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Impact of economic change on international business

Overview[ edit ] An economic impact analysis attempts to measure or estimate the change in economic activity in a specified regioncaused by a specific business, organization, policy, program, project, activity, or other economic event. Types of Economic Impacts[ edit ] Economic impact analyses often estimate multiple types of impacts.

Economic impact analysis

An output impact is the total increase in business sales revenue. In turn, local businesses use some of this new revenue to pay for goods and services outside of the study region, so the output impact is not synonymous with local business profits. This impact estimates the increase in local employee wages plus local business profits not total revenue, like the output impact. However, the value added impact may overstate local profits when they are transferred overseas such as in the form of dividends or investments in foreign facilities.

This is a measure of the economic impact on just personal incomes, not business revenues or profits. A similar measure is the employment impact, which measures the increase in the number of total employees in the local region.

  • Each impact can be decomposed into different components, depending on the effect that caused the impact;
  • The United States Department of Energy economic impact model is one example of this type of application;
  • Alternatively, a low-cost, open local economy may make it feasible to create your own local distribution network.

Instead of measuring the economic impact in terms of money, this measure presents the impact on the number of jobs in the region. Each impact can be decomposed into different components, depending on the effect that caused the impact.

  1. This includes money spent to pay for salaries, supplies, raw materials, and operating expenses.
  2. These are more complex econometric and general equilibrium models. Production Carrying out production locally is one way to reduce costs and limit the influence of international economic factors on your operations.
  3. Businesses initially benefiting from the direct effects will subsequently increase spending at other local businesses. An economic impact analysis may also be performed to help calculate the benefits as part of a cost-benefit analysis.
  4. However, the value added impact may overstate local profits when they are transferred overseas such as in the form of dividends or investments in foreign facilities.

Direct effects are the results of the money initially spent in the study region by the business or organization being studied. This includes money spent to pay for salaries, supplies, raw materials, and operating expenses. Indirect effects are the results of business-to-business transactions indirectly caused by the direct effects.

Businesses initially benefiting from the direct effects will subsequently increase spending at other local businesses.

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The indirect effect is a measure of this increase in business-to-business activity not including the initial round of spending, which is included in the direct effects. Businesses experiencing increased revenue from the direct and indirect effects will subsequently increase payroll expenditures by hiring more employees, increasing payroll hours, raising salaries, etc. Households will, in turn, increase spending at local businesses.

The induced effect is a measure of this increase in household-to-business activity. Finally, dynamic effects are caused by geographic shifts over time in populations and businesses. These models rely on inter-industry data to determine how effects in one industry will impact other sectors.

  • For some markets, it makes economic sense to market your products via direct sales, either through local representatives or via online sales;
  • Some social impacts that affect a region's quality of life , such as safety and pollution, may be analyzed as part of a social impact assessment , but not an economic impact analysis, even if the economic value of those factors could be quantified;
  • Several transportation agencies, including the Transportation Research Board [7] and US Department of Transportation , [8] [9] publish guides, standards, and techniques for utilizing economic impact analyses in transportation planning projects;
  • These models rely on inter-industry data to determine how effects in one industry will impact other sectors;
  • For international marketing, the economics of the target market as well as the international economy affect your marketing strategy;
  • The channel you choose for your marketing initiatives depends on the economics of delivering the goods to market and the local economic situation.

Based on this data, multipliers are calculated and used to estimate economic impacts. These are more complex econometric and general equilibrium models. An economic impact analysis only covers specific types of economic activity.

Some social impacts that affect a region's quality of lifesuch as safety and pollution, may be analyzed as part of a social impact assessmentbut not an economic impact analysis, even if the economic value of those factors could be quantified. An economic impact analysis may also be performed to help calculate the benefits as part of a cost-benefit analysis.

The Impact of Economics on International Marketing

Several transportation agencies, including the Transportation Research Board [7] and US Department of Transportation[8] [9] publish guides, standards, and techniques for utilizing economic impact analyses in transportation planning projects. Economic impact analyses are often used to examine the consequences of economic development projects and efforts, such as real estate development, business openings and closures, and site selection projects.

  1. A product you market as environmentally-friendly may not be relevant in a subsistence economy.
  2. These models rely on inter-industry data to determine how effects in one industry will impact other sectors.
  3. Product Your international marketing of goods may be successful in western economies that have a similar economic structure to the United States, but it will fail in developing markets unless you make adjustments.
  4. Price Whether an international market is accessible to your company depends on whether you can offer your products at a competitive local price. If establishing a local presence is costly, you may opt for partnering with a local or international distributor who already has experience in the target market.
  5. Alternatively, a low-cost, open local economy may make it feasible to create your own local distribution network. Some social impacts that affect a region's quality of life , such as safety and pollution, may be analyzed as part of a social impact assessment , but not an economic impact analysis, even if the economic value of those factors could be quantified.

The United States Department of Energy economic impact model is one example of this type of application. It can be useful with lobbyingmedia relations, and community outreach efforts.