Opportunities and Threats
Economic Environment
The level of economic development varies considerably, ranging from countries where everyday survival is a struggle, such as Sudan and Eritrea, to countries that are highly developed, such as Switzerland and Japan. In general, complex, sophisticated industries are found in developed countries, and more basic industries are found in less developed nations. Average family incomes are higher in the more developed countries than in the least-developed markets. Larger incomes mean greater purchasing power and demand, not only for consumer goods and services but also for the machinery and workers required to produce consumer goods. (Figure) provides a glimpse of global wealth.
Business opportunities are usually better in countries that have an economic infrastructure in place. Infrastructure is the basic institutions and public facilities upon which an economy's development depends. When we think about how our own economy works, we tend to take our infrastructure for granted. It includes the money and banking system that provide the major investment loans to our nation's businesses; the educational system that turns out the incredible varieties of skills and basic research that actually run our nation's production lines; the extensive transportation and communications systems – interstate highways, railroads, airports, canals, telephones, internet sites, postal systems, and television stations – that link almost every piece of our geography into one market; the energy system that powers our factories; and, of course, the market system itself, which brings our nation's goods and services into our homes and businesses.
| Where the Money Is | |
|---|---|
| The Top 20 | Gross National Income Per Capita* US$ |
| *Gross National Income is the value of the final goods and services produced by a country (Gross Domestic Product) together with its income received from other countries (such as interest and dividends) less similar payments made to other countries. | |
| Final goods are the goods ultimately consumed rather than used in the production of another good. For example, a car sold to a consumer is a final good; the components, such as tires sold to the car manufacturer, are not. They are intermediate goods used to make the final good. The same tires, if sold to a consumer, would be a final good. | |
| Luxembourg | 103,199 |
| Switzerland | 79,243 |
| Norway | 70,392 |
| Ireland | 62,562 |
| Qatar | 60,787 |
| Iceland | 59,629 |
| United States | 57,436 |
| Denmark | 53,744 |
| Singapore | 52,961 |
| Australia | 51,850 |
| Sweden | 51,165 |
| San Marino | 46,447 |
| Netherlands | 45,283 |
| Austria | 44,498 |
| Finland | 43,169 |
| Canada | 42,210 |
| Germany | 41,902 |
| Belgium | 41,283 |
| United Kingdom | 40,096 |
| Japan | 38,912 |
| The Bottom Five | |
| Madagascar | 391 |
| Central African Republic | 364 |
| Burundi | 325 |
| Malawi | 295 |
| South Sudan | 233 |
- Explain how political factors can affect international trade.
- Describe several cultural factors that a company involved in international trade should consider.
- How can economic conditions affect trade opportunities?