International Business Case Study
Chapter FOUR
The ECONOMIC Environment
CLOSING CASE: Meet the BRICs [See Fig. 4.5.]
Over the next 50 years, changes in the relative performance, scale, and scope of the world’s economies will be dramatic. Most notably, data indicate that the combined economies of Brazil, Russia, India and China—the so-called BRICs—should surpass those of the G7 nations by 2050 [see Fig. 4.5]. In fact, of the original G7 nations, only Japan and the United States will still rank among the world’s largest economies at that time. Thus, managers need to rethink their traditional views of the economic environment as they encounter fundamental shifts in investment and spending, increasing competition for inputs in the world’s commodity markets, and the rapid growth of consumer markets in many transition economies. Other significant impacts loom as the leaders of the BRIC nations seek to collectively develop their economies and political presence through the creation of a multilateral alliance amongst themselves. No matter what the outcome, the fallout will be momentous as the world’s emerging economies come into their own.
Questions
1. Debate the relative merits of GNI per capita versus the idea of purchasing power and human development as indicators of economic potential in Brazil, Russia, China, and India. Gross national income per capita (GNI per capita) represents the market value of all final goods and services newly produced in an economy by a country’s domestically-owned firms in a given year divided by its population. Thus, GNI per capita serves as a very useful indicator of current individual wealth and consumption patterns; those countries with high populations as well as high per capita GNI are most desirable in terms of total market potential. Purchasing power parity (PPP) represents the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market that one unit of income would buy in another
The ECONOMIC Environment
CLOSING CASE: Meet the BRICs [See Fig. 4.5.]
Over the next 50 years, changes in the relative performance, scale, and scope of the world’s economies will be dramatic. Most notably, data indicate that the combined economies of Brazil, Russia, India and China—the so-called BRICs—should surpass those of the G7 nations by 2050 [see Fig. 4.5]. In fact, of the original G7 nations, only Japan and the United States will still rank among the world’s largest economies at that time. Thus, managers need to rethink their traditional views of the economic environment as they encounter fundamental shifts in investment and spending, increasing competition for inputs in the world’s commodity markets, and the rapid growth of consumer markets in many transition economies. Other significant impacts loom as the leaders of the BRIC nations seek to collectively develop their economies and political presence through the creation of a multilateral alliance amongst themselves. No matter what the outcome, the fallout will be momentous as the world’s emerging economies come into their own.
Questions
1. Debate the relative merits of GNI per capita versus the idea of purchasing power and human development as indicators of economic potential in Brazil, Russia, China, and India. Gross national income per capita (GNI per capita) represents the market value of all final goods and services newly produced in an economy by a country’s domestically-owned firms in a given year divided by its population. Thus, GNI per capita serves as a very useful indicator of current individual wealth and consumption patterns; those countries with high populations as well as high per capita GNI are most desirable in terms of total market potential. Purchasing power parity (PPP) represents the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market that one unit of income would buy in another