Chapter 4 Summary Flashcards
Explain economic development and how its measured
Economic development refers to economic well-being, quality of life, and general welfare of a nation’s people.
Measures of economic development:
-National production, including gross national product and gross domestic product.
-Purchasing power, the ability of 2 country’s currency to buy the same basket of goods in those 2 countries.
-Human development index, or the extent to which people’s needs are satisfied and addressed equally across the population.
Describe economic transition and its main obstacles
A process where a nation changes its fundamental economic organization to create free-market institutions.
Obstacles:
-lack of managerial expertise
- Shortage of capital to pay for communications, infrastructure, financial institutions, and education.
-Cultural differences between transition economies.
-Unsustainable practices lowered productivity due to law environmental standards and poor health care.
Outline the Various sources of political risk
Political risk is when a society is likely to experience political change that negatively affects local business activity.
Sources of risk: conflict/Violence
-Terrorism/kidnapping
-Property seizure
-policy changes
-Local content requirements.
Explain how companies can manage political risk
Managers can reduce the effects of political risk:
-Adaptation
-information gathering
-political influence
-ensuring their actions do not harm international relations
-Supporting economic development efforts
Describe China’s and Russia’s experiences with Economic transition
China:
-Has an economic philosophy called socialism with Chinese characteristics.
-Rising incomes, an immense population, and expanding opportunities attract huge sums of investment.
-Potential threats to the pace of development are political and social problems. high migrant unemployment and a rocky unification w Taiwan.
Russia:
-Communism started in 1917 and began changes in the 1980s
-transitioned away from central planning
- Has a need to foster managerial talent suited to a market based economy, political instability, and unstable investment climate.
