Business Global Economic Environment & Marketing - Case Study Example

Business Global Economic Environment &Marketing Part A Question Four 4 There are various issues and problems that the World Trade Organisation faces that led to the premature ending of the summit in Cancun that resulted in the summits failure. One problem the organisation encountered was the increasing domestic economic repercussions and technical complexity of issues that were being discussed by the summit. This is where each country experienced different economic situations hence wanted policies that would be advantageous to them individually. Secondly, the fact that there was emphasis on the achievement of fairness rather than focusing of liberalization of trade also resulted in disagreement among member states. The fact that certain nations had bargaining power over others and this power was being shifted to other member countries caused a rift between members. Some of these issues reflect on the case study. For instance, one of the guidelines of the organisation was fairness. However, countries usually want to maintain the bargaining power over others irrespective of the fact that globalization has resulted in change and new markets where countries which were not major players in the past are currently significant players in the market. 4.2 In the international market, free trade cannot be fair. This is as a result of the fact that each country wants to protect its indigenous business establishment thus governments end up providing an added advantage over other business organisations in the international market (Salvatore, 2012. For instance, countries such as the United States of America are known to offer subsidies to farmers in order to give them an upper hand in the import and export sector. Question Five 5.1 Various a factors contributed to the economic crisis in Thailand to spread to other south East Asia countries making it a contagion. One of the major factors that contributed to this is that most of the respective governments in the region did not deal with the increasing balance of benefits in turkey, overheating pressures the stock market and property bubbles early enough. The fact that pegged / fixed exchange rates went on for too long was also a major contributor since it resulted in a false sense of stability that encouraged firms in the region to lend huge sums of money to those in Thailand. Finally, the fact that financial markets in the region were not regulated and supervised at the time was also major contributor 5.2 Countries in the region would have been able to prevent such a crisis if they implemented certain policies. Firstly, more supervision and regulation would have helped in ensuring that balance deficits that were present would not have risen to that level (Jackson, 1999). Secondly, countries in the region should have come up with measures that would ensure that stock market and property bubbles could be withstood since they would have been forecasted. Finally, the region would have adopted exchange rates that were not fixed. They would allow the exchange rate of currencies in the region to be determined by the forces of demand and supply. This would have helped greatly since a fall in the Thai baht would indicate something was wrong. Report Introduction There are various indicators that are used to determine the economic position in which a country or a region is in. Such indicators are instrumental in policy and decision making especially for business establishments that operate internationally. Such companies are able to determine if their business ventures will be successful by evaluating indicators such as GDP. This part of the paper will focus on how different indicators have affected particular regions and how they are interpreted by an organisation Gross domestic product (GDP) is an indicator in macroeconomics that is used to measure the economic state of a country. It is the value of all goods and services recognised officially produced within a specific country in a stipulated period. In general, it is used to determine the living conditions of a specific country. Inflation is another indicator used to determine the economic growth of a country. It is the rate at which the prices of commodities in a given countries increases in general. It is usually measured as a percentage in relation to the previous year. Unemployment is also used to establish the economic growth of a country (Arnold, 2008). It is the number of people in percentage who are willing and have the ability to work but have no job currently. The balance of payments is an indicator of economic growth in which a country’s trade in commodities and the financial arrangements are summarised. This indicator is reliable especially when it comes to the determination of the value of a country’s currency in the financial market. Lending rates are the rates at which financial and lending institutions charge interest when lending money. This indicator is reliable since it affects other indicators such as inflation and GDP. A country’s government general budget balance is an indicator of economic growth that indicates a government’s balance between the governments’ spending and revenue. This comparison is reliable since it establishes if the government has more debts that it can pay or vice versa. When one considers the GDP of China, Japan and the United States of America, one is able to determine the state at which the economy was during a specific year. When one considers China, the GDP in the year 2010 was at a high 10. However, in the following year the GDP fell steadily by 0.9. In Japan, the GDP was 3.9 while in the following year it fell to a low -0.7. The United States of America had a 2.8 GDP which fell in the year 2011 it fell to 1.7. This shows that among the three countries China had the best GDP. When the inflation rate is considered, the United States of America tops the three countries with a 121% inflation rate. In this case, Japan had the lowest inflation rate. The USA experiences the highest employments in both years while Japan experienced the least. The balance of payments indicator shows that with regard to the indicator the United States of America performed well among the three countries while Japan performed poorly. The lending rates in China were highest among the three countries. Chinas government general budget balance was the best where it had a surplus in 2011 and the least deficit in 2010. The examination of all the indicators in the three countries indicates the presence of cyclical and countercyclical sectors. For instance, it is noted that the rise in the inflation rate is something present in all countries while the unemployment rate changes independently in each country. When determining the economic growth or fall of a country, the different indicators influence each other in different ways. For instance, one notices that the gross domestic product of the three countries behave in the same way as the country’s specific general budget position. This is so due to the fact that the GDP of the country directly determines the government’s revenue. This is so since the government gains revenue from taxation of goods and services and income. Thus, if the GDP increases then governments revenue increases resulting in a surplus in its general budget since more goods and services are being producing where the governments gets income from tax deductions and the sale of the commodities (Salvatore, 2012. In the same way if the GDP falls then the revenue for the government will decrease since the number of commodities being taxed has decreased thus affecting the government’s income. This is the same case with the unemployment rate since the government also gets revenue from income taxation (Sloman and Garrett, 2013) It is with no doubt that the gross domestic product of all countries significantly determines the performance of the economy in terms of the other indicators. For instance, in all countries the GDP fell. This might have been as a result of the 2007/2008 economic crisis. As a result of the GDP falling in the three countries, indicators such as unemployment rate, inflation rate and the governments general budget surplus decreased. This shows how the GDP of a country is very important. The better performance of both China’s and Japans GDP over that of the United States of America can be attributed to the fact that the economic crisis of 2007/2008 greatly affected the USA and Europe significantly where many companies went bankrupt resulting in the GDP performing poorly. In fact, Japan and China are among the countries listed as to have suffered the least as a result of the financial countries (Gup, 2010). The low unemployment rate the country experiences can also be attributed to the financial crisis. China’s good performance in the GDP, unemployment and its government’s general budget state of balance can be attributed to the high population in the country that has resulted in production of goods and services due to the availability of domestic market thus increasing the performance of the economy with regard to the indicators China’s economy is in a good stage since it is steadily growing. Such a profile will impact the company positively. Japan’s profile is uncertain since it fluctuates every now and then. This might result in negative consequences for the company since it is difficult to forecast how the economy of the country will perform in the future. Despite the fact that the economy of the United States was impacted so much by the economic crisis thus its economy performing poorly, the company stands to have positive results as a result of its economic activities in the country. This is due to the fact that the economy is steadily recovering thus its future can be determined. This is derived by the fact that the unemployment rate and the governments general budget deficit decreases in 2011 when compared with 2010 while its current account surplus increased. Conclusion As it has been shown, growth indicators are very important when it comes to decision making. This is so since they attract or repel investors. It is the duty of the respective governments to ensure that such indicators display positive performance. It is also crucial for companies to understand such indicators well enough because they hugely determine the success of the business establishment. References Arnold R, 2008. Macroeconomics. Boston: Cengage Learning. Print Gup B, 2010. The Financial and Economic Crises: An International Perspective, Cheltenham: Edward Elgar. Print Jackson K, 1999. Asian Contagion: The Causes and Consequences of a Financial Crisis, Colorado: Westview Press. Print Salvatore D, 2012. Introduction to International Economics, New Jersey: John Wiley & Sons. Print Sloman J and Garrett D, 2013. Essentials of Economics, New York: Pearson. Print Read More