Chapter 4 (Economic Systems And Industry Potential) Flashcards
What re the types of economic systems?
Command economy
Market economy
Mixed economy
Economy in transition
What are aspects which influence the macroeconomic environment?
Size and growth rate
Income distribution
Balance of payment
Financial system infrastructure
Labor markets
Natural resources
What are aspects which impacts an industry’s competitive environment?
Institutional barriers
Market size
Competition
Knowledge and innovation
Suppliers capabilities
What makes a command economic system?
Ownership is state owned
Distribution is done by central planning
What makes a mixed economic system?
Ownership is state and privately owned
Distribution happens through market pricing and govt regulations
What makes a market economic system?
Ownership is privately owned
Distribution is done through market price
What re the types of state owned enterprises?
Government-linked companies
Public sector entreprises
Public sector entreprises
State-enabled
Public-private partnerships
What are the goal and means of state owned and private enterprises?
Stated owned, goal societal value, means taxes and fees
Private enterprise, goal profit, means consumer value
What are the costs of state-owned enterprises?
Distorts competition
Can lead to inefficiencies
Conflict of interest with its regulatory functions
Leads to political interference in market
May discourage foreign investment
What are some benefits of state-owned enterprises
Can stabilize an industry in times of financial crisis
Infrastructure development
Serves public interest not limited to a profit
Why do some command economies fail?
Too complex
Misallocation of resources
Poor quality of goods and services
Discourages entrepreneurship
Relatively lower rate of innovation
Slow economic growth
Lower standards of living
Why do market economies succeed?
Competition
Higher productivity
Efficient allocation of resources
Encourages entrepreneurship
Encourages innovation
Easier to manage/invisible hand
What are some condition to economies in transition?
Privatization/liberalization
Changing regulations
Macroeconomic instability
Cultural inertia
Underdeveloped capital markets
Lack of managerial skills
Weak private sectors
What is economic liberalization?
Removal of price control
Liberalization of trade (removal of trade tariffs)
Liberalization of investment
-removal of ownership restrictions
-open to foreign investment
-foreign ownership of business enterprise
What is privatization?
Sale of state-owned enterprises
Restructuring of large state-owned enterprise into small and medium size enterprises
Prioritization of selected sectors
What are some consequences of changing trade regulations?
Newly formed market institutions
High uncertainty
Weak enforcement mechanism
Protection rents
High intellectual property risks
What is cultural inertia?
Residue of communist mindset
Desire to avoid cultural change, or a change in trajectories, or conversely, desire cultural change once movement or change is already occurring
Lack of trust
Lack of understanding of market economic system
What is a first mover advantage?
Less competition
Protection rents
Switching cost
Pre-empts future competition
Greater choice
What is a late mover advantage?
Avoid pioneering costs
Learns from first movers mistakes
What re the categories and characteristics of economic development
Dev countries
- industrialized with large service sectors
- well dev healthcare system
- well developed banking system
Newly industrialized countries
- large manufacturing sector
- high rate of economic growth
- growth education and health care
Developing countries
- agricultural, extraction, and tourism sectors
- underdeveloped infrastructure
- underdeveloped social sectors
- high government debts
What are the indexes for the global competitiveness index (countries)?
Economic performance
Govt efficiency
Business efficiency
Infrastructure
What are some measures to assess the financial sector?
Financial depth
Financial access
Financial stability
Financial efficiency
