Question

Explain the differences between developed countries, newly industrialized countries, and less developed countries. What areas of opportunity need to be measured and analyzed within each of these countries before investing and establishing a multinational corporation? What do measures like Human Development Index tell us about a country’s place along the development continuum?

Answer 1

“Nations are commonly classified as being developed, newly industrialized, or developing based on quantifiable economic measure”. Less developed countries are considered third world countries which are still undergoing the beginning of industrialization, and as a result they have low per capita income levels and poor infrastructures. Developed countries have an established economy that is very industrialized; as a result, they enjoy a high per capita income. Their industrial activities are highly efficient, and their people enjoy a high quality of life. Newly industrialized countries (NICs) have recently transitioned into a more urban economy by increasing their national production and exports from their industrial operations. Thus, allowing them to break away from an agriculturally based economy. This enhances their economic stability and oftentimes puts them somewhere in between the less developed and highly developed classifications.

Before investing and establishing a multinational corporation within each of these countries, there are several areas of opportunity that should be measured and analyzed. One system of measure is national production, most often classified as gross domestic product (GDP) or gross national product (GNP). These figures are used to determine if a country’s population can afford to begin purchasing its products. A second system of measure is the countries Purchasing Power Parity (PPP), which accounts for the cost of living in that country relative to another country when purchasing every day items. This helps a company understand the true value of the currency in its home country.

A third system of measure is the Human Development Index (HDI). Measures such as the Human Development Index look beyond the financial wealth of a country, and show us “that high national income alone does not guarantee human progress” . It measures the extent to which the government fairly provides its people with an education, decent standard of living, and the prospect of a long and healthy life. Factors such as physical health, safety, life expectancy, education and literacy are important indicators of a country’s ability to continue to develop.