Question

If you are a manufacturer of toys interested in beginning export operations, which economic indicators would you choose to analyze country opportunities? How would these indicators change if you were considering building a computer manufacturing and assembly plant overseas?

Answer 1

Answer- Economic indicators help to analyse the impact of future decisions that the firm might take before investing into some project. Economic indicators help to inderstand the economic health of a nation and is of tremendous help when planning for company’s long term plan. Following economic indicators I would consider before making the decision of export-

• GDP- It refers to the final production of goods and services in a country and helps to analyse how country’s economy is doing. When considering GDP otter factors that are related with it will also be considered like investment spending, Government expenditure, Consumption, net exports etc. By this we can observe if the country relies more on exports or imports and how is it’s economic structure ie., weak or strong.

• Interest rate- Since exporting requires some funds to setup to business and hence it is important to consider the interest rates. It will help to analyse if taken a loan from that country will be beneficial or not. Also by interest rates we can get an idea of money supply in the economy. This will help us understand the consumption and expenditure of the consumers.

•Unemployment rate- This is considered to be an inportant factor since in case of manufacturing or direct sales promotion the requirement of people is a must. If the unemployment rate is high the labor will be cheap as the demand for jobs will be high. So availablility of cheap labor will be beneficial as it will help reduce the production costs.

• Consumer price index- It will help to understand and analyse the inflationatory changes that may happen in the economy. Since indlation is an important factor as many price decisions are based on it. It will be a good indicator as it will tell about the rising prices in the economy.

•Leading and lagging- In this the leading indicator helps to analyse the future changes that may happen in the economy and the lagging helps to analyse the changes that have already occurred in the economy.

The above mentioned indicators are the most important among all the indicators and hence will be focused more.

These indicatirs would nit change much and some new indicators will added depending on the type of business one is planning. In case of of computer manufacturing and assembly plant the most important factors will be-

-Availability of cheap labor

- Lower transportation costs

- Stable legal and political setup etc.

For setting up a computer manufacturing and assembly plant the above things are very important as most of the work to do is manual and thus requires other evonomic factors to be considered. Following are some factors to be considered when making this decision-

• Currency strength- The strenth of the currency would help to analyse if the labor would be cheap or will be expensive and thus it helps to predict the future costs.

• Income and wages- The laws regarding income and wages should be considered and also laws for the minimum wage. It helps to prodict the production costs and see if it is not higher than expected.