The Brics

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CHAPTER FOUR
THE ECONOMIC ENVIRONMENT

OBJECTIVES

• To appreciate the importance of the economic analysis of foreign markets
• To identify the major dimensions of international economic analysis
• To compare and contrast the economic indicators of countries
• To profile the characteristics of the types of economic systems
• To discuss the idea of economic freedom
• To profile the idea, drivers, and constraints of economic transition

CHAPTER OVERVIEW

When companies source, manufacture, and/or market products in foreign countries, they encounter fascinating and often challenging economic environments. Chapter Four first explores the economic environments of countries in which an MNE might want to operate by discussing the importance of economic analysis and identifying the major dimensions of that process. It then compares and contrasts key macroeconomic indicators, such as economic growth, inflation, and the surpluses and deficits reflected in the balance of payments. Finally, it reviews the characteristics of the major types of economic systems, explores the principles of economic freedom, and concludes by examining the idea, the drivers, and the constraints associated with the transition from a centrally-planned to a market-based economy.

CHAPTER OUTLINE

OPENING CASE: MCDONALD’S AND RUSSIA’S ECONOMIC TRANSITION [See Map 4.1.]
This case exemplifies the extraordinary challenges of operating in a transition economy. In fascinating detail it explains how, despite enormous start-up costs and difficulties, McDonald’s has managed to succeed in Russia since finally opening its first Moscow restaurant in 1991. Currently McDonald’s employs 17,000 people at 127 restaurants located in 37 Russian cities. In fact, Russia has become its fifth most profitable market in Europe. Along the way, various transition crises in the…...

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