Transcript AOF Business in a Global Economy

AOF
Business in a Global Economy
Unit 2, Lesson 4
Political and Economic Systems
Copyright © 2009–2012 National Academy Foundation. All rights reserved.
Risks are inherent in the global marketplace
• Social aspects
• Technology
• Economic development
• Politics and laws
What other things must one
consider when analyzing a foreign
market?
Global businesses face political risks
• Ownership risks
• Loss of business property
Risk
• Operating risks
• Disruption of business
• Transfer risks
Political Stability
Risk vs. Political Stability
• Problems moving goods or
money
Attorneys are an essential part of a global team
• Contracts
• Property rights
o Intellectual property
• Product safety
Do people own their ideas?
Why or why not?
Other factors contribute to business success
Geography
o Location
o Resources
Education
o
Literacy rate
What influence does a
country’s GDP have on its
literacy rate, and vice
versa?
Highest National Literacy Rates
1
Sweden
2
Norway
3
Denmark
4
Finland
5
Canada
6
Netherlands
7
Czech Republic
8
United Kingdom
9
USA
10
Germany
Economic policies can benefit business
• Taxes pay for public services.
• Education
• Infrastructure
• Governments may try to
protect local businesses…
• Tariffs
• Quotas
• Subsidies
• …but this can reduce choice,
raise prices, and make local
businesses uncompetitive.
Percentage of GDP
Spent on Education
How do protectionist policies affect
economic development?
Economic development indicators measure
production, consumption, or quality of life
GDP: Gross Domestic Product
Highest GDP 2007
• Goods and services produced 1
and consumed
2
PPP: Purchasing Power Parity
• Adjusts for cost of living
USA
Japan
3
Germany
4
China
5
United Kingdom
HDI: Human Development Index
• Quality of life
How could an increasing level of
economic development influence a
firm’s decision to expand to a
country?
Risk analyses protect global businesses
S
T
E
P
• Social factors: language, customs
• Technological factors: energy,
transportation, communications
• Economic factors: capital, resources
• Political factors: protectionism,
conflicts
What other factors could be
included in a risk analysis?