Macroeconomics for Business lecture 6
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工商管理专业MBALectureLecture06共18页
•Consolidation:
•In growing market, company expands with market to maintain share of market •In mature market more difficult challenges, tendency is for emphasis on cost, quality of product or service. Competitors are all seeking to consolidate there positions
Dr Ita O'Donovan Beechgrove Associates
6
Some reasons for unrelated diversification
Possible Advantages
1. Need to use excess cash or safeguard profits
2. Personal values or objectives of powerful figures
– What is the optimal number of businesses for the firm – Should we stay in this business
– How should our businesses be managed – How is the corporation going to operate as a whole
Possible es
1. Control of supplies Quantity Quality
Price 2. Control of markets
3. Access of information
•In growing market, company expands with market to maintain share of market •In mature market more difficult challenges, tendency is for emphasis on cost, quality of product or service. Competitors are all seeking to consolidate there positions
Dr Ita O'Donovan Beechgrove Associates
6
Some reasons for unrelated diversification
Possible Advantages
1. Need to use excess cash or safeguard profits
2. Personal values or objectives of powerful figures
– What is the optimal number of businesses for the firm – Should we stay in this business
– How should our businesses be managed – How is the corporation going to operate as a whole
Possible es
1. Control of supplies Quantity Quality
Price 2. Control of markets
3. Access of information
工商管理专业MBALectureLecture0618页PPT
6. Spreading Risk 7. Resource Utilisation
Avoid overreliance on one product/market, but build on related experience
Under-utilised manufacturer acquires company with compatible products to fill capacity
Strategies continued
•Consolidation
In declining markets; need to consider significant changes e.g. Buying up the order books of those leaving the market, distributors may need to find new suppliers. New internal agreements to main competitive edge. During a transition form a mature to a declining market, they might consider harvesting i.e. gaining maximum pay off from strong position. e.g. Licensing of technology, or distribution rights, or leasing facilities. Difficult decision whether to remain in market where there is product decline but chance of recovery
ECON6002_Macroeconomic Analysis_2010 Semester 1_Lecture 1 Introduction
Table 1.1
ECON6002 Introduction
2
1.1 Fact #1: y levels vary
• Enormous variation in levels of per GDP capita across economies Contrast yUSA ($20,000) & yUganda ($700) Richest countries are at least 20 times richer than the poorest countries
• ensure existence of steady state equilbrium
ECON6002 Introduction 24
4. Mathematical Techniques
• • • • What is a Time Derivative? Product Rule Logarithm Rules Time Derivative of Logarithm gives Percentage Change or Growth rate • Log Difference approximates Growth rate • Dynamic optimization – the Hamiltonian
ECON6002 Introduction 8
Do poor countries grow faster?
ECON6002 Introduction
9
1.3 Fact #3: Sustained Growth is Modern Phenomenon
• The world is substantially richer today than ever before: y1500=$500; y2000=10 x $500 • Sustained economic growth at rates of 2% per year is just as much a modern invention as is electricity or the transistor radio
Macroeconomics for Business lecture 5
Sri Lanka p e rce n tag e
20
Domestic Savings/GDP
Real deposit rate
15
10
5
0
1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
Economic growth
11
Composition of financing (1981-2002)
percentage of total
90
80
70
60
50
N on-m arket
Foreign investment
Domestic loans
40
30
20
10
0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
-5
Economic growth
14
Growth and inflation (1979-2002)
percentage
25.0 20.0
GDP grow th (right axis) R2 = 0.3
GRPI change
15.0
10.0
5.0
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
Economic growth
23
Fluctuations in economic growth and external impulses
percentage percentage
工商管理专业MBALectureLecture06
Strategies Continued
Market Penetration: how easy this is depends on nature of the market and position of competitors. In general easier in growing markets, than static markets or mature markets.
Examples /Comments
Tea Processors own plantations to secure continuity of Supply. Components for motor cars may need to be manufactured by the company Printing facility can be cheaper in -house
Dr Ita O'Donovan Beechgrove Associates
6
Some reasons for unrelated diversification
Possible Advantages
1. Need to use excess cash or safeguard profits
2. Personal values or objectives of powerful figures
Dr Ita O'Donovan Beechgrove Associates
4
Related developments; related and unrelated diversification
Dr Ita O'Donovan Beechgrove Ass for related Diversification
Macroeconomics for Business lecture 4
• Switch to manufacturing (1)
• Curbing financial sector(2)
• Welfare/basic needs (3) • Food security (4) • Indigenous technology
base (5)
Pre-condition of growth
• If this is so, productivity in both countries is increased
8
Output growth and factors of production
Utilisation of factors
Output
Productivity of factors
2
Neoclassicals on causes of growth
• Long run (1) • Short run (2)
3
Neoclassicals on sources of longrun growth or development
General
• Changes in the institutional environment (1)
15
Structuralists on sources of economic growth and development (1)
Long run
Economic factors
• Institutional (2) • Increases in inputs in the production process (3) • Factor productivity • Stability (4)
11
Lecture_6
• The IS-LM model includes
3
Structure of the IS-LM Model
4
The Goods Market and the IS Curve
•
The IS curve shows combinations of interest rates and levels of output such that planned spending equals income
I I bi
The investment schedule is determined by b and I
If the investment is highly
responsive to i, then b is large, and the investment schedule is almost flat.
5
Investment and the Interest Rate
• The investment spending
I I bi
function can be specified as:
• b > 0, which tell how
responsive the investment is to interest rate, and, • I is the autonomous investment spending
2
Introduction
• The figure shows the
growth rate of output and money supply (U.S. data) link between money and output growth.
宏观经济管理学与财务知识分析英文版PPT66页egqn
17
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Figure 5.5 - U.S. Measured Economic Growth: Real GDP per Worker 1995 Prices,
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Looking Back into Deep Time
• Up until 1500, there had been almost zero growth of output per worker
Questions
• What policies can make economic growth faster?
• What are the prospects for successful and rapid economic development in tomorrow’s world?
2
7
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Demographic Transition
• As material standards of living rise far above subsistence, countries undergo a demographic transition
• Why are some nations so (relatively) rich and other nations so (relatively) poor?
Macroeconomics for Business lecture 3
Agg Price
AD
Aggregate Output
5
The shift of the AD curve: Neoclassical explanations
Agg Price
• Changes in money stock (1)
• Changes in the rate of interest (2)
Agg Price
A rise in the aggregate price level leads to a rise in interest rates, a fall in investment and, therefore, AD
AD
Aggregate Output
11
The shift of the AD curve: Keynesian explanations
Aggregate Price
Full employment
AS
Aggregate Output
13
Price = Cost
Mark-up pricing
ATC + mark-up
P’
ATC
Aቤተ መጻሕፍቲ ባይዱC
AVC
80% 100%
Quantity
14
The shift of capacity output: Keynesian explanations
12
The AS curve: Keynesian explanations
• Constant or even decreasing costs (see next slide)
• Less than full employment normal operating levels for the economy
Macroeconomics for Business lecture 2
S=I
Circular flow analysis
7
Circular flow of income
GOODS MKTS Total Final Expenditure on Goods and Services
Business
Total output of final goods and services
• A rise in aggregate money expenditure will lead to inflation and a deterioration of the BoP (2)
• A rise in aggregate money expenditure is principally due to an increase in the money supply (and a fall in interest rates) (3)
• Expenditure on consumption and investment goods (C+I) (1)
• Net government expenditure (G-T) • Net foreign spending on exports (X-M)
C + I + (G-T) + (X-M)
Business Inv. Exp
Lending for Inv est ment
MONEY MKTS Financial Institutions
Net taxes
Government Exp.
Ot her Count ries
M oney
Government
Saving
Net Taxes
Households
Circular flow analysis
7
Circular flow of income
GOODS MKTS Total Final Expenditure on Goods and Services
Business
Total output of final goods and services
• A rise in aggregate money expenditure will lead to inflation and a deterioration of the BoP (2)
• A rise in aggregate money expenditure is principally due to an increase in the money supply (and a fall in interest rates) (3)
• Expenditure on consumption and investment goods (C+I) (1)
• Net government expenditure (G-T) • Net foreign spending on exports (X-M)
C + I + (G-T) + (X-M)
Business Inv. Exp
Lending for Inv est ment
MONEY MKTS Financial Institutions
Net taxes
Government Exp.
Ot her Count ries
M oney
Government
Saving
Net Taxes
Households
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Demand factors (2)
• Budget deficit • Foreign exchange inflows
9
Inflation in DMEs (1)
• Rising imported costs – also due to fall in the exchange rate
• Rising food and other basic consumer goods prices
• The shift of deficit financing to money market sources has been detrimental to LDCs (5)
• The shift of deficit financing to foreign money market sources has been nothing short of catastrophic for many LDCs (6)
6
Aggregate Price
Back to the AD/AS framework
AS
P2 P1
AD’ AD
Aggregate Output
7
Inflation in DMEs
• Inflation in DMEs is due to excessive government expenditure
• Structural bottlenecks/changes causing prices of key goods or services to rise, e.g., power, transport, energy, telecommunications, water, etc.(2)
• Massive, unavoidable, budget deficits
Macroeconomics for Business
Lecture 6: Inflation
• Definition and measure of inflation • Theories of inflation
Meaning of inflation
• Inflation = increase in the general level of all prices of goods and services in an economy
• Surges in export earnings
10
Money supply changes and deficit financing
• Typically money stock adjusts to money demand in the system (1)(2)
• Funding the deficit from captive sources will not be inflationary and not cause interest rates to rise (3)(4)
11
Back to the AD/AS framework
Full employment
Aggregate Price
P4
AD’
P3
P2
AD
AS’
P1
AS
Aggregate Output
12
3
Measures of inflation
• Consumer price index (CPI) • Wholesale price index (WPI) or
producer price index (PPI) • Cost of production index • Implicit GDP deflator (GDPD)
• Government’s in DMEs often have little choice but to print money to finance large but deficit because;
➢ Borrowing from the public is limited ➢ Borrowing from international sources can
be risky
8
Standard பைடு நூலகம்eynesian inflation theory (1)
Cost factors
• Domestic (food, energy, etc) • Imported (raw materials, capital goods,
etc and exchange rate)
4
Who should care about inflation and why?
• Individuals – standards of living • Businesses – correct pricing decisions,
interest rate movements, government policy, etc. • Government – popularity
5
Standard Neoclassical inflation theory
• Inflation is caused by an excessive creation of money by the government
• Increases in money stock are typically the result of increases in the budget deficit
• Rate of inflation = the rate of change in the general level of prices over a given period – usually a year
2
Types of inflation
• Consumer inflation • Cost inflation • Economy-wide inflation
• Budget deficit • Foreign exchange inflows
9
Inflation in DMEs (1)
• Rising imported costs – also due to fall in the exchange rate
• Rising food and other basic consumer goods prices
• The shift of deficit financing to money market sources has been detrimental to LDCs (5)
• The shift of deficit financing to foreign money market sources has been nothing short of catastrophic for many LDCs (6)
6
Aggregate Price
Back to the AD/AS framework
AS
P2 P1
AD’ AD
Aggregate Output
7
Inflation in DMEs
• Inflation in DMEs is due to excessive government expenditure
• Structural bottlenecks/changes causing prices of key goods or services to rise, e.g., power, transport, energy, telecommunications, water, etc.(2)
• Massive, unavoidable, budget deficits
Macroeconomics for Business
Lecture 6: Inflation
• Definition and measure of inflation • Theories of inflation
Meaning of inflation
• Inflation = increase in the general level of all prices of goods and services in an economy
• Surges in export earnings
10
Money supply changes and deficit financing
• Typically money stock adjusts to money demand in the system (1)(2)
• Funding the deficit from captive sources will not be inflationary and not cause interest rates to rise (3)(4)
11
Back to the AD/AS framework
Full employment
Aggregate Price
P4
AD’
P3
P2
AD
AS’
P1
AS
Aggregate Output
12
3
Measures of inflation
• Consumer price index (CPI) • Wholesale price index (WPI) or
producer price index (PPI) • Cost of production index • Implicit GDP deflator (GDPD)
• Government’s in DMEs often have little choice but to print money to finance large but deficit because;
➢ Borrowing from the public is limited ➢ Borrowing from international sources can
be risky
8
Standard பைடு நூலகம்eynesian inflation theory (1)
Cost factors
• Domestic (food, energy, etc) • Imported (raw materials, capital goods,
etc and exchange rate)
4
Who should care about inflation and why?
• Individuals – standards of living • Businesses – correct pricing decisions,
interest rate movements, government policy, etc. • Government – popularity
5
Standard Neoclassical inflation theory
• Inflation is caused by an excessive creation of money by the government
• Increases in money stock are typically the result of increases in the budget deficit
• Rate of inflation = the rate of change in the general level of prices over a given period – usually a year
2
Types of inflation
• Consumer inflation • Cost inflation • Economy-wide inflation