Macroconomic indicators

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REPORT ON THE INFLUENCE OF ECONOMIC ENVIRONMENT

ON PLANNING AND PERFORMANCE OF INTERNATIONAL BUSINESSES.

Ranking of variables:

1. GDP GROWTH

2. INFLATION RATE

3. UNEMPLOYMENT4. DEVALUATION, REVALUATION

5. INTEREST RATE

1. GDP (Gross Domestic Product) growth – the increase of per capita gross domestic product (GDP) or other measure of aggregate income,typically reported as the annual rate of change in real GDP. Economic growth is primarily driven by improvements in productivity, which involves producing more goods and services with the same inputsof labor, capital, energy and materials. 

• GDP growth is an indicator of the economic cycle the country’s currently in. Therefore it affects directly the entry mode and the risk it carries asthe strategy of entry changes in the case of economic growth, stagnation or decline. Usually the positive economic growth brings the Foreign Direct Investment. 

• Lower GDP of a given countrydirectly influences the Price strategy of a Multinational company. If the overall output of goods and services of a given country is low, the product price has to be adequately adjusted to the givenconditions.

• Dynamic growth of GDP is connected with the growth of investment and consumer expenditure, which greatly weakens the competition and enables the growth of the entire company.Recession is connected with the opposite results, i.e. the demand decreases and thus the market competition exacerbates, which leads to elimination of weaker companies.

2. Inflation – rise in thegeneral level of prices of goods and services in a economy over a period of time.

• Inflation is a source of uncertainty and risk for the international businesses. It influences the price ofproducts and costs. Prices and costs in the case of inflation rise the tendency for long term investments lessens and more common become speculative investments, which means greater economic risk....
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