The BRIC’s economies are on the verge of the rapid growth of their consumer markets. (Experience indicates that consumer demand takes off when GNI per capita reaches levels between $3,000 and $10,000 per year. ) In Russia there is already significant evidence of the growth of consumerism during the past decade.
There are also early signs of similar trends in China and India, where the growth of their middle classes is very rapid. It is expected that within a decade or so, each of the BRICs will show higher returns, increased demand for capital, and stronger national currencies. Thus, foreign firms will want to monitor major economic indicators such as GNI, PPP, and the Human Development Index, as well as developments in the cultural, political, and legal environments of those nations.
The economic environment of BRICs shapes its attractiveness to foreign investors. In terms of specific, China and India will be the dominant global suppliers of manufactured goods and services, while Russia and Brazil will become the principal suppliers of raw materials. Collectively, on almost every scale, they will become the largest entity on the global stage. Managers should assess economic environments and forecast market trends to make better investment choices, operating decisions, and competitive strategies.
Managers use several indicators to assess an economic environment; meaningful indicators include growth rates, income distribution, inflation, unemployment, wages, productivity, debt, and the balance of payments. Managers improve economic analysis by identifying meaningful indicators and then understanding how they interact with each other. 2. What are the implications of the emergence of the BRICs for careers and companies in your country? Responses will vary according to the level of economic development and the economic basis of a student’s home country.
Those students from industrialized nations may feel challenged and express the fear of a decline in their standards of living due to increased pressures in the labor market and the declining cost competitiveness of their countries’ firms. On the other hand, students from developing countries may be hopeful that their countries will be able to successfully generate and/or compete for the investment capital and those business activities that lead to significant economic growth and the increasing global competitiveness of their countries’ firms.
How-ever, there is ample room for exceptions to these feelings, given the present and future comparative advantages of particular nations. 3. Compare and contrast the merits of GNI per capita versus the idea of purchasing power parity, human development, and green economics as indicators of economic potential in Brazil, Russia, China, and India. Gross national income per capita (GNI per capita) represents the market value of all final goods and services newly produced in an economy by a country’s domestically-owned firms in a given year divided by its population.
Thus, GNI per capita serves as a very useful indicator of current individual wealth and consumption patterns; those countries with high populations as well as high per capita GNI are most desirable in terms of total market potential. Purchasing power parity (PPP) represents the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market that one unit of income would buy in another country.
PPP is estimated by calculating the value of a universal “basket of goods” that can be purchased with one unit of a country’s currency and thus serves as a useful indicator of international differences in prices that are not reflected by nominal exchange rates. The Human Development Index measures life expectancy, education (primarily the adult literacy rate), and income per person and is designed to capture long-term progress rather than short-term changes.
Thus, by combining indicators of real purchasing power, education, and health, the index provides a comprehensive measure of a country’s standard of living that incorporates both economic and social variables. Growing concern for the ecological welfare of the world spurs calls for green measures of GNP. Green economics hold that a country’s economy is a component of, and dependent upon, the natural world within which it resides. As such, the standard measures of GDI and GNP are misleading indicators of a country’s long-term economic health and performance.
More specifically, GDP measure of the quantity of market activity without accounting for the social and ecological costs involved results in mismeasureing economic performance. Moreover, ensuring sustainable development requires managers heed the idea that economic activity must ultimately “meets the needs of the present without compromising the ability of future generations to meet their own needs. ” Therefore, green economics calls for a wider view of what qualifies as economic growth and progress in studying a country’s economy.
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