Main Aspects of Economics and Features of Working Internationaly - Essay Example

ECONOMICS Economics is the study of how people allocate scarce resources among alternative uses. Areas of economics are divided in various ways like microeconomics, macroeconomics, positive economics and normative economics. Recent developments closer to microeconomics include behavioral and experimental economics. The main purpose of Economic Theory is to provide an outlet for research in all areas of economics. Economic Theory is providing a wide spread of scientific knowledge in the relevant area of economics. Various factors are influencing outside the business are the external factors; among them the main factor is the degree of competition. Rapid changes are taking place in market areas due to customers develop new needs and wants; new competitors enter in the market, due to the introduction of new technology. By taking in to consideration of the external environment in India, a great amount of non-state factors. The other security implication of India’s economic revival would be in the ground of energy security. As India’s energy needs grow dramatically, India’s basic security interest would clearly lie in ensuring a free, uninterrupted flow of energy to fuel its economic growth. The external environment in UK is playing a wide role in this regard, “There is a tendency for businesses to build high barriers to keep potential criminals out and make valuables harder to see from the outside. However, the same barriers can provide a protective screen for intruders, allowing them to carry out their activities and escape without being seen”. (Business Crime, External Environment) (http://www.thamesvalley.police.uk/reduction/businesscrime/external-envir.htm) The external environment in US is that an organization is marked by intense competition between rival firms. The components of external environment include economic, socio-cultural, and global issues. In order to gain sustainable competitive advantage, the organization needs to study its external environment and exploit the opportunities prevailing therein. Microenvironments are internal factors influencing the organization. They are- 1. CUSTOMERS- organization will survive on the basis of meeting the needs and wants of customers; if there is any failure in fulfilling the customer needs, then the business strategy will fail. 2. EMPLOYEES- Training and development playing an essential role in the service sector for the strategic planning process in an organization. 3. SUPPLIERS- “Increase in raw material prices will have a knock on affect on the marketing mix strategy of an organization. Prices may be forced up as a result. Closer supplier relationships is one way of ensuring competitive and quality products for an organization”.(POPULAR LINKS, MICRO ENVIRONMENTAL FACTORS) (http://www.learnmarketing.net/microenvironment.htm) 4. SHARE HOLDERS- Organization’s success mainly relies on the investment growth, there should be increasing pressure to move the ownership from private to public. 5. MEDIA-Advertisements through media is providing a great help to attain the targeted profit of a concern. 6. COMPETETORS- Competitor analysis and monitoring is crucial, if an organization is to maintain its position within the market. Macro environment and environmental scanning are closely related to each other, and it involves analyzing of – 1. Economy. 2. Government. 3. Legal. 4. Technology. 5. Ecology. 6. Socio-cultural. Macro environmental variables for threats and opportunities are playing its potential impact on the company. It includes the economy, technology, government and the competitive environmental factors influencing the organization, which is beyond the control of the enterprise. PEST Factors- It is an analysis of the external macro environment that affects the factors like, political, economical, social and technological. “The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses”. (Lesson Exercise Answer, PEST Analysis) (http://marketingteacher.com/Lessons/lesson_PEST.htm) Economic factors indicates that marketors need to consider the state of a trading economy in both short and long run of the business. Socio-cultural factors meant that the influence of the business may vary from country to country on religion, sex, age basis. But technology is vital for competitive advantage, and is a major driver of globalization. As per the direction given, the preferred country is India. So it is necessary to undertake an appropriate evaluation of the economic system prevailing in Indian economy. Economists were trying to accelerate the economic growth of a country in the long run, without causing inflation and over capacity.” According to neoclassical theory, at the most basic level, a country’s output is powered by structural and cyclical forces. Structural or long-term growth is driven by three factors inherent to the economy: the number of workers, their productivity, and how much long-term capital is available to them”. (The Indian Productivity Miracle) (http://indianeconomy.org/2006/12/19/the-indian-productivity-miracle/) An economic system is a mechanism which deals with the production, distribution and consumption of goods and services in a particularsociety. The economic system is composed of people, institutions and their relationships to resources, such as the convention of property. The methodology of economics is providing a clear picture of economic freedom by using data driven equations rather than the performance concepts. Freedom index is an annual comparative assessment of the state of political right and civil liberties. “While there are many sources of economic data, good political data is hard to find. Freedom Houses survey is an exception. For anyone concerned with the state of freedom, or simply with the state of the world, Freedom in the World is an indispensable guide”. (Freedom in the world, 2006 edition) (http://www.freedomhouse.org/template.cfm?page=15&year=2006) Income per capita- it means, the income of how much each individual receives, in monetary terms, of the yearly income that is generated in their country through productive activities. Per capita income is often used as a measure of the wealth of the population of a nation, particularly in comparison to other nations. It is usually expressed in terms of a commonly-used international currency. The economy is diverse and encompasses agriculture, handicrafts, textile, manufacturing, and a multitude of services. Balance Of Payment- It is the sum total of a country’s capital account, current account and other financial reserves. Balance Of Payment (BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year. BOP identity states that: Current account + Capital account = Change in official reserve account. “Debit transactions involve payments by domestic residents to foreign residents. *Imports of merchandise, foreign transportation services, purchases of American residents traveling abroad, foreign investment by home residents. Credit transactions involve receipts by domestic residents from foreign residents *exports of merchandise, purchases of foreign travelers in the US, investment in the US by foreign residents” (Balance Of Payments) (http://www.econ.iastate.edu/classes/econ355/choi/bal.htm) Income and purchasing power- Literally speaking, purchasing power means the money or liquid assts. There should be an inverse relation between the price level and the purchasing power. Market exchange rate fluctuates widely which results in long run equilibrium value. Income disparities between both developed and developing countries of the world are apparent in average purchasing power concept. It is the ability to purchase, which is generally measured in terms of income. Purchasing Power Parity (PPP), is the method of using the long-run equilibrium exchange rate of two currencies to equalize the currenciespurchasing power. It is based on thelaw of one price , the idea that, in an efficient market, identical goods must have only one price. It is necessary to make some adjustments between the quality of goods and services.Exchange rate between two currencies specifies how much one currency is worth in terms of the other. The exchange rate thus floats depending on the foreign exchange supply and demand on the foreign exchange market. A currency that uses a fixed exchange rate is vital in respect of increase/decrease in values. “Floating exchange rates are preferable to fixed exchange rates because floating rates are responsive to the foreign exchange market.”. (Fixed exchange rate) (http://en.wikipedia.org/wiki/Fixed_exchange_rate) Under fixed exchange rates, the automatic re-balancing does not occur. Global Trade Agreements- Global exchange has organized a bilateral trade agreements, in a vision of global economic integration that value worker’s rights, fair trade and environmental protection over corporate profits. General Agreements on Tariff and Trade (GATT) is mainly aiming for reducing the barriers to international trade.It is only an agreement and noot an organization. It is an agreement signed to promot the global trade between members through a reduction in tariff. “GATT provides a set of rules and principles that are committed to the liberalization of trade between member nations, and the member nations meet every two years to negotiate new tariff agreements”. (Answers.com, GATT) (http://www.answers.com/General%20Agreement%20on%20Tariffs%20and%20Trade) World Trade Organization (WTO) deals with the rules of trade between nations at a global level; it is responsible for negotiating and implementing new trade agreements. It is the most powerful legislative and judicial body in the world. “The central operating principal of the WTO is that commercial interests should supersede all others. Any obstacles in the path of operations and expansion of global business enterprise must be subordinated. In practice these "obstacles" are usually policies or democratic processes that act on behalf of working people, labor rights, environmental protection, human rights, consumer rights, social justice, local culture, and national sovereignty”. (WTO) (http://www.ifg.org/wto.html) GATT is a multilateral agreement; moreover both GATT and WTO are two distinct agreements affecting the international trade. Regional Economic Arrangements- There has been a spate of trade agreements signed between countries of the same region and even beyond. It is a bilateral free trade agreement which are currently evolving in different stages of negotiation. It helps in analyzing the global trends in the regional economic integration, their motivations and implications for other countries. Asian countries that had continued to follow multilateralism all along very faithfully had begun to respond to the trend of regionalism. India’s first brush with new age preferential trade arrangements was a bilateral free trade agreement signed with Sri Lanka in 1998. Regional economic integration between both developing and developed states is a process for enhancing the international legal mechanisms. SAARC- South Asian Association for Regional Cooperation is an economic and political organization of eight countries in Southern Asia. The major categories of regional group are depicted below: 1. Free trade area- is a designated group of countries that have agreed to eliminate tariff, quotas etc. Within an industrialized country there are usually few if any significant barriers to the easy exchange of goods and services between parts of that country. 2. Customs union- Organization of autonomous countries where trade between member states is free of restrictions, but where a tariff or other restriction is placed on products entering the customs union from nonmember states. 3. Common market- Is a market place occupying the entire area of economy. It is playing an important role in regional group category. 4. Monetary union- “In economics, a monetary union is a situation where several countries have agreed to share a single currency (also known as a unitary or common currency) among them. (Monetary union) (http://en.wikipedia.org/wiki/Currency_union) List of monetary unions are- 1. Current. 2. Proposed. 3. Defunct 5.. Political union- A political union is a type of state which is composed of smaller states. Unlike a personal union , the individual states share a common government and the union is recognized internationally as a single political entity. Therefore it is very necessary to forecast the business condition and also to analyze the regional groups existing in an economy. Economic factors should be taken in to consideration for the overall analysis and impact of an economy. Like wise, forecasring of future exchange rates and the relevant business plan is also vital. A thorough analysis of the significant importance of environmental factors. Common trade policies are also having an equal impact. So the proper implementation of the relevant economic theory is very effective in international business.Adequate steps have been taken for implementing a well- designed businee plan. The business plan includes an organization’s feasibility analysis and technical viability. Business is playing a wider role internationally for the overall development. Suitable implication of common trade policies are essential for this.There should be an implication of a proper trend in the economic activity for the achievement of the well settled plan or goal of the business. In this study is also relating with the Global job environment and its benefits and problems in deferent economies. Most of the developed countries facing a big problem of workers emigration from under developed countries. Economic situation of under developed countries and lack of job opportunities is the main cause of workers emigration. Demands for skilled and efficient work force in developed countries are very high. People from deferent countries they are migrate to developed countries and work there at the same time they are enrolled in universities for further education these students get better job experience and qualification after the completion of their course they are able to earn high salaries. WORKCITED 1. (http://www.thamesvalley.police.uk/reduction/businesscrime/external-envir.htm) 2. (http://www.learnmarketing.net/microenvironment.htm) 3. (http://marketingteacher.com/Lessons/lesson_PEST.htm) 4. (http://indianeconomy.org/2006/12/19/the-indian-productivity-miracle/) 5. (http://www.freedomhouse.org/template.cfm?page=15&year=2006) 6. (http://www.econ.iastate.edu/classes/econ355/choi/bal.htm) 7. (http://en.wikipedia.org/wiki/Fixed_exchange_rate) 8. (http://www.answers.com/General%20Agreement%20on%20Tariffs%20and%20Trade) 9. (http://www.ifg.org/wto.html) 10. (http://en.wikipedia.org/wiki/Currency_union) Read More