IntroductionThe impact of economic change has a variety of characteristics. Some are direct and clearly linked to environments, companies, or competitors. Other exerts a subtle influence on a firms activities and its ultimate performance.The importance of economic environment from the fact of different countries has different level of economic development, performance, and potential. For instance, in absolute terms, world economic output more than tripled between 1975 and 2006, reaching $47 trillion. In relative terms, many countries prospered but some more than others and in a few cases, some not at all. Thus estimating the attractiveness of a country as a place to do business and then, once there, making prudent investment and potential decisions depend on how well managers understand economic performance and trends.Globalization connects countries in many ways; change in one country likely has economic consequences in other countries. Companies must also watch economic change in those countries where they may not operate but where they are competitors do. Improving economic performance or revised economic policies in a particular country, such as is happening in Brazil, China, India, and Russia, may unexpectedly strengthen their rivals competitiveness. Although the pace varies from country to country, national economic environments around world are continually changing. We have seen over the past decade tremendous changes in economic opportunities as more countries have adopted the principles and practices of free markets. Indeed, a countrys economic policies give a clear indication of governments goals and the economic tools and market reforms it must adopt. Managers aim to spot those small changes in a countrys economic environment that promise to have big market impact.Finally, economic development is a vital topic to citizens, managers, policymakers, and institutions. The evident triumph of free market over controlled economies has spurred countries to unleash ambitious economic programs. To degree, economic development efforts have helped countries improve their standard of living. Then again, the bold development programs of some countries have fallen short. A fuller understanding of the process of economic transaction and development helps managers make better decisions that benefit their companies, their countries, and the world. Different countries have different economic development, performance, and potential. Managers need to understand economic environments to predict trends that might affect their companys performance. A countrys economic policies give a clear indication of the governments goals and the economic tools and market reforms it must adopt.

ObjectivesThe objectives of economic environment are: To describe and demonstrate the importance of the economic environment factor in planning and carrying out global marketing. To show the importance of the economic factor in global marketing To describe and give an understanding of the major world regional economic blocs with particular emphasis on developing countries To specify the definitive set of economic indicators that precisely estimates the performance and predicts the potential of a countrys economy. To set of estimators, new challenges emerge when interpreting their relationship with other elements of the economic environment.

MethodologyThis Assignment is about the Economic environment of International Business. To complete this assignment I used all the data mainly from secondary sources.

Primary Sources: No primary data

Secondary source:1. Text book of International Business 1. Internet based information1. Articles

Main Discussion of the Economic EnvironmentEconomics: Thetheories,principles, andmodelsthatdealwith how themarketprocessworks. Itattemptsto explain howwealthis created and distributed incommunities, how peopleallocateresourcesthat are scarce and have many alternativeuses, and other suchmattersthat arise indealingwith humanwantsand theirsatisfaction.Environment: Thesumtotal of all surroundings of a living organism, includingnatural forcesand other living things, whichprovideconditionsfordevelopmentand growth as well as ofdangeranddamage. See alsoenvironmental factors.Economic Environment: Theeconomic environmentconsists of external factors in a business' market and the broader economy that can influence a business. You can divide the economic environment into the microeconomic environment, which affects business decision making - such as individual actions of firms and consumers - and the macroeconomic environment, which affects an entire economy and all of its participants. Many economic factors act as external constraints on your business, which means that you have little, if any, control over them. Let's take a look at both of these broad factors in more detail.The global economic turmoil that has permeated both developed and emerging markets has begun to abate in some areas, though the stage of recovery is still the subject of dispute among academics, analysts, and market participants. The stock and transaction market decline and related credit crunch beginning in 2007 rippled through developed and emerging markets. The contraction of private equity transactions also softened capital markets and certain volatility and fluctuations of markets rivaled that of any period since the Great Depression. Review some of the unique challenges facing valuation and damages experts as a result of the recent global economic crisis; it may be helpful to briefly revisit some basic principles. We shall summaries briefly the difference between the but for and actual scenarios before explaining how these might be impacted by the crisis. We will then discuss the main approaches and methodologies for calculating damages, in particular the impact upon the fair market value standard, as well as the three main valuation approaches; the market, income and cost approaches.

Key economic forces includePrice stability: The situation whereby thepricesofgoods and servicesoffered in themarketplaceeitherchangevery slowly or do not change at all.Factorsaffecting this includeemploymentandinflation.

Capital Markets: Afinancialmarketthatworksas aconduitfordemand and supplyofdebtandequity capital. Itchannelsthemoneyprovided by savers anddepository institutions(banks,credit unions,insurance companies, etc.) toborrowersand investees through a variety offinancial instruments(bonds,notes,shares)calledsecurities. Factor endowments:Numberoflabors,land,moneyandentrepreneurships that could be exploited for manufacturing within a country. Countrieswith large factor endowments are often financially better off than countries with less factor endowment.Market size:The number ofindividualsin a certainmarketwho are potentialbuyersand/orsellersof aproductorservice.Companiesare interested in knowing the market size before launching anew productor service in an area.Public Policy:Stateobjectivesrelated to thehealth,morals, and well being of the citizenry. In theinterestof public policy, legislatures andcourtsseek to nullify anyaction,contract, ortrustthat goescounterto these objectives even if there is nostatutethat expressly declares itvoid.

Elements of the Economic EnvironmentManages use many different measures to assess a countrys level of economic performance and potential. Some may be informal indicators like of telephones or circulation patterns of newspapers in a country. Gross National Income (GNI): the income generated both by total domestic production as well as the international production activities of national companies Gross National Product (GNP): the value of all final goods and services produced within a nation in a given year, plus the income earned by its citizens abroad, minus the income earned by foreigners from domestic production. Gross domestic product (GDP): the total value of all final goods and services produced in a country in a given year equal to total consumer, investment, and government spending, plus the value of exports, minus the value of imports.Improving the Power of GNITheGross National Income(GNI) comprises the total value of currently produced final goods and services produced by the domestic economy of a country, measured within a given period of time, usually a year. (a close value is Gross National Product (GNP).Per Capita: A measure of the total output of a country that takes the gross domestic product (GDP) and divides it by the number of people in the country. The per capita GDP is especially useful when comparing one country to another because it shows the relative performance of the countries. A rise in per capita GDP signals growth in the economy and tends to translate as an increase in productivity.

Rate of Change: Expressed as aratiobetweenchangesinvariablesover a specificperiodof time. Can be represented graphically with the slope of a line, or illustrated with the Greekletterdelta. Stocktradersrely on the speed of change of one stockpricerelative to anotherstock'sprice.

Purchasing Power Parity: Is a method of measuring the relative purchasing power of different countries currencies over the same types of goods and services, despite differential rates of inflation. PPP allows making more accurate comparisons of standards of living across countries, because goods and services may cost more in one country than in another.Degree of Human Development: GNI including its expression in terms of per capita, growth rate, and PPP, profiles growth and development in an economy. Some argue that these indicators, by focusing on growth only as measured by monetary indicators, misrepresent the scale and scope of a countrys level of development. Beginning in 1990, the United Nations has translated this view into its Human Development Report and its principal indicator, Human Development Index (HDI).Specifically, the HDI measures the average achievements in a country on three dimensions: Longevity, as measured by life expectancy at birth. Knowledge, as measured by the adult literacy rate and the combined primary, secondary, and tertiary gross enrollment ratio. Standard of living, as measured by GNI per capita expressed in PPP.

HDI aims to capture long-term progress in human development, rather than short-term change.Green measures of GNP: Growing concern for the ecological welfare of the world spurs calls for green measures of GNP.

Features of an Economy Inflation: A sustained, rapid increase inprices, as measured by some broadindex(such asConsumer Price Index) overmonthsor years, and mirrored in the correspondingly decreasingpurchasing powerof thecurrency. It has its worst effect on the fixed-wage earners, and is a disincentive tosave.

Unemployment: Total number ofablemenand women ofworkingage seeking paidwork. Unemploymentstatisticsvary according to how unemployment is defined and who isdeemedto be part of theworkforce. Traditionalmethodsfor collecting unemploymentdataare based, typically, onsamplingor the number ofunemployment benefitrequests.International labor organization (ILO)computes unemployment on the basis of number of people who have looked for employmentin thelastfourweeksand are available to start work within two weeks,plusthose who are waiting to start working in ajobalreadyobtained.

Debt: Adutyorobligationtopaymoney,delivergoods, or renderserviceunder an express or impliedagreement. One who owes, is adebtorordebtor; one to whom it is owed, is a debate,creditor, orlender. Use of debt in anorganization'sfinancial structurecreatesfinancial leveragethat can multiplyyieldoninvestmentprovidedreturnsgenerated by debt exceed itscost. Because theinterestpaid on debt can bewritten offas anexpense, debt is normally the cheapest type oflong-termfinancing.

Income distribution: National incomedivided amonggroupsofindividuals,households, social classes, orfactors of production, to compute anaveragefor comparison purposes. Poverty: Conditionwhere people's basicneedsforfood, clothing, and shelter are not being met. Poverty is generally of twotypes: (1) Absolute poverty is synonymous with destitution and occurs when people cannotobtainadequateresources(measured intermsofcaloriesor nutrition) to support a minimum level of physicalhealth. Absolute povertymeansabout the same everywhere, and can be eradicated as demonstrated by somecountries. (2) Relative poverty occurs when people do not enjoy a certain minimum level of living standards as determined by agovernment(and enjoyed by thebulkof thepopulation) that vary from country to country, sometimes within the same country. Relative poverty occurs everywhere, is said to be increasing, and may never be eradicated Labor costs: Thecostofwagespaid toworkersduring anaccounting periodondaily, weekly, monthly, orjobbasis,pluspayrolland related taxes andbenefits(if any).

Productivity: Ameasureof theefficiencyof aperson,machine, factory, system, etc., inconvertinginputs into usefuloutputs. Productivity is computed by dividingaverageoutput perperiodby thetotal costsincurredorresources(capital,energy,material,personnel) consumed in that period. Productivity is a criticaldeterminantofcost efficiency.

Balance of payments: Key Components Current Account Value of merchandise exports and imports Value of services exports and imports Value of income receipts and payments Net value of unilateral transfers Capital Account Value of capital inflows and outflows Value of financial inflows and outflows Net change in official reserve assets

Three types of economic systemsThree types of economic systems exist, each with their own drawbacks and benefits; the Market Economy, the Planned Economy and the Mixed Economy.An economic system is loosely defined as countrys plan for its services, goods produced, and the exact way in which its economic plan is carried out. In general, there are three major types of economic systems prevailing around the world.

Market EconomyIn a market economy, national and state governments play a minor role. Instead, consumers and their buying decisions drive the economy. In this type of economic system, the assumptions of the market play a major role in deciding the right path for a countrys economic development. Market economies aim to reduce or eliminate entirely subsidies for a particular industry, the pre-determination of prices for different commodities, and the amount of regulation controlling different industrial sectors.The absence of central planning is one of the major features of this economic system. Market decisions are mainly dominated by supply and demand. The role of the government in a market economy is to simply make sure that the market is stable enough to carry out its economic activities properly.Features of market economy:Property Rights:Property rights are social institutions that govern the ownership, use and disposal of resources, goods and services.There are different types of property which individuals and firms can privately own:1. Real property which includes land, buildings, durable goods such as plant, capital equipment etc.2. Financial property which includes shares and bonds, bank deposits, money kept at home.Freedom of choice:Freedom of choice in the marketplace means there is a voluntary exchange between buyer and seller. Coercion and force are absent from this process. The freedom of choice is not influenced by law or by criminal activity. When the freedom of choice is exercised by all market participants, their collective actions will determine what is produced, what is consumed, and the price at which the exchange will take place. This is the natural outcome when freedom of choice is present in the marketplace.

Self Interest:It is not from the benevolence (kindness) of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest

CompetitionA market economy encourages competition. Regardless of the type of small business you operate, you likely face competition in some form. The more competition you encounter, the more you have to monitor your pricing in relation to your competitors. You also need to develop some form of marketing campaign to differentiate yourself from your competition and to carve out your own niche in the marketplace.

Planned/ command EconomyA planned economy is also sometimes called a command economy. The most important aspect of this type of economy is that all major decisions related to the production, distribution, commodity and service prices, are all made by the government. The planned economy is government directed, and market forces have very little say in such an economy. This type of economy lacks the kind of flexibility that is present a market economy, and because of this, the planned economy reacts slower to changes in consumer needs and fluctuating patterns of supply and demand.On the other hand, a planned economy aims at using all available resources for developing production instead of allotting the resources for advertising or marketing.

Characteristics of Command Economy1. The central plan is closely adhered to and is created by a central government through rules, regulations and laws.2. The government is responsible for creating a central economic plan for the country. To implement a command economy, short-term goals are set in order to quickly mobilize and shape the economy.3. All goods and services production is set through the central plan. The main goal is to ensure employment and see that all basic needs are met for every person within the society.4. There is a monopoly owned by the government in industries that are the most important in meeting the needs of the society.5. The regulations and laws created are for the good of the economy and regulate wage and price controls.

Mixed EconomyA mixed economy combines elements of both the planned and the market economies in one cohesive system. This means that certain features from both market and planned economic systems are taken to form this type of economy. This system prevails in many countries where neither the government nor the business entities control the economic activities of that country - both sectors play an important role in the economic decision-making of the country. In a mixed economy there is flexibility in some areas and government control in others.Mixed economies include both capitalist and socialist economic policies and often arise in societies that seek to balance a wide range of political and economic views.

Features1.Co-existence of public and private sectors:Both public and private enterprises exist in this economic system. The role and areas of both the sectors arc well defined.

The relative roles assigned to the public and private sector differ from economy to economy. But generally the public sector is expected to perform certain basic functions such as:1. Development of economic infrastructures.2. To promote basic industries those requires huge investment and are of long gestation periods;3. To promote industries in backward regions where inducement to invest is low.4. To develop defense production industries in public sector.Similarly, the private sector is expected to supplement the efforts of public sector and to take advantages of investment opportunities enhanced by public enterprises.In the mixed economy the two sectors are not rivals. The two sectors are partners in the process of development, because for the efficient working of this system the co-operation between the two sectors is necessary.The private sector in mixed economy operates under certain controls and regulations of the government.2.Economic planning:Generally a mixed economy is a planned economy. Public sector enterprises have to work according to a definite plan to achieve certain predetermined aims and objectives. Similarly the private sector is not left to develop in its own way.The growth of private sector is also regulated through various controls and incentives to achieve the objects of plans.Thus, the nature of economic planning in mixed economies is planning by direction for the public sector and for private sector planning by inducement is adopted.To ensure faster economic growth, the developmental programs of both the sectors are coordinated in such a way that growth in one sector complements the growth in the other sector.3.Division of industrial undertakings:There is division of industrial enterprises in a mixed economy. The division of industrial sector may differ from economy to economy.

Generally, the industrial economy is divided into following:1. Exclusively State Monopoly. In it same strategic and basic industries are included.2. Private Sector Industries. In it industries of lesser importance are included such as consumer goods industries, small scale industries, etc.3. Joint Sector Industries. The industries included in this sector are developed jointly by public and private sector.4. Common Industrial Sector. Both public and private sector can establish industrial units in this sector.

4.Existence of social welfare and private profit motive:In mixed economy public sector works as the principle of social welfare motive. Public sector tries to reduce regional economic inequalities and to increase employment opportunities.The basis of price policy of public sector is social welfare instead of private profit. Whereas the operations and price policy of private sector is guided by private profit motive.But the private profit motive is controlled by government through fiscal and monetary policies, direct controls, etc.5.Individual freedom:The people have freedom of consumption and to choose their occupations in this economic system. Private entrepreneurs are to choose technique of production.From the above discussion, it is clear that mixed economy is a marriage between capitalism and socialism.It is an attempt to have the merits of both capitalism and socialism Therefore, it is said and rightly too that mixed economic system a golden path between capitalism and socialism.

ConclusionThe economic environments of a country helps managers better apprise how developments and trends have and will likely affect their companys performance. A countrys economic policies give a clear indication of governments goals and the economic tools and market reforms it must adopt. Managers aim to spot those small changes in a countrys economic environment that promise to have big market impact. Globally change in one country likely has economic consequences in other countries. Companies must also watch economic change in those countries where they may not operate but where they are competitors do. Improving economic performance or revised economic policies in a particular country, such as is happening in Brazil, China, India, and Russia, may unexpectedly strengthen their rivals competitiveness. This factor are just some of the marketers must consider when deciding to market globally. The global economy can be traced back hundreds of years when traders from the east and west came together to exchange goods. Through the legacy of mercantilism up to the current GATT Round, marketers have had to contend with changes and developments in the economic environment, including the growth of regional economic blocs, all aimed at increasing cooperation between the grouped nations.Markets differ widely in their size and state of development worldwide. Countries show great within country differences also and marketers have to be aware in assessing market potential that they do not use general descriptions of nations as criteria of whether to, or whether not to, open trade negotiations.

Reference

Daniels, John D., Radebaugh, Lee H., & Sullivan, Daniel P., (2012), International Business Environments and Operations Twelfth Edition, Pearson International Edition, Chapter: The Economic Environment, pp.184-216. http://www.economywatch.com/world_economy/world-economic-indicators/type-of-economic-system.html http://www.yourarticlelibrary.com/economics/free-market-economic-system-meaning-main-features-and-functioning/36619/ http://www.learnfreedomeconomics.com/the-freedom-of-choice/ http://theinsuranceadvice.com/command-economy-advantage-disadvantage/ http://smallbusiness.chron.com/features-market-economic-system-3887.html WWW.ICLG.CO.UK http://www.shareyouressays.com/95714/top-5-main-features-of-mixed-economy