Note for IBA 350 with Professor Turner at UA-Intro World Business (5)
Note for IBA 350 with Professor Turner at UA-Intro World Business (5)
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This 4 page Class Notes was uploaded by an elite notetaker on Friday February 6, 2015. The Class Notes belongs to a course at University of Alabama - Tuscaloosa taught by a professor in Fall. Since its upload, it has received 21 views.
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Date Created: 02/06/15
CHAPTER SEVEN REVIEW MATERIALS China with a population of over 13 billion vs India with a population of around 11 billion has an economy that is growing much faster Hence in the future China will have more people of wealth millionaires than India Managers make an economic analysis on every country in which they do business in order to appraise the overall outlook of the economy and to assess the impact of economic changes on their companies This is an ongoing process for all companies in all countries Managers must have good economic information and there are many sources to acquire information on countries in order to estimate market potentials by having data on the size and the rates of change of economic and socioeconomic factors Remember For an area country to be a potential market there must be sufficient people with the means to buy a company s products Economic analyses become more compleX when a firm enters overseas markets because unlike the situation for a company operating only domestically management must now operate and have good data in two or more new environments foreign and international Because of the importance of economic information to the control and planning functions at a global headquarters the collection of economic and socioeconomic data is normally done in the home office Obviously these home office people do rely on help from the management in the foreign affiliates to get the information from time to time There are many sources to get good data on various countries including 1 Commercial officers in embassies 2 The World Bank 3 The United Nations 4 The International Monetary Fund 5 The Organization for Economic Cooperation and Development OECD Developed nations are all industrialized nations which are the most technically developed Developing nations are the lower income nations which are less technically developed w Gross National Income is the measure of the income generated by a nation s residents from international and domestic activitv Most international organizations prefer GNI over GNP Gross National Product which is the measurement of income generated from domestic activity by residents of the country as well as nonresidents GNUCapita is the Gross National Income divided by the population The higher in value of GNUCapita for a country the more advanced the nation s economy is 0 However multinational company management are generally more interested in the w glowth rate than they are in the GNUCapita data Faster growth rate indicates a better market opportunity for their products 0 Income distribution within a nation is also important to understand by managers The better the income is distributed among the population the bigger market will normally be 0 Income distribution studies con rm that income is more evenly distributed in the richer more developed nations This is another reason developed nations tend to trade with other developed nations as we have agreed to before 0 Disposable Income is money left after paying taxes Marketers want to know how consumers in a country allocate their disposable income between purchases of essential and nonessential goods Manufactures of household durables for instance will want to know the amounts spent in that category whereas producers of nonessentials will be interested in the magnitude of discretiona income which is disposable income less essential purchases 0 Unit labor costs Total direct labor costsunits produced are important to understand by international managers Countries with slowerrising unit labor costs attract management s attention for two reasons First they are investment prospects for companies striving to lower production costs Second they may become sources of new competition in world markets if other firms in the same industry are already located there Ifunit labor costs are low and they are slow in rising and even if other firms are in the country managers will decide to go ahead and compete against them that is the free market philosophy 0 Changes in wage rates may cause a multinational firm that obtains products or components from a number of subsidiaries to change its sources of supply 0 The reasons for changes in unit labor costs are 1 Compensation 2 Productivity 3 Exchange rate 0 Socioeconomic Dimensions include 1 Total population A large population in a country is not necessarily an indicator that this will be a good market 2 Age distribution 3 Ruraltourban shifts This is happening primarily in developing countries 4 Population density densely populated areas tend to make product distribution and communications simpler and less costly than they are in areas where population density is low 5 Age distribution Japan by 2025 will have a population aged 65 and older of 268 of total population 0 All of these factors must be taken into consideration by managers of international operations when determing which countries to enter and how to market products in a competitive manner etc etc etc developed A classi cation for all industrialized nations which are the most technically developed developing A classi cation for the world39s lowerincome nations which are less technically developed discretionary income The amount of income left after paying taxes and making essential purchases gross national income GNI The total value of all income generated by a nation39s residents from international and domestic activity humanneeds approach View that de nes economic development as a reduction of poverty and unemployment as well as an increase in income import substitution The local production of goods to replace imports income distribution A measure of how a nation39s income is apportioned among its people commonly reported as the percentage of income received by population quintiles newly industrialized economies NIEs The fastgrowing uppermiddleincome and highincome economies of South Korea Taiwan Hong Kong and Singapore newly industrializing countries NICs The four Asian tigers and the middleincome economies such as Brazil Mexico Malaysia Chile and Thailand population density A measure of the number of inhabitants per area unit inhabitants per square kilometer or square mile population distribution A measure of how the inhabitants are distributed over a nation39s area promotional miX A blend of the promotional methods a rm uses to sell its products purchasing power parity PPP The number of units of a currency required to buy the same amounts of goods and services in the domestic market that one dollar would buy in the United States the theory that predicts that currency exchange rates between two countries should equal the ratio of the price levels of their commodity baskets ruraltourban shift The movement of a nation s population from rural areas to cities underground economy The part of a nation39s income that because of unreporting or underreporting is not measured by of cial statistics unit labor costs Total direct labor costs divided by units produced vertically integrated Descriptive term for a rm that produces inputs for its subsequent manufacturing processes
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