Discuss four economic issues that affect management.
What will be an ideal response?
A global manager must be aware of economic issues when doing business in other countries. First, it's important to understand a country's type of economic system.
a. Type of economy - The two major types of economies are market economies and command economies. A market economy is one in which resources are primarily owned and controlled by the private sector. A command economy is one in which economic decisions are planned by a central government. Managers need to know about a country's economic system because it has the potential to constrain decisions and actions. Other economic issues a manager might need to understand include currency exchange rates, inflation rates, and diverse tax policies.
b. Currency strength - A global firm's profits can vary dramatically depending on the strength of its home currency and the currencies of the countries in which it operates. Any revaluation of a nation's currency can affect the managers' decisions and the level of a company's profits.
c. Inflation - It means that prices for products and services are going up. But it also affects interest rates, exchange rates, the cost of living, and the general confidence in a country's political and economic system. Managers need to monitor inflation trends so that they can make good decisions and anticipate any possible changes in a country's monetary policies.
d. Diverse tax policies - Diverse tax policies are a major worry for a global manager. Some host countries are more restrictive than the organization's home country. Others are far more lenient. Managers need exact information on the various tax rules in countries in which they operate to minimize their business's overall tax obligation.
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