Four major global environmental factors that affect management?

Answer 1

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. Why would 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. For instance, China's revaluation of the yuan in the summer of 2005 was cheered by General Motors even though a stronger yuan could raise the costs of Chinese-made parts that GM buys. Why would GM be happy about higher costs? Because a rising Chinese yuan could also lead to a stronger Japanese yen, which could hurt rival Toyota Motor Corporation. Any revaluation of a nation's currency can affect managers' decisions and the level of a company's profits. c. Inflation-inflation 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. In most developing countries, consumer prices are rising more slowly than they were in the late 1990s, although inflation rates can, and do, vary widely. The World Factbook shows country inflation rates ranging from a negative 3.6 percent (Nauru) to a whopping positive 246 percent (Zimbabwe). Managers need to monitor inflation trends so 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. About the only certainty is that tax rules differ from country to country. Managers need exact information on the various tax rules in countries in which they operate to minimize their business's overall tax obligation.