations, the orientation of the economic system that shapes its path of development, performance, and potential, and the drivers of economic change
Three largest GDP's
USA, China, Japan (USA's is almost double China's)
Economic Issues for International Business
What is the level of development? How does their government treat foreign firms? What type of economic system? How will all of this effect decisions and what it means to do business? Is the company's industry in the public or private sector?
