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Global Economic and Business Trends I

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GLOBAL ECONOMIC AND BUSINESS TRENDS I

A MODEL FOR ANALYSING THE BUSINESS ENVIRONMENT

* PEST MODEL
Business environment facing all firms in an industry or sector * political trends * economic trends * social & demographic trends * technological trends
PESTEL: PEST + environmental, legal

EXAMPLES: innovation driven
UK Aero engines Oil extraction F1
Japan IT /computers Consumer electonics
Germany Cars Capital goods
Russia Defence Space exploration
China Consumer electronics THE WORLD ECONOMY: increasing inter-dependence
MEASURES OF ECONOMIC ACTIVITY
GDP is best measure of the output of an economy
Gross National Product (GNP)
Value of goods and services by national producers at home and abroad
Gross Domestic Product (GDP)
Value of goods and services by all producers (domestic and foreign) within national boundary

ECONOMIC TRENDS: 2 ASPECTS * Growth rates (%) * Levels of economic activity (GNP or GNP per capita) * ie size of economy

SOME DEMOGRAPHIC TRENDS
World population forecast to grow +38% 6.8 bn (2009) to 9.3bn by 2050
75m growth pa, all in developing world
Developed countries static or declining: ageing population, low birth rate
China (1,350 m) and India (1,200m) represent 37% of world population
But.. potential driver for growth in world economy and living standards
Pocket World in Figures, 2012 Edition, The Economist

SOME DEMOGRAPHIC TRENDS
World GNP +220% to 2050 (PwC, PPP, 2009 $)
Twice as many speak Mandarin as English
Implies on-going growth opportunities for international businesses
“World food production will need to double by 2025 to feed world population”
UN Food Programme

WORLD INCOME (GNP) * Developed nations dominate + China * Asian tigers small * Rest of world relatively undeveloped
In more detail…..

WORLD GNP AND POPULATION 2008 % GNP % POPULATION EU 23% 5%
NAFTA 26% 5%
JAPAN 8% 2% 67% 12%
ASIAN TIGERS 4% 3%
CHINA 7% 20%
OTHER 22 % 65% 33% 88% Source: The World in Figures, 2011 Edition, The Economist

WORLD GNP: TOP 12/ Major growth in next 20/25 years * Same major players + China but .. * S Korea, Thailand and India emerge * Within Europe .. UK growth outperforms Eurozone

CONCLUSIONS: SOME COMPARISONS
2008 GNP/capita ($, current purchasing power parities)
Top performers
Luxembourg 78,900 Norway 58,700
USA 46,400 Switzerland 42,400
Medium performers
Japan 34,100 France 33,100
Denmark 37,000 Australia 38,900
Austria 37,900 UK 35,500
Canada 39,100 Italy 31,300
Germany 35,400 Ireland 41,900
Netherlands 41,000 Spain 31,700 The World in Figures, 2011 Edition, The Economist

CONCLUSIONS: GDP PER CAPITA
A useful measure of national wealth and economic activity * Eurozone & UK are similar but .. mostly behind USA, Canada, Australia * Japan, Germany lose historical lead * Some UK improvement in recent years * 2008-2010 economic downturn likely to see some Eurozone economies fall down rankings

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