Macro Economic Environment Of Global Business

The New World Order

Economic groupings replace military groupings Business leads the politics Enter the globalization and WTO regime Size of economy matters over military might

The Ranking of the Big Economies

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

GDP Basis USA JAPAN GERMANY UK FRANCE ITALY CHINA SPAIN CANADA INDIA

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

GDP on PPP basis USA CHINA JAPAN INDIA GERMANY FRANCE UK ITALY BRAZIL RUSSIA

Size of An Economy
How do we measure the size of an economy? GDP What is GDP? Flow of goods and services produced in a country in one year. Other related terms-NDP= GDP - Depreciation GNP= GDP + Income from abroad NNP= GNP - Depreciation

Indicators of Economic Health

GDP on PPP basis Per Capita Income Human Development Index Level of Employment B.P.L. Population

Risk In International Business

Regressive vs. Progressive policies Political stability Confiscation Domestication

Ratings
What is Rating? Comparative ranking of countries, companies by independent agencies that reflects the promise/ risk involved in doing business with them. TYPES---1- Sovereign Ratings 2- Economic Ratings

RATINGS contd.
KEY PARAMETERS--Size of economy Growth Rate Current Account Deficit Debt Service Ratio Balance of trade GDP/ Fiscal Deficit Ratio

Ratings Of Companies
Size of the company Top line growth rate Bottom line / Top line Ratio Industrys life cycle Companys goodwill R.O.N.A. R.O.C.

Monetory Policy
Who decides this ? Central Bank Of a Country What it aims to achieve? Monetory policy regulates the money supply in an economy.

Tools of Monetory Policy

1. Bank

Rate 2. Open market operations 3. CRR and SLR 4. Credit ceiling 5. Differential Interest Rates

Fiscal Policy
Who determines this? Finance Ministry/ Budget office What exactly is this? The part of govt. policy which is concerned with raising revenues through taxation and deciding on the level and patterns of expenditure.

Tools of Fiscal Policy

1. Level

of taxation 2. Structure of taxation 3. Control of govt. expenditure 4. Subsidies and price controls 5. Export/ Import Restrictions

Why?
The whole world moves with repo rates declared by US Federal reserves? A large number of shipping companies sport the Liberian flag? Bahamas is home to some of the highest net worth individuals?

Foreign money in India

FDI FOREX investment in productive capacity, plant machinery etc.

FII Foreign pension and mutual funds parking funds in bonds and stocks.

Case in point
Why FDI is such a preferred source of FOREX?

Why does China get higher FDI than India?

RAISING FUNDS ABROAD

Why go abroad? 1. Size of Issue 2. Cost of getting listed 3. Global ambitions Who has gone abroad? Reliance, Infosys, Ranbaxy, Bharti, TCS, TV today, DRL.. ICICI

RAISING FUNDS ABROAD contd.

Routes of raising funds abroad 1. GDR 2. ADR 3. ECB 4. IPOs abroad

What must one know?

Local laws to promote competition Local laws to prevent price fixing IPR regime of destination country Child labour , environmental and health concerns Immigration laws Peculiarities of host country

EXCHANGE RATE
How is it determined? Basket of currency Role of RBI Impact of appreciation of Rupee Vs. USD FOREX reserves of 140 billion USD