What general characteristics of a country should managers consider when analyzing an economic environment? What specific indicators help managers measure the economic development, performance, and potential of a country?
Answer: Managers apply three perspectives to help make sense of the economic environments of various countries. First, they estimate how much freedom they will have to make investments and run operations as they see fit. Second, they evaluate the type of economic system in the country, studying how current policies shape development and performance. The third investigates the points of change that drive economic change, assessing the conditions that moderate economic freedom as well as move a country from one economic system to another. Collectively, the insights help managers pinpoint where investments should go and, perhaps more importantly, where they should not. The key dimension used to distinguish one country from another is the gross national income (GNI). In particular, countries are classified according to per capita GNI, or the size of GNI of a nation divided by its total population. Those countries with high populations and high per capita GNI are generally most desirable in terms of market potential. A country's GNI growth rate also indicates its economic potential. Businesses comparing markets will also likely examine the purchasing power parity (PPP) of a possible foreign market.