ISSUES IN TRANSITIONAL ECONOMIES

1
ISSUES IN TRANSITIONAL ECONOMIES

• CEITs, REFORMS AND PROGRESS

2
Economic Factors International Businesses Must
Address

• Inflation
• Government Deficits
• External Debt
• Internal Debt
• Privatization
• Balance of Payments

4-17
3
Issues in Transition Economies
Economic Inflation, Economic
Instability, Infrastructure Privatization,
Property rights, Currency convertibility Social
Lack of managerial knowledge, entrepreneurial
skills Finding reliable partners Law
and order Political Uncertainty
4
Issues in Transition Economies

• Motivation of CEITs
• Some want to become market economies
• Make reforms w/in a central planning system
• Status quo
• Geographic and Political Positioning in relation
  to central planning system
• Hyper
• Normal
• Marginal

5
McDonalds in Russia

• What are the challenges to internationalization
  that McDonalds felt in Russia?
• Which of these are particular to transitional
  economies?
• Does McDonalds represent the same thing to
  Russian consumers as it does to Americans?
• Are there positive or negative recontextualization
  s?

6
Reforms and Economic Progress the Vicious Circle
Figure 4.3 - 1
7
Reforms and Economic Progress the Virtuous
Circle (the goal)
Figure 4.3 - 2
8
GNI can be an inadequate indicator of wealth

• Purchasing Power Parity is the number of units of
  a countrys currency required to buy the same
  amounts of goods and services in the country that
  1 would buy in the United States
• PPP is a useful measure since it accounts for
  international differences in price
• Example China has a higher PPP than Japan

9
Chapter Review

• Learn differences among the worlds major
  economic systems
• Learn criteria for dividing countries into
  economic categories
• Discuss economic issues that influence
  international business
• Assess the transition process for market
  economies