External Environment
Examples of economy external impact
- Corona crisis, possible global recession 2022 - Ukraine War, Inflation - Trade war USA vs China - Financial crisis 2009/2010
Legal analysis
- antitrust laws - employment laws - consumer protection law - health and safety laws - education laws
Technology analysis
- automation - level of innovation - internet infrastructure - communication infrastructure - technological awareness
Environmental analysis
- environmental policies - climate change - natural disasters - recycling disasters - air and water pollution
Currency systems
- fixed: Exchange rate between two or more countries does not vary or varies only within narrow limits (China, Bahrain, Cuba, Saudi Arabia) - free floating: Value of one currency in relation to another is free to fluctuate and is determined only by forces of supply and demand (USD, Euro, Yen)
Politic analysis
- government stability/instability - corruption level - competition regulation - bilateral relationships - import/export regulations
Economic analysis
- growth rate - level of disposable income - unemployment trend - stock market trends - customer behavior
Social analysis
- population size and growth rate - per capita income - education level - lifestyles/buying habits - attitude towards traveling
Top 5 countries with highest GDP (2023)
1. U.S. (24,671) 2. China (19,581) 3. Japan (5,908) 4. Germany (4,937) 3. India (4,330)
How many EU members have a Euro currency
19 out of 27
Imbalance of trade
A weaker currency strengthens exports, but Long-term deficit means that goods are bought abroad over a long period of time, affecting skills of domestic companies to produce these products.
GDP real formula
GDP nominal - inflation rate
PRC
Political Risk Components are risk components, weights, and sequence are used to produce a political risk rating
What is a key driver for GDP growths
Technology
Economic cycle
Upward and downward movements of levels of GDP. Refers to periods of expansion and contraction in the level of economic activities
Bretton Woods system
a conference held at New Hampshire, in 1944, this system provided the foundation for postwar economic globalization, including the World Bank and the International Monetary Fund; based on the promotion of free trade, stable currencies, and high levels of capital investment.
Inflation
a general increase in prices and fall in the purchasing value of money.
Capital account
an account used to summarize the owner's equity in a business.
trade deficit
an excess of imports over exports
Political culture
an overall set of values widely shared within a society. Reflects importance of government and legal system, provides a context within the companies relate to the political system
PESTLE analysis
analysis of the external political, economic, social, technological, legal and environmental factors affecting a business
GDP economy
consists of three sides: politics, technology, society
Global currency
currency that is accepted throughout the world for international transactions: US Dollar (61%), Euro, Yen
When the Euro was introduced?
in 1999
Current account
is the balance of payments, records transactions involving the export or import of goods and services
GDP
is the total market value of all final goods and services produced annually in an economy
Currency
money that is generally accepted
Sovereignty
supreme and independent political authority
GDP formula
total consumption + investment + government spending + net exports
Political risk
unexpected drastic changes in a country's business environment that will adversely affect the profit and other goals of a particular business enterprise.
Trade surplus
when a country exports more than it imports