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Expanding the Horizons for Prosperity

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Key Economic Dynamics affecting the Success of the

Corporation

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In the 1970s there was a major shift in the structure of the world economy with what can only be described as internationalization of production.

This culminated in the birth of a truly global system of industry with the multi-national corporation at its heart.

The multi-national firms had subsidiary networks spanning the globe with concentration in areas deemed to yield the highest returns.

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Since the advent of globalization in the late 18th Century, the international economic bonds have grown stronger bearing robust global capital flows, market capitalization measures and vast investment opportunities.

Expansion of global trade has opened up the untapped markets of Central Europe, Latin America and Asia.

These emerging markets have effected free market reforms that provide new consumers, new resources to leverage and new opportunities to grow sales and revenue for global corporations (Brown, 2006).

However, one of the defining features of globalization in the past decade has been the increased cohesion and integration of the transatlantic economy in general, and US-Germany ties in particular.

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In 1700, Latin America and the US were on relatively similar economic footing. In recent times however, the gap between them is huge with Latin America trailing behind the US, which holds fort at the peak of economic leadership. This disparity is largely attributable to the former country’s economic policy and weak political institutions.

An indicator of this high level of uncertainty is that in the years 1978-1991, Brazil had 9 different economic ministers. Intuitively, investors would fear what actions each new minister would take and the effect of said actions on growth for their firm.

Aggregate investment rates for a country depend on perceived stability in an economy. Further, investors would favor a country with a supply industry capable of delivering the required factors of production at a competitive cost. Herein lies the attraction for Latin American as an investment venue since production outlay will be significantly less.There has been changes to the geopolitical landscape with pointers towards the rise of states such as Brazil as an economically strong force. The consequent growth in infrastructure will yield increased opportunity for investment.

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There is no discounting the emergence of a stronger, more united Europe which is bound to give Germany great economic leverage. A firm’s presence in such a strengthening market can only be lucrative.

China’s desire to attain ‘Superpower’ status is likely to lead other Asian countries to appeal to each other and the US to counterbalance China’s influence. Such closer relations are fated to extend to the economic front as well (Eukuwama, 2008).

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The collapse of the US economic system may be blamed on a lapse in monetary safeguards. However, the true nature of the deterioration lies with the failure of the US to adapt to realities of a global economy (World Bank, 2005).

The main problems plaguing the country are its inability to nurture a competitive workforce, a weakening technological force and a general tendency towards economic protectionism.

The loss of its industrial base, erroneously thought to be a mere shift from a labor-intensive to a knowledge based economy has eroded America’s relative technological superiority (Taylor, 1982).

However, both Japan and Germany have been able to maintain an industrial base even as they move to the Information Age. This is due to the close co-operation that exists between industry and government.

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These include; The Gross Domestic Product (GDP), inflation, unemployment and interest rates.

The GDP consists of all goods produced within an economy and specifically focuses on geographical boundaries.

The rate of inflation in the US has gone up as a result of the global economic crisis and the interest rates as well.

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Key Macroeconomic Metrics

Transaction costs have risen since the dollar is weakened against other currencies. This has slowed down production and lowered the country’s GDP.

Additionally, unemployment rates are at an all time high since most corporations have been forced to streamline their operations to survive the downturn. This has resulted in a deluge of job cuts.

The current economic environment calls for prudence in corporate governance for any firm to succeed, especially with the big multinational firms such as Procter & Gamble, Unilever and others , competing with us for the same consumer whose purchasing power has been serious eroded.

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The basic economic problems are: What& in what quantities to produce, How to produce and For whom.

The second question begs for a means of production that requires the least average cost per unit of production.

Expansion of the companies operations would beget the economies of scale and we would certainly be able to offer the products at more favorable prices.

This would increase our competitiveness in the market and ultimately result in a rise in revenue.

The third question in our circumstance requires a widening of our client base. The resultant increase in sales volume is exactly what this firm needs to get ahead of the competition.

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World Bank,(2005), World Development Report: A Better Investment Climate for Everyone, World Bank Publications, 2005

Taylor, M, (1982), The Geography of Multinationals: Studies in the Spatial Development and

Economic Consequences of Multinational Corporations, Taylor & Francis, 1982 Pages 33-62

Brown, J, P, (2006), Globalization in 2020, Nova Publishers, 2006, Pages 41-63  Luck, K, (2005), Transatlantic Mergers and Acquisitions: Opportunities and Pitfalls in German-

American Partnerships, John Wiley and Sons, 2005

Ferraz, C, J & Rush, H, (2007), Development, Technology, and Flexibility,,Routledge, Page 207  Eukuwama, F, (2008), Falling Behind: Explaining the Development Gap Between Latin

America and the United States,By Francis Fukuyama,Edition: illustrated,Published by Oxford University Press US, 2008 Pages 1-7,72-77.