The G7 Industrial Economies Carefully - Coursework Example

ECONOMIES, MARKETS AND STRATEGIC DECISIONS Introduction The G7 is an alliance of seven countries that are considered to be global economic giants. The G7 group was founded in 1975 by finance ministers and Central Bank Governors being part of the economic bloc. In addition, the group also was made up of representatives from the European Union and other stakeholders who were involved in economic affairs of the countries. Primary, the G7 group, is made up of seven countries whose economic issues are exemplary. It consists the United States of America, Canada, Germany, France, United Kingdom, Japan, and Italy. The seven countries are considered to be leading economic giants globally and corporate in a wide range of economic activities. The area of the corporation includes trade agreements, taxation policies, tariffs and duties among other areas. The report seeks to examine one of the countries in the G7 industrial economies carefully (G20, 2015). Although the G7 industrial economies are of countries that have been perennial economic powerhouses, there have been emerging economies that have sprung out rapidly. Some of the economies that have grown rapidly in the recent years include Brazil, Russia, India, China and South Africa. The countries are as BRICSA or tiger countries. Over the last decades, the BRICSA countries have grown rapidly causing ripples to some of the developed nations. Among the drivers that have led to the emergence of the countries includes innovation in the technological sector. The report carefully examines economic factors that have spurred the growth of the economies are also carefully considered (G20,2015). Finally, the report also features macroeconomic performance, international trade and international trade and investment over the last five years of one of the open economies. The free economy is not part of the G7 group neither is part of the BRICSA countries. The open economy consists several countries that include Argentina, Australia, Indonesia, Republic of Korea, Mexico, and Saudi Arabia among other countries (G20,2015). US macroeconomic performance The U.S. economic was among the economies that worst hit by the recent global financial meltdown. Most of the world economies were stagnated following the eruption of the global financial crisis that adversely affected most countries. Over the last five years, significant economic changes have been made following the adoption of workable economic policies. The systems have seen the economy recovery from its shackles. Although proper measure have been put ensure full economic recovery issues such high unemployment rates housing problem and public debt remains major impediment the current government (Guo and Guo, 2010). The Federal Reserve has been with the responsibility of establishing interest rates. The institutions adjust the rate from time to time when it deems to be necessary. Furthermore, the adjustments are done for the purpose of promoting economic development. One of the causes of the recession that was witnessed recently was as a result of decreased interest rates. The Federal Reserve lowered the interest rates in a bid to encourage more customers to borrow from banks. Consequently, a majority of the customers borrowed mortgages and ended defaulted the loans. Furthermore, many financial institutions were run out of cash and were on the verge of collapsing. In addition, some of them had to be bailed out from the crisis (The World Bank, 2015). Despite the economic crisis that the country underwent, the country was able to recover from the problem. Economic Analysts indicates that the GDP of the country had significantly improved as at 2014.The report revealed that the GDP had increased by a margin of more than 2% in the last quarter of 2014.One of the factors that were used in measuring the GDP was consumer expenditure that had significantly risen by more than 4% (Salidjanova, 2011). US economy at the present 6 4 2 0 2012 2013 2014 2015 Source: World Bank International trade was also booming. The country had an overseas market for food products, beverages, and animal feeds. The U.S. was the leading country exporter in the whole world for the products. In addition, the country imports rose rapidly. Importation of petroleum products, as well as other goods and services, has improved in the last five years. International trade and investment are an important activity that has helped the country grow economically. The sector has created more than 39 million job opportunities for the citizens. Furthermore, with the trade agreements that have been enacted export of goods and services has been enhanced (Salidjanova, 2011). Macroeconomic performance of China China has emerged as one of leading economic powerhouse in the recent years. It is one of the leading economies in the Asian religion surpassing the likes of Japan. As at 2002, the country was among the largest consumers in the global market. In the year 2002, trade with China and other countries was valued at US 40 billion representing a 20% growth from 1991.In addition, exports and imports for China have increased in the present times. In the year 2000, China was reported to be the leading exporter in the Asian region controlling about 3% of the Southeast Asian market. Although there was an imbalance in trade, the country also started to import goods and services in a move to achieve a balanced trade (Salidjanova, 2011). However, the GDP of the Asian country has declined with the margin of more than 7.5% in the 2014 last quarter from an estimated 7.8 in the prior quarter. Interestingly, the figure was higher than the value that had been forecasted. Efforts are underway to ensure that the country retains the economic growth that has been achieved so far. Furthermore, the government of China has made a decision to review the model used for economic development. In addition, the financial institutions of the country also encouraged the citizens of the country to access financial resources as a way of promoting economic development and growth in the country. Despite the initiative being noble for the citizens, it had its drawbacks. Some of the beneficiaries of the loan diverted the funds for other purposes. Furthermore, there were concerns that banks could not recover the money. Credible sources indicate the move could have negative implications for the economic development of the country. In order to promote investment opportunities, the country has over the last five years reviewed its trade policies. For instance, the telecommunication industry was primarily regulated in the ancient days. However, in the recent years, the telecom sector has been opened to tap into the numerous opportunities that exist. With the adjustment of communication regulation, the country could tap into the gaming industry that has attractive revenues in Europe and other countries. The new policies will promote the telecommunication industry in the country that will spur the country into academic prosperity (The World Bank, 2015). 6 4 2 0 2012 2013 2014 2015 Source: World Bank Macroeconomic performance of Australia Australias economy has been fluctuating. The GDP has been growing at the same time dropping. Economic analysts had predicted the GDP to increase by more than 2.5% between 2014 and 2015.In addition, the nominal GDP that is in the estimation of the tax revenues had increased by 2% as at 2014. The sluggish growth is lower than what had been predicted. The long run effect is that it could lead to a decline in the public revenue collection. Consequently, Australia is likely to have a deficit budget for a very long time (Salidjanova, 2011). Australias exports have gone down. On a brighter side, the volume of goods and services being exported has also increased. The country has witnessed a booming trade in international trade and investment. The exports of the country have grown by more than 7% in the recent years. On the other hand, the percentage of prices of exports compared to the imports reduced significantly by 10%.The drop was a positive indicator in comparison with previous years more so with a decline in oil prices. Furthermore, the exports of the country contributed almost 1.5% to the general economic growth of Australia (Guo and Guo, 2010). Despite the Australian economy experiencing mixed fortunes, the purchasing power of a majority of the Australians has gone up. The unemployment rate has also grown with those employed seeking for better salaries and wages. Although the macroeconomic indicators could be indicating that the economy is experiencing a slow-paced growth, records show that consumption for many households went up. The level of consumption of households rose by 3%.The contribution of families to the economy was higher than the value contributed by the export and import markets (The World Bank, 2015). Shockingly, most households chose to spend a huge chunk of their salaries on recreation and leisure activities. Also top on the list of the expenditure was rent, furnishings and household equipment and health. Least expenditures were reported on cigarettes and tobacco, acquisition of new cars and transport services (Dunning and Lundan, 2008). Another sector that contributed significantly to the economic growth of the country was the mining industry. Although the industry had been contributing a significant share in the development of the country, the contribution of the sector has been slowly declining since 2014.For instance; Australia has been among the leading producers in the production of gold. The revenue collected from gold has been used for funding mega infrastructural facilities in the country. In addition to the mining sector, other sectors of the economy such as finance and insurance, healthcare, and education among others have also improved the economy (Guo and Guo, 2010). 6 4 2 0 2012 2013 2014 2015 Source: World Bank Critical analysis of Australia, China and U.S. The US and China seem to be having a lukewarm in the recent years. Analysts suggest that the outcome of the relationship between the two countries in the coming years is going to influence the global economy and the financial markets. Whereas, the economy of China has been growing, the American economy seems to have stagnated. The secret of China’s success especially in the aftermath of the recent recession was the introduction of a stimulus package. The introduction of the fiscal policy gave China an upper hand over America and Australia. China was able to control the situation comfortable as Australia, and the US struggled to overcome the situation. In addition, financial stakeholders started discouraging institutions from using the American dollar as the primary unit of currency (The World Bank, 2015). Unlike Australia and the US, China has been actively been involved in international trade and foreign investment. In 2005, China had invested more than $3billion in Australia. However, in the subsequent years, China’s international trade and foreign investments dropped sharply. The leading exporters were the US and the UK. However, China remained ahead of Japan. The investments had been forecasted to be more than $16 billion. The contribution was mainly from the resources sector. However, the target was not realized (Dunning and Lundan, 2008). The need for the three countries to have trade agreements has been necessitated given Chinas rapid growth. The three countries promote foreign trade agreements that create business opportunities for the member countries. Furthermore, China, U.S., and Australia have made a decision to involve their financial institutions in the development and economic policies matters. The countries have bestowed responsibilities to the institutions to formulate economic policies aimed at enhancing their economies (Guo and Guo, 2010). Whereas the Chinese government has engaged the Australian government in economic matters, the U.S. government has been inactive in cooperating with the Asian country. The relation between China and Australia has brought positive economic implications. The Asian export was largely dominated by Japan prior to the entry of China in 2010.China being the leading exporter in the Asian religion; Japan has been forced to export its products to the U.S. markets (The World Bank, 2015). Numerous shreds of evidence have been presented supporting how China is slowly displacing the United States of America in terms of economic development. The imbalance of trade between the U.S and China has expanded although the case was different prior to the recession. Whereas the U.S. government was putting measures to reduce the military allocation budget, China was making advancements in the military sector (Guo and Guo, 2010). Although China and America seem to have a lukewarm relationship in the public domain, the current government has been holding talks with Chinese officials in a bid to dispel the notion. U.S. and China have a strong economic bond with the later providing the former with cheap goods. On the other hand, the Chinese government borrows from the American government to meet its budget deficit. China also enjoys a ready market for its products in the American market. (Dunning and Lundan, 2008). The United States of America GDP stands at $16 trillion. China’s GDP is estimated to be worth about $9 trillion whereas that of Australia is about $1.5 trillion. The US uses the capitalist ideology where citizens have been granted access to property ownership and make independent business decisions. The business environment in America is much flexible compared to those of other developed nations. However, US businesses have a serious challenge when it comes to penetrating new markets overseas. The international market is by policies and laws enacted by individual countries. Such enactments have been impediments to the entry of the US into particular markets (The World Bank, 2015). On the contrary, China has been enjoying access to the international markets. Unlike the previous years where the economic development was primarily controlled by the government, the story is different in the present days. The government of China has reviewed its fiscal policies and promoted a liberal market so as to promote economic development in the country. The trickle-down effect of implementation of the economic policies is that the stock market, international trade, and investment have tremendously grown. Furthermore, the government has made a decision to promote parastatals in order to position the country strategically for competition in the global market. Unlike the US, China has managed to penetrate the international market and had the largest share of trading partners (Index Mundi, 2015). The Australian economy has been experiencing mixed fortunes. The economy has been fluctuating from time to time. Additionally, the unemployment rate has been decreasing with minimal inflation rates being reported. Economists have indicated that the economy of the country has been rising with an annual growth of about 3.5%.Furthermore; the export market has been lucrative for the county. Australia exports most of its products to the Chinese market. The trade between the two countries has promoted the presence of Australia in the international market platform. The service industry is very robust. The sector has contributed 70% to the GDP of the country and provides more than 75% of the jobs in the economy. Furthermore, the Earnings per Share grew by about 20% reaching a landmark value in the history of the company (Atkinson, 2013). Analysis of major companies Apple incorporation is Technology Company based in the US. The organization is one of the most renowned companies in the United States of America. Apple is in the telecommunication and entertainment industry. Their products include mobile phones, music applications, laptops and other electronic devices. In the recent years, the company has largely dominated the technology industry surpassing the likes of Microsoft that was once among the most profitable companies in America. In the last financial year, the business entity reported a net profit of $40 billion in the last quarter. Apple continues to be one of the influential companies in the American market and controls a significant market share of the technology industry. The secret of the success can be to the high level of innovation and the production of products that meet the specification of customers (Hu and Kao, 2007). The Wal-mart store is also an American business entity that concentrates on selling household goods. In 2004, the enterprise made profits of more than $480 billion. The figure was a 1.6% increase from the previously trading period. However, the earning of the company was affected by environmental factors. Primarily; the winter weather affected the profits of the firm given that few consumers purchased goods (Index Mundi, 2015). Exxon Mobil is as one of the most influential American companies. In 2003, the total earnings of the firm reduced by 9%.Oil production went down whereas the cost of exploring new oil reserves rose. The company has invested its resources towards ensuring the oil production remains like the previous years and meets the demand in the market (Guo and Guo, 2010). Origin Energy is an Australian company engaged in the exploration of energy, power generation and other forms of energy. The firm has maintained its leadership in the energy industry and has managed to make a fortune. The companies report about 5 billion in profits every year. The sales are approximated to be about 6 billion every year. According to online sources, the organization seeks to retain its leadership in the industry in the coming years through embracing technology (Guo and Guo, 2010). Telstra dominates the telecommunication industry in Australia. The firm provides telecommunication services to more than 16 million clients across the country. In addition, technology has been a major driving force for the company’s success. Furthermore, Telstra has expanded its services to other international markets such as China and more than other 15 countries (Index Mundi, 2015). The Common Wealth Bank is a leading financial institution in Australia. It provides financial services to its customers to meet their financial needs. Statistics indicates the profit of the bank was about $4billion in the last trading year. The company makes an estimated $4 billion in profits and contributes taxes to the national government. Moreover, the bank has also made a significant step in ensuring the shareholders of the organization reap from the profits of the business. The bank has expanded its scope of operation to other religions using the strategy of partnering with other business firms. Its activities have been extended to China, New Zealand, and London among other countries (The World Bank, 2015). ICBC is among the most prominent organization. In 2014, the profit of the bank was 300,000 million Yuan. The profit was a 14% growth from the previous year. The ICBC is a government institution that provides financial services for the local market. Also, it has several branches located in France, Italy, Spain, Netherland and other European countries (Forbes, 2015). The China Construction Bank Corporation is also a financial industry based in China. It is involved in the construction of infrastructural facilities also. Records indicate as, at last year, the revenue collected was more than 200million Yuan. The profit was a15% increase from the past earnings reported. The business has diversified its activities a strategy that has worked well considering the profits currently being recorded. In addition, it operates in the international market (Guo and Guo, 2010). Finally, the Agriculture Bank of China is an important institution in the economy of the country. It is a profitable entity in the world recording a profit of 150 million Yuan. The bank has more than 24,000 branches and has extended its scope of operation to other countries. In the international market, it has eight branches. Unlike, the US and the Australian markets, the Chinese business environment seems to be mostly dominated by financial institutions (The World Bank, 2015). 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[22.4.2015].< http://data.worldbank.org /indicator/NY.GDP.MKTP.KD.ZG>. Read More