Leveraging Data to Inform Business Decisions
The problem of the relationship between business, government, and the economy is today at the center of public attention and scientific discussions. There are different variants of relations between businesses and governments of different states. In any case, the state creates the conditions for the development of the economy and private entrepreneurship and sets the parameters for the influence of entrepreneurs on social life. Thus, it is natural and logical to consider the state policy and the economic situation in the country in the process of forming a business.
Collecting and Analyzing Key Market Data
Economic Factors
If one wants to create a new business or expand an existing one, one should consider the country’s economic and political perspectives. Economic factors related to goods, services, and money play a significant role in decision-making and business management (Classifying world economies, 2023). One must consider the various economic blocks to study the country’s production and income level, and, at the same time, understand the country’s potential for developing business in it.
For this, along with the level of gross domestic product (GDP), the categories of purchasing power parity (PPP), human development index (HDI), and gender development index (GDI) are essential (Classifying world economies, 2023). In addition, with society’s development, countries’ development also occurs. The economic blocks identified above may change, so following the current economic and political development picture is essential.
Political Factors
In addition to the economic situation, business organizations can be significantly influenced by the political environment of the country, which can interfere in many ways. It can make it easier to expand the business, increase the risk of failure, and cause severe losses, so to develop a business, it must be understood that different political factors can affect the results. On the other hand, businesses can also influence government policy at the local or federal level.
In general, companies must be prepared to deal with the results of local and international politics (Political and legal factors, 2023). Governments have key policy areas through which they can influence businesses, such as subsidies, tariffs, quotas, exchange controls, and more (Palumbo & Nicolaci da Costa, 2019). In addition, governments may intervene in the market to protect the country’s economy or develop cultural, social, economic, and political structures.
Political stability is essential for the government’s efforts to attract investment from others. Suppose the political system adopted in the country hinders the development of business and its conduct in general. In that case, the business will most likely not be successful in this country (Political and legal factors, 2023). Theoretically, the risk for business development can be in any country, but some countries have more favorable ways to enter the market and a more stable business environment.
Assessment Factors and Their Role
- The political system helps businesses understand a country’s political and government structure.
- Economic classification allows one to determine the country’s economic development level: low, medium, or high income.
- The economic blocks that affect trade rates display a country’s trade agreements, which allow it to highlight the advantages and disadvantages of the trading system and calculate those that can make it easier to do business with other countries.
- The gross domestic product can be calculated as the total income of citizens, companies, and the state for a specific period.
- Purchasing power parity is the ratio between two currencies, equalizing their purchasing power with respect to a fixed set of goods and services.
- Gross domestic product per capita reflects the state of a country’s economy relative to its citizens.
Table 1. Comparison of countries by indices (World Bank Open Data, 2023)
Evaluating Market Suitability and Strategic Priorities
Based on the data, Germany ranks as the most suitable country for business development, China as the second most suitable, and Mexico as the least suitable country for expansion.
Germany
Germany was chosen as the primary market because the country has a favorable political structure for development. In addition, Germany has the highest Human Development Index, 0.9, and China and Mexico have 0.77 and 0.78, respectively (Human Development Index, n.d.). It speaks of a high culture that considers employees’ standard of living. In addition, the German trade blocs and the country’s membership in the European Union also represent significant business advantages. That will take advantage of the German market and develop the potential for supply to various EU countries and those with trade agreements with it.
China
China has become the second country in the world for business development, mainly because of its political system, which makes it difficult to enter the market. Despite the highest GDP, China has a different political system, a socialist market, which can be more challenging to work with than Germany, where everything is based on democracy. However, with a successful entry into the market, a country also opens up many opportunities for expanding and distributing products in different countries.
Mexico
Mexico is currently the least suitable country for expansion as it has the lowest GDP, and its economy is still growing. A low GDP and GDP per capita mean that residents cannot always afford what is on the market, so expanding business in Mexico has high risks. In addition, the country’s economic blocs and political system can make doing business in a foreign market difficult.
References
Classifying world economies. (2023).
Human development index. Country Economy. (n.d.). Web.
Palumbo, D., & Nicolaci da Costa, A. (2019). Trade war: US-China Trade Battle in charts. BBC. Web.
Political and legal factors that impact international trade. (2023).
World Bank Open Data. The World Bank. (2023). Web.