CHAPTER FOUR:

Economic systems & market methods:

What could be the economic factors affecting international operations?

external influences (political, legal, cultural, economic, geographic) Operations (objectives,

strategy, means)

When managers assess a country’s economic environment, they know that countries differ,
economic and political changes alter market circumstances, it is important to understand
connections, challenges of comeback, choices of citizens, policymakers, and institutions.

What is economic freedom? When people have the right to work, produce, consume, save, &
invest the way they prefer.
How is it measured? Across business freedom, monetary freedom, fiscal freedom, investment
freedom, property rights, trade freedom, government size, financial freedom, and labor freedom.

economic conditions:
- price stability
- capital markets
- market size
- public policy
- resources

Market development:
- GNP Gross national product
- GNI gross national income
- GDP gross domestic product
- PPP purchasing power parity
- HD index, degree of human development (longevity, knowledge, standard of living)

Various principles help manag-ers better assess economic environments, including:

• system complexity,
• market dynamism,
• market interdependence.

Economic analysis:
- inflation (Increase in the cost of living) deflation (prices for products go down) reflation
(increase money supply and reduce taxes)
- unemployment
- income distribution (estimates proportion of population that earns various levels of
income)
- poverty (having little to no money or materials)
 - debt (internal/external) signals of growing public debt signals (tax increases, reduced
growth, rising inflation)
- balance of payments (current account/trade balance, capital account/given loans)

Economic freedom is the : absolute right of property ownership, fully realized freedoms of
movement for labor, capital, and goods, and an absolute absence of coercion or constraint of
economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself.

The Economic Freedom Index estimates economic freedom in a particular nation.

Economic freedom, by expanding international trade across open borders, promotes

globalization.

types of economic systems (the mechanism that deals with the production, distribution, and
consumption of goods and services)
1. Market economy (mostly private) (bias towards entrepreneurial innovation) ( capitalism:
private ownership of capital) (government supervises & monitors economy)
2. command economy ( government owns most or all resources) (bias toward large scale )
(communism)
3. mixed economy (government and private ownership of economic resources in varying
proportion) (goal balancing economic efficiency and protects the excesses of greed and
self interest) (socialism: focus on equality and fair distribution of wealth)