There are a number of economic measures used to analyze economic conditions. Som
ID: 384036 • Letter: T
Question
There are a number of economic measures used to analyze economic conditions. Some of the major ones include:
Gross domestic product (GDP)
Gross national product (GNP).
Unemployment Inflation Rate Consumer Price Index (CPI)
The Interest Rate
New Factory Orders
Business Inventories T
he Consumer Confidence Index Index of leading Indicators
(See this link for more details - http://www.referenceforbusiness.com/encyclopedia/Eco-Ent/Economic-Conditions.html)
For this discussion, you are working for a company that is looking to expand its business globally from the United States. Research at least two of the above economic measures and describe how you will use them to make a decision about doing business in a specific country. You are free to choose any product or service for this discussion.
Explanation / Answer
Answer –
Use of Economic Factors in Making the Decision for the Global Business: –
For export business expansion plan, we need to analyze the location or countries where we would like to explore the export of products and services. For these we need to analyze the requirements of these products in that particular country. We require consumption data of the country along with key location. Based on the consumption data study, we can decide the list of locations or countries where we would like to export these products. By this method we have high level information of the target countries for export business expansion.
Now the other important step in planning is the study of influencing economic factors in the selected countries for export business. Since the business is being influenced by economic factors, we need to have a plan to understand each and every key economic factor of that particular country. Following are the key economic factors for the same.
New factory orders : – For any export business, we need to have clear understanding of that country’s economic condition in terms of allowing the entry of new company. We need to understand the legal, economic and statutory requirements of the nation to start the company in that particular country. The permission of the company in the new country is very important and it is the top most priority for the business idea. Without local government support and permission, one cannot start the company in that country. These factors will be the decisive factors which will decide our entry into that particular market. We need to understand the legal / regulatory process and understand all the compliances in business laws with that country. All these export business calls for registration at the country level and needs to get the business permission from that country official. Plan for legal factor study helps us to develop the introduction plan in that country. This is the first step in business introduction. This will help in understanding the new factory orders in that country. The new factory orders in the country will help to understand the need/ requirement of the factories in the country, so that the economic condition of the country can be improves. The new factory orders will help to understand the government’s behavior towards the permission and support for the new company. The factor can make one to understand the pull or push system for the company in that country. Pull system will be easy for the new company and push system will be difficult for the new company.
Consumer Price Index Factors – The other economic factor which can help us to understand the economic condition in the target country is by knowing the consumer price index. The consumer price index will help us to understand the allowable price range of the consumers in that particular country. This will help us to understand the buying capability of the people in the country. These will help to understand the current economical scenario in the country and the purchasing power of the consumers in the target markets of the country. Based on purchasing power of the people, one can develop and decide the strategy for the new market of the country. It will help to figure out one’s pricing strategy for that country and target expenses required in that country. These make an important element in the business decision. The consumer price index will help to understand the consumer environment in term of economic conditions. This will help to assess whether the country is developed country or developing country. This will help in understanding the need of type of product in the market. Based on type of product, one can make the business case for the country.
So these two factors will help to understand the economic environment of the target country and can be used as important input for the decision of the business start in that country.
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