State the purpose of economic analyses.

To keep abreast of the latest economic developments and also to plan for the future, firms regularly assess and forecast economic conditions at the local, state, and national levels. When they enter international operations, the economic analysis increases in complexity because managers are operating in two new environments: foreign and international. There are more economies to study, and these economies are frequently highly divergent.

Identify different categories based on levels of national economic development and the common characteristics of developing nations.

Managers involved in international business encounter markets with far greater differences in levels of economic development than those in which they have been working in domestic business settings. A nation's level of economic development affects all aspects of business, and we commonly group them into categories based on their level of economic development, such as developed, developing, newly industrializing, and newly industrialized economies. Developing nations have certain common characteristics, including unequal distribution of income, technological and regional dualism, a large percentage of the population in agriculture, high population growth, high illiteracy rate, insufficient education, and low savings rates.

Recognize the economic and socioeconomic dimensions of the economy and different indicators used to assess them.

The various functional areas of a firm require data on the size and rates of change of a number of economic and socioeconomic factors. Among the more important economic dimensions are GDP, GNI, distribution of income, personal consumption expenditures, private investment, unit labor costs, and financial data, such as exchange rates, inflation rates, interest rates, and the amount of a nation's foreign debt. The principal socioeconomic dimensions are total population, rates of growth, age distribution, population density, and population distribution.

Discuss the importance of a nation's consumption patterns and the significance of purchasing power parity.

Marketers must know how consumers allocate their discretionary incomes, since this is money spent on their products. They must also use purchasing power parity (PPP) to understand what the true purchasing power of a nation is. Consumers in a nation whose GNI appears to be too low to be a viable market may have some discretionary buying power when the GNI based on market exchange rates is converted to a GNI based on PPP.

Discuss the new definition of economic development, which includes more than economic growth.

The human-needs approach defines economic development as the reduction of poverty, unemployment, and inequality in the distribution of income.

Explain the degree to which labor costs can vary from country to country.

Hourly labor rates, especially when stated in U.S. dollars, change rather rapidly. There are three factors that are responsible: (1) real changes in compensation, (2) changes in productivity, and (3) changes in exchange rates.

Discuss the significance for businesspeople of the large foreign debts of some nations.

Large foreign debts may indicate that the government will impose exchange controls on its country's businesses. If a large part of the country's export earnings go to service its external debt, there will be little remaining for use by firms in the country to pay for imports of raw materials, components used in their products, and production machinery. The government could impose price and wage controls. There is also the possibility that firms can buy some of the discounted debt to obtain local currency at a favorable exchange rate.