The Brics

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B CHAPTER FOUR THE ECONOMIC ENVIRONMENT OBJECTIVES • To appreciate the importance of the economic analysis of foreign markets • To identify the major dimensions of international economic analysis • To compare and contrast the economic indicators of countries • To profile the characteristics of the types of economic systems • To discuss the idea of economic freedom • To profile the idea, drivers, and constraints of economic transition CHAPTER OVERVIEW When companies source, manufacture, and/or market products in foreign countries, they encounter fascinating and often challenging economic environments. Chapter Four first explores the economic environments of countries in which an MNE might want to operate by…show more content…
Key economic factors include: the general economic framework of a country, its degree of economic stability, the existence and role of capital markets, the presence of factor endowments, market size, and the existence of economic infrastructure. Factor conditions represent available inputs to the production process, such as human, physical, knowledge, and capital resources, as well as infrastructure. [See Fig. 4.1.] III. ELEMENTS OF THE ECONOMIC ENVIRONMENT Economic analysis often begins by examining a country’s gross national income, (GNI) i.e., the monetary value of the total flow of goods and services within its economy. Then related measures such as growth rates, income distribution, inflation, unemployment rates, debt, and the balance of payments are considered. Gross National Income Gross national income (GNI) measures the income generated both by total domestic production plus the international production activities of national firms, i.e., it is the market value of all final goods and services newly produced by a country’s domestically-owned firms in a given year. Gross domestic product (GDP) measures the value of production generated by both domestic and foreign-owned firms within a nation’s borders in a given year. B. Improving the Power of GNI Managers improve the usefulness of GNI by adjusting it for the population of a country, its growth rate, and the local cost of
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