Category: Economics 2707

Fair Chocolate Trade

More than half of the global cocoa supply comes from the Ivory Coast. Moreover, it is estimated that 500,000 children exercise labor to support the market demands on the market. The practice is illegal and unethical, so specific measures can be implemented on an international, national, and consumer level. On the one hand, various countries can impose trade restrictions on the Ivory Coast due to the governments inability to control who enters the workforce and which conditions are put in place for workers (Geringer, McNett, Minor, & Ball, 2016). However, the measure will result in a major economic downfall in the region already experiencing financial problems. The international community can also implement quantitative barriers in regard to the numeric limit of goods that can be exported from said region.

On a national level, the government can ensure fair competition and the protection of workers by implementing a set of strict policies. Thus, by ensuring competition in the market, employers would not have to resort to using child labor due to the low costs correlating with this tactic. On a consumer level, individuals can be more mindful of the products they purchase. I support all implementations because they are evidence-based and centered around ethical business practices, with the exception of international restrictions, which would negatively affect the Ivory Coast population as a whole.

European Union General Data

The European Union General Data Protection Regulation has been implemented to protect the data correlating with the residents of the EU countries. Thus, it does not imply that the regulation protects US citizens. However, a concept that links the two elements is the extraterritorial application of laws (Geringer, McNett, Minor, & Ball, 2016). Thus, a European Union resident who resides in the US or works for a company from the States is still protected under the law. As a result, it can be stated that implications exist regarding the regulation being valid in US businesses if the employees are from a country that is a member of the EU.

Extraterritoriality is a term highlighting the privilege of being exempt from a particular jurisdiction despite it being territorially applicable due to the fact that they are citizens of different countries. The notion should be allowed concerning EU regulations being applied to EU citizens abroad as it ensures the protection of rights, especially in regions in which such concepts are not the primary concern of those governments. As a result, US regulations should also apply to Americans residing in different countries.

Best Ways to Measure a Nations Development

A nations development can be assessed in two main ways: by considering the economy and by considering the people. In regards to the economy, researchers suggest determining the gross national income, hence, the value generated by all the residents of the country (Geringer, McNett, Minor, & Ball, 2016). Needless to say, it also requires consideration in the informal economy, which is relatively difficult to measure in certain countries where the field is a predominant economic driver. However, factors such as inflation and income distribution are not considered when focusing on the countrys income. Hence, an effective way of measurement of development is through the assessment of ones quality of life. For example, the Human development index can be applied.

Chinas Future Economic Recovery

Chinese consumers are becoming more potent in regards to distributing their expenses and spending more finances on different segments. On the one hand, it is inevitable that the financial recovery can be attributed to the growing gross national income and the fact that the national economy is developing. Moreover, consumers have more access to disposable income, which is shared between acquiring non-essential and essential goods (Geringer, McNett, Minor, & Ball, 2016). Regarding socioeconomic and economic elements contributing to the development of the financial sector of the country, globalization of trends for younger people and the overall improvement in income, precisely disposable income, are to be considered.

References

Geringer, J. M., McNett, J. M., Minor, M., & Ball, D. A. (2016). International Business. New York, NY: McGraw-Hill Education.

Summary of the Article

The article focused on the study of the modern achievements of regional integration and different aspects of foreign direct investments in South Asia. In the article, Aggarwal (2008) tries to explain the problems influencing the consolidation of international business in the region. Some of the barriers to international trade comprise political movements, unresolved bottlenecks, mutual mistrusts, and narrow nationalisms (Aggarwal, 2008). The hypothesis of the study is based on the success of the India-Sri Lanka FTA as one of the major global economic development tools. One of the investment solutions in the region is the use of the SAARC Development Bank and SAARC University to help in managing the trade barriers in the region. SAARC developments are believed to promote the corporation of the region through cross-border investments and enhancement of foreign direct investments in the form of MNCs (Aggarwal, 2008). The findings of the study reveal that foreign direct investments have an impact on the RTAs of the region.

Discussion of the Article

From the introduction, it is regional trade agreements (RTAs) in South Asia have been undergoing transformations through WTO/ GATT with the objective of resolving the international trade issues in the region. Some of the barriers to regional trade in the region comprise factors like political, rigid labor laws and trade unions, restrictions on cross-border movement (VISA), restrictions on foreign investments, and structural barriers (Barrell & Nahhas, 2018). Studies from other regions show that the FDI has a positive impact on the regional trade agreement. The FDIs in the region help to explore some of the constraints which are addressed through economic interaction.

The study also focused on some of the trends in FDI, such as FDI inflows and outflows. The FD inflows have a significant impact on the capital requirement for investment. From the findings, the government has a significant impact on the FDIs. The article has also highlighted some of the benefits of FDIs by viewing the economic growth of India and other Asian countries.

How is the Article Applied to the Weeks Readings?

The article has a positive correlation with the learning materials for this week. The learning covered the regional trade blocks by highlighting how the GATT and WTO can be utilized in reducing trade barriers. From the study, it is clear that Asian countries have been using GATT and WTO to control the RTAs in the region. The establishment of common markets in the region helps in the reduction of FDI restrictions (Barrell & Nahhas, 2018). Some of the levels of economic integration that can promote FDI and global trade rely on the political and economic union. The study shows that Asian countries embraced this through the establishment of the SAARC development bank.

Some of the trends in the FDI contributing to global economic development comprise the outflows, inflows, and stock of the FDI. The FDI stocks involve the aspect of investing in assets that are owned by foreign companies (Iammarino, 2018). Outflows in the FDI are associated with investments in foreign countries. For instance, the parent company in the USA, that is, Coca Cola can open subsidiaries in other countries like Germany (Iammarino, 2018). Arguably, with FDI inflows, the government allows foreign investors to venture their investments into a country. This is mainly being mainly done by removing the restriction on trade barriers, tariffs, and taxation.

References

Aggarwal, A. (2008). Regional Economic Integration and FDI in South Asia : Prospects and Problems. Www.econstor.eu. Web.

Barrell, R., & Nahhas, A. (2018). Economic integration and bilateral FDI stocks: the impacts of NAFTA and the EU. Web.

Iammarino, S. (2018). FDI and regional development policy. Journal of International Business Policy, 1(3-4), 157183.

Demand and supply of a product change considerably depending on various market factors, like price and customer preferences. When the doctor encourages people to take apples to lower cancer risk, many people will change their fruit preferences and opt to take more apples, considering the increased cases of cancer around the globe. This shift causes a rise in demand and price at first, but lower prices and saturated supply in the long run, for apple and related products.

First, there will be an increase in the demand for apples as people seek to include them in their diets to reduce their cancer risk. This will lead to higher apple prices as suppliers respond to the increased demand by raising prices. Second, there will be an increase in the supply of apples as growers respond to the higher prices by planting more apple trees and harvesting more apples. This increased supply will eventually lead to lower prices for apples as the market becomes saturated with apples, and suppliers are forced to lower costs to attract buyers (Turvey, 2022). Third, there will be an increase in the demand for apple products as people seek to include apples in their diets in various forms, such as applesauce, apple pie, and apple-flavored drinks. This will lead to higher prices for apple products as suppliers respond to the increased demand by raising prices.

Lastly, there will be an increase in the supply of apple products as manufacturers respond to the higher prices by increasing production. This increased supply will eventually lead to lower prices for apple products as the market becomes saturated with apple products, and suppliers are forced to lower costs to attract buyers (Turvey, 2022). In conclusion, the surgeon generals decision to declare that eating more apples will reduce the danger of cancer will significantly impact the market for apples and apple products, resulting in higher prices in the short run and lower prices in the long run.

Demand first rises, Prices go up (Short Run)

Demand Curve

Supply Rises, Prices go down (Long run)

Supply Curve

Reference

Turvey, R. (2022). Equilibrium, prices, demand, and supply. Demand and Supply, 7491.

Introduction

Africa is a rich continent with diverse flora and fauna but is highly susceptible to climate change and, in turn, economic changes against this background. The agricultural sector mainly funds African states, not the industry and the information sphere. Accordingly, the state reacts very painfully to climate change when society protests. In Africa, the connection between capitalism and the world market is intertwined with climatic conditions and unimaginable cruelty in the suppression of public discontent.

Minerals of Africa and Corruption

Tantalum, gold, and diamonds are often mined in Africa, attracting new investments every year. Africa is rich in oil; many locals work in the mines and wells, which is convenient for investors since Africans are seen as a low-paid workforce. The predatory manners of investors harm African nature and spoil relations between society and the state, becoming reasons for protests. States strongly associated with minerals are almost always corrupt, and pay systems in the mines are opaque (Monks, 2018). Protests against corruption are brutally suppressed; one of the authoritarian leaders who did this was Robert Mugabe from Zimbabwe.

Global Climate Change

The climate is changing all over the planet, and the World Meteorological Association is concerned about Africa in particular, as the region is warming faster than other continents. Global warming could cause frequent droughts; hence, livestock deaths and crop failures and melt the glaciers of Mount Kenya and Kilimanjaro (World Meteorological Organization, 2021). With anthropogenic climate change, the loss of glaciers in Africa means the absence of reservoirs and cultural and tourist facilities. Climate change, particularly drought, affects population migration and can lead to a migration crisis.

Impact of Precipitation and Drought

Precipitation and drought shape social moods and aspirations to a great extent. Many scientists record an extraordinary mobilization of society during high rainfall, but at the same time appeasement during drought (Jones et al., 2017). One can argue with this statement since the drought, for example, caused unrest in Somalia in 2008 (Connolly-Boutin & Smit, 2015). Both rainfall and drought equally influence price increases, which is the main reason for Africans to protest. Even those who are not usually prone to non-conform behavior recognize that in the absence of food or satisfaction of basic needs, there is nothing left for them but protest.

Possible Solution

The World Meteorological Association is currently leaning toward the idea that the best option is not to ask for solutions to rebuild African areas but to take careful preventive measures. Ecologists and meteorologists are ready to install high-quality equipment that will allow predicting weather changes, but this is a long process that requires financial costs. COVID-19 has worsened the social and economic situation of African countries, debilitating them (World Meteorological Organization, 2021). Therefore, the proposed program has not yet brought any clear conclusions.

Import Substitution

Capitalism, which destroys Africas nature, sometimes helps it fight the effects of climate change. Democratic regimes try to distribute benefits among citizens on the principle of justice in order to avoid protests (Anderson et al., 2021). In addition, African leaders are trying to bring in international food to achieve a high level of import substitution. Africans need imports not for variety of goods, but for protection from hunger in years of crop failure. If, for some other states, access to the world economy is a matter of capitalist goods, then for Africa, it is still a matter of hunger.

Suppression of Protests

Protests in corrupt authoritarian regimes are brutally suppressed; international organizations cannot pressure leaders, so they feel unpunished. In the societies of countries such as South Sudan and Nigeria, there is still a high threshold for perceiving violence (Fritts, 2021). Economic problems and the extraction of necessities prevent Africans from eliminating gender inequality and promoting education (Bassey, 2018). It affects the particular cruelty cultivated in many African tribes for centuries.

Conclusion

Africa is a rich but unhappy continent that capitalism has intervened in but has been unable to help bring economic stability. African territories torn apart by climate problems, but its lack of inclusion in the modern world makes it difficult to make global decisions quickly. Usually, power in Africa falls into the hands of dictators or autocrats who do not try to live according to the laws of capitalism, in which the internal wealth of the continent helps them. Foreign investment at disadvantageous terms, corruption, risks of famine, and unclear climate change lead to protests that are brutally suppressed without condemnation by the international community.

References

Anderson, W., Taylor, C., McDermid, S., Ilboudo-Nébié, E., Seager, R., Schlenker, W., Cottier, F., de Sherbinin, A., Mendeloff, D., & Markey, K. (2021). Violent conflict exacerbated drought-related food insecurity between 2009 and 2019 in sub-Saharan Africa. Nature Food, 2(8), 603615. Web.

Bassey, N. (2018). The climate crisis and the struggle for African food sovereignty. In V. Satgar (Ed.), Climate Crisis, The: South African and Global Democratic EcoSocialist Alternatives, 190-208. Wits University Press.

Connolly-Boutin, L., & Smit, B. (2015). Climate change, food security, and livelihoods in sub-Saharan Africa. Regional Environmental Change, 16(2), 385399. Web.

Fritts, R. (2021). To understand hunger in Sub-Saharan Africa, consider both climate and conflict. Prevention Web. Web.

Jones, B. T., Mattiacci, E., & Braumoeller, B. F. (2017). Food scarcity and state vulnerability: Unpacking the link between climate variability and violent unrest. Journal of Peace Research, 54(3), 335350. Web.

Monks, K. F. C. (2018). Why the wealth of Africa does not make Africans wealthy? CNN. Web.

World Meteorological Organization. (2021). Climate change triggers mounting food insecurity, poverty and displacement in Africa. Web.

The most popular method of forecasting exchange rates is called the theory of purchasing power parity (PPP). The PPP principle is based on the theoretical law of one price, according to which identical goods in different countries should have the same price (Jabbie & Jackson, 2020). For example, according to this rule, a pencil in Canada should cost as much as the same pencil in the United States, taking into account the exchange rate and excluding the costs of exchange and transportation. In other words, there should be no reason for speculation when someone buys pencils cheaply in one country in order to sell them profitably in another (Majumder & Ray, 2020).

Based on this PPP theory, the exchange rate should change in such a way as to compensate for price increases due to inflation (Papell & Prodan, 2020). For example, lets assume that prices in the United States should increase by 4% in the coming five years, while in Canada by only 2%. The inflation differential will be:

4%  2% = 2%

This means that the rate of price growth in the United States will be faster than those in Canada. According to the principle of purchasing power parity, the US dollar should depreciate by about 2% in order for the prices of goods in the two countries to remain relatively the same. For example, if the exchange rate was 90 US cents per Canadian dollar, then according to the PPP method, the projected rate will be:

(1 + 0.02) x (0.90 US dollars for 1 Canadian dollar) = 0.918 US dollars for 1 Canadian dollar

This means that the Canadian dollar should rise to 91.8 US cents per dollar in a year. In the next year, considering the economic conditions remain the same, we have

• (1 + 0.02) x (0.918 US dollars for 1 Canadian dollar) = 0.936 US dollars for 1 Canadian dollar
• One more year

  • (1 + 0.02) x (0.936 US dollars for 1 Canadian dollar) = 0.954 US dollars for 1 Canadian dollar
• Another year

  • (1 + 0.02) x (0.954 US dollars for 1 Canadian dollar) = 0.973 US dollars for 1 Canadian dollar
• In five years

  • (1 + 0.02) x (0.973 US dollars for 1 Canadian dollar) = 0.992 US dollars for 1 Canadian dollar.

References

Jabbie, M., & Jackson, E. A. (2020). On the Validity of Purchasing Power Parity: The Case of Sierra Leone 1. Journal of Advanced Studies in Finance, 11(1), 18-27.

Majumder, A., & Ray, R. (2020). National and subnational purchasing power parity: a review. Decision, 47(2), 103-124. Web.

Papell, D. H., & Prodan, R. (2020). Long-run purchasing power parity redux. Journal of International Money and Finance, 109, 102260. Web.

Stocks and bonds are the sources of dividends in the long term when income is generated by paying interest or returning invested funds when owning the relevant securities. In their financial statements, companies reflect stock and bond performance when comparing the results for a particular period with those of an earlier period and making forecasts regarding the growth of potential earnings. By evaluating the financial statements of individual large corporations, the characteristics of securities management can be analyzed, and conclusions can be drawn concerning future stock impacts.

One of the globally known companies, whose profit largely depends on the stability of securities and their demand in the financial market, is Apple. According to the corporate financial report, for the 2022 second quarter, the share of stock dividends per share increased by $0.23, which indicates a 5% increase in the parameter (Apple Inc., 2022). In March 2022, common stock was about $61.2 million, while in September 2021, the figure was $57.3 million (Apple Inc., 2022). The repurchases of common stock remained almost unchanged at $43.1 million (Apple Inc., 2022). The securities management policy is an important aspect of Apples activities because, traditionally, the company is considered one of the most profitable global brands to invest in and gain profits.

Another influential participant in the securities market is the American travel company Expedia Group. By generating income through the combined activities of a number of subsidiaries, the company pursues an open shareholder policy. According to the latest financial statement, in 2021, the indicator of Expedias preferred stock dividend was $67 million, which was lower than the previous year by $8 million (Expedia Group, 2022). The treasury stock in 2021 was $10.2 million, which was slightly higher than the 2021 parameter, and the total stakeholders equity was $3.5 million (Expedia Group, 2022). Tough times for tourism in recent years due to the COVID-19 pandemic explain weak equity capital growth.

FedEx, the American logistics company providing postal and courier services, has been in the target market for many years. Based on its latest financial statement, the common stock share in 2021 remained the same as in 2020  $32 million (FedEx, 2022). At the same time, investor activity increased significantly in 2021 compared to the previous year. This can also be explained by the current COVID-19 pandemic and restrictions on direct social contacts, which have increased the demand for postal services. In 2021, the indicator of total stakeholders investment was $82.7 million, while in 2020, this parameter was almost $10 million lower (FedEx, 2022). As a result, one can talk about the effective use of stock resources for conducting FedExs shareholder policy.

Based on the reviewed financial reports of the three companies, one can note that their equity policies are flexible, as evidenced by fluctuations in investment activities and changes in dividend shares. External factors play an essential role in the construction of a stock management system, and the examples of FedEx and Expedia Group confirm the direct relationship between the situation in the world and the stability of securities. The impact of the COVID-19 pandemic has turned out to be massive, and in light of global restrictions, these companies services have become more in demand, which directly correlates with investor activities (Duralia, 2021). With regard to Apple, this corporation has always been appreciated highly among shareholders, and in view of the companys stable market growth and the interest of the target market in its products, its shares are unlikely to fall in price. Thus, the analysis of the aforementioned financial statements has made it possible to single out the characteristic features of the corporations equity asset management policies and identify the corresponding investment dynamics.

References

Apple Inc. (2022). Condensed consolidated statements of operations (unaudited). Web.

Duralia, O. (2021). Changes in brand-related consumer loyalty in the current pandemic context. Studies in Business & Economics, 16(1), 68-80. Web.

Expedia Group. (2022). 2021 annual report. Web.

FedEx. (2022). 2021 annual report. Web.

Fiscal policy uses government expenditure and taxation to control the economy during macroeconomic conditions. The government uses the policy to create strong and sustainable growth and reduce poverty (Bossone, 2021). During recessions, governments might consider lowering tax rates or increasing their level of expenditure to spur economic activity and encourage demand. Similarly, to fight inflation, the government might increase its rates or decrease its spending to cool the economy. The role of fiscal policy is to enable the government to support financial systems in the country, jump-start growth, and ease the impact of crises on vulnerable groups. The essay explores the history of fiscal policy and how it was created.

The fiscal policy in the United States is founded on the concepts of the British economist John Maynard Keynes. Keynes claimed that economic depressions occur because of decreased consumer expenditure and aggregate demand in businesses (Bossone, 2021). In this regard, Keynes believed that governments could stabilize business cycles and control output in the economy by regulating their expenditure and taxation rules to compensate for losses in the private sector (Bossone, 2021). After the Great Depression and the stock market crash, policymakers pushed the government to control the economy. As a result, Keyness arguments were advanced, challenging the old notions that economic swigs are self-corrective (Bossone, 2021). Keyness concepts were very significant and resulted in the creation of the fiscal policy, which required the government to increase its expenditure on public work projects and social welfare programs.

Conclusively, the paper has described the fiscal policy as government spending and taxation that influence the economy, especially during macroeconomic conditions. The essay has also examined the history of fiscal policy. It has been found that the policy is based on the ideas of British economist John Maynard Keynes that the government used to create fiscal policy after the Great Depression. Therefore, fiscal policy is vital because it helps governments reduce poverty and ensure sustainable growth.

Reference

Bossone, B. (2021). Globalization of capital, erosion of economic policy sovereignty, and the lessons from John Maynard Keynes. Review of Keynesian Economics, 9(4), 512-520. Web.

Introduction

In order to allocate resources as fair as possible, the market economy is based on a set of dogmas that govern the distribution process. A healthy situation on the market can lead to greater accessibility of products and services and reflects positively on a nations global position. Under perfect conditions, markets serve as the sole decision-making factor that keeps people motivated and content. This paper will discuss how product and service pricing, the laws of supply and demand, the labor force, and other causes affect the economy. It is essential to comprehend that the processes that govern the market environment are shaped by people and for people and occur naturally.

Prices and the Market

The need for a particular good or service is reflected in its price. This notion enables people to show their willingness to trade an amount of work they have performed to obtain it. The primary benefit of prices is the automatic regulation of resources in accordance with their scarcity, as both their abundance and deficit reflect the objective reality with relatively close accuracy. Products that are highly sought after will have a higher cost, and fewer individuals can afford them. Simultaneously, firms are incentivized to seek ways to increase their products worth and drive innovation. A price tag shows an equilibrium between the demands of customers and the interests of sellers. This crucial aspect of the economy is a representation of the markets inherent distributing power.

Supply and Demand

In reality, prices are only an outcome of the underlying processes that show the desirability and accessibility of a certain good or service. Prices are not set in stone, and the markets constantly shift to accommodate their performance to a variety of economic, social, political, and other factors that affect peoples willingness to pay for a good. The laws of supply and demand reveal how the quantity and the price of any particular good are connected through balancing between opposing interests. Each scale represents a different side of the market and enables economists to create a complete picture of each industry. Both curves may shift depending on the prices of resources, innovations, changes in incomes, and other similar reasons. These values are the focus of any interventions that seek to bring the market economy closer to the perceived fairness expected by the participating sides.

Cost of Goods

The value of each good is constructed from a multitude of variables. First and foremost, the raw resources and the labor that was expended on its production plays a critical role. The price dictates if a product is desirable and if it is profitable to put raw resources into its creation in contrast with putting them in alternative places. As a result, high demand may lead to a greater evaluation of these materials. In the opposite case, manufacturers may decide to put these resources into different goods. The cost of products is also affected by taxes, logistics, patents, the cost-efficiency of the involved processes, and other factors.

National Economy and the Market

A strong nation is impossible to create without a stable economy. The market enables firms to create a unique ecosystem that is quasi-dependent on external factors, yet the countrys financial situation is paramount. Actions taken by a countrys government affect almost all transactions within its borders. The total national output reflects a nations success and enables it to take bolder actions, directing funds acquired from taxes into the quality of life improvements for its citizens. This notion is often accounted for through a gross domestic product to show how much value is created and stored within a country.

Role of Taxes

A taxation is a vital tool for governments that enables them to reduce the gap between the desired point of supply and demand curves and the current one. For example, these parameters may decrease if the taxes are too high or increase simultaneously if they are low or even replaced with subsidies. If applied properly, this tool may assist governments with stabilizing their economy. For example, the growth of gross domestic product may be boosted by tax adjustments for luxury and basic goods. These added costs also affect peoples ability to freely decide how to spend their money while giving authorities a source of income that is available for redistribution.

Role of Profit and Loss

Under the market economy, profits and losses are the vital parameters that reflect the sustainability of a business. These two values serve both as a motivation and a deterrent for companies in the market economies. Profits serve as progress drivers, as they incentivize entrepreneurs to seek a competitive advantage, while losses punish poor decision-making. Profits may lead to benefits being transferred to customers via various means, including quality, quantity, and availability of products. However, entrepreneurs are forced to keep their processes optimized to prevent going bankrupt.

Pay and the Market

Salaries are a primary representation of the value of ones work. They are a motivational factor that enables people to assess the necessity of their abilities in the labor market. Wages represent a financial benefit that ones actions create for a business, which decides to award a portion of said gains to an individual responsible for their accumulation. In fact, salaries are driven by the competitive advantage an employee provides and are higher the less replaceable a person is, as such a variable shows ones worthiness. Market trends direct peoples attention to particular industries that are valued more than others, causing the economy to guide society into an equilibrium.

Minimum Wage

Another vital tool for governments to create a stable resource allocation mechanism is minimum wage caps. These laws enable people who work in vulnerable sectors to be able to live off their work without being exploited by employers. However, they must be applied cautiously and remain slightly below the point where labor supplied meets its demand. An increase in the minimum wage inevitably leads to a reduction of employment in low-skilled labor areas, as businesses refrain from hiring more workers to cut their expenses. Therefore, governments need to remain wary of making adjustments to this value to keep it usable as a protection mechanism.

Men vs. Women

While the market economy has its benefits, there are downsides related to social factors. One such aspect of labor payments is the difference in average salaries between genders. Nowadays, not a single country has succeeded in eliminating this inequality, despite the global tendency for its reduction. The long history of discrimination in workplaces, education, and society has led people into this situation. In addition, differences also stem from the tendency for women to work part-time and mens willingness to take low-skilled jobs more often. These aspects play a critical part in the market economy, as they reflect the social reality that puts men and women into different life circumstances. Through the market economy, people are able to find a suitable way to sustain themselves while accounting for their needs and preferences.

Racial Disparities

There are biases that may hinder the original goal of the market economy even further, as there are notable differences in payouts for people of different racial and ethnic origins. This factor adversely affects the competitiveness of workers and businesses as well by distorting the real situation in the industry. The economic interests of minority populations are damaged severely as an outcome of this toxic relationship. Reasons for such behavior may vary but usually consist of statistical and taste-based conclusions that employers may make. The conflicts of the past continue to be reflected in peoples minds in the United States. However, it is not only a perception that causes racial disparities. African Americans did not possess a sufficient level of access to education and training, which hindered their productivity and resulted in racial stereotypes in modern days. However, without government-backed limitations, this phenomenon is bound to be alleviated, as the market enables oppressed minorities to improve their situation.

Conclusion

In conclusion, the complex interconnected system that is the economy depends on the decisions that shape the market environment made by companies and people alike. Society as a whole is represented in its fullness through functions that create a unique financial ecosystem driven by communities and individuals. Products and services are given prices in accordance with their necessity and availability, while people receive finances to spend in proportion to their input to their nations total output. While there are deficiencies in the system, the market economy gradually shifts toward a balanced state.

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The first topic that is thought-provoking is the relationship between quality and price. As Lichtenstein and Burton (1989) note, the over-reliance on price as an indicator of quality is a common mistake among consumers. Even though this observation was made forty years ago, it is still relevant today. Almost any person living in a country with a market economy is overwhelmed with a wide choice of available goods and services.

The proposed explanation for the inaccuracy of consumers perception of value included the concept of schema. It refers to the subjective understanding of market forces that determine how people perceive the quality of products. Unsurprisingly, Lichtenstein and Burton (1989) deduce that most of such assumptions are incorrect. However, the most intriguing implication is actually not stated  most people spend more money on overpriced products precisely due to their inner beliefs.

In essence, the majority of people are unaware that they lose money. Therefore, the subsequent problem is teaching consumers what can be done to reduce their unjustified spending. For instance, resource scarcity is a certain predictor of increase in price and value. However, the impression of scarcity is no less important, since it drives people to buy overpriced products (Park et al., 2020). As a result, people should challenge their schema in order to stop being deceived by prices.

The most effective way to change incorrect perception is to conduct research. The more people are aware of the quantities of products and their qualities, the easier they can spot inconsistencies between declared price and objective price. The availability of the Internet has facilitated this task, which is likely the reason why Lichtenstein and Burton (1989) did not address solutions to the identified problem. Todays opportunities allow consumers to increase awareness of product value more than ever.

References

Lichtenstein, D. R., & Burton, S. (1989). The relationship between perceived and objective price-quality. Journal of Marketing Research, 26(4), 429-443. Web.

Park, H., Lalwani, A. K., & Silvera, D. H. (2020). The impact of resource scarcity on price-quality judgments. Journal of Consumer Research, 46(6), 1110-1124. Web.

Introduction

The purpose of this paper is to analyze the intention of American Startup Capital Ventures (SCV) to invest in the Chinese Zero2IPO. SCV is headed by managing partners John and Danny, both of whom have experience of geometrically increasing the revenues of technology startups. Zero2IPO is a Chinese market research firm that provides insight into the demand for venture capital in China. SCV is currently at a point of intersection of two influence figures  a prominent investor Charlie Eubanks and the CEO of Zero2IPO Gavin Ni. Both pressure SCV to invest in China and Zero2IPO specifically. Understanding the parameters that have to be considered for entering Chinese market as well as the strengths and weaknesses of SCV is essential in ascertaining the arguments for and against investing in Zero2IPO.

Parameters for Entering Foreign Markets

The first parameter that has to be considered is the availability of startups that would allow a Venture Capital firm to perform its investment work on a long-term basis. Due to the saturated status of large Asian markets, they have a common feature, which is a large presence of high-risk enterprises offering explosive growth prospects (Wen et al., 2018). However, their abundance is also indicative of a high chance of partnering with an entity that will experience only short term growth or will yield no successful return on investments. Therefore, the firm should consider how fast it can find enterprises capable of long-term cooperation.

The second parameter is the firms ability to handle competition. Startups in emerging markets are numerous and have a large selection of venture capital firms to choose from. This implies that in order to stay competitive in this market niche a firm has to distinguish itself among its competitors. Furthermore, China is characterized by the strong influence of state-owned enterprises, which also seek to provide startups with venture investment. This circumstance presents an additional challenge to managing competition.

The third parameter is the readiness of the firm to accept local business norms. There is a multitude of differences between ways Chinese and Americans conduct business. Cultural norms also determine how business success is classified, which can potentially lead to miscommunication between startups owners and venture investment firms. The less flexible a firm is in terms of adapting to local business practices, the more likely it is to impose domestic norms on local startups. If culture differences do prove too complex to be resolved, the success of the investment partnership will be compromised.

The fourth parameter is the level of governmental intervention in the economy. The more the state attempts to influence private businesses, the less control the firm will have over its investments. In extreme cases, it might take the form of the firms assets being frozen without an opportunity to pull out from the market. The more the firm is willing to bear such risk, the more resilient it will be towards sudden intervention policies. Considering that long-term investments spanning decades are preferable, their success is highly dependent on the firms tolerance to governmental meddling.

The fifth parameter is tax pressure in the chosen market. As much as regulatory practices may stimulate foreign investors to cooperate with local startups, tax policies may compromise the benefits derived from investing in highly promising enterprises. Similarly, the absence of certain taxes might encourage more intense entrepreneur activities, thus providing the firm with more partners and opportunities. Subsequently, choosing a market with a welcoming tax environment is essential for ensuring long-term profitability of venture investments.

The sixth parameter is the presence of a legal system with favorable conditions for foreign investors. Each country has laws regulating business practices on its territory. The less bureaucratic complications are involved, the easier it is for companies to cooperate. Legal system determines the status of foreign investors and outlines their restrictions and capabilities. In order to successfully invest in local startups, the firm has to be aware of its legal status and corresponding opportunities.

SCVs Four Strengths and Two Weaknesses

The most evident strength of SCV is its geographic origin. Being an entity with a history of work with American enterprises, it possesses certain investor appeal to local startups. Generally, experienced US firms entering local markets are seen as more financially stable in comparison with local venture capital firms. For the reason of positive public perception, SCV is likely to receive a stable supply of business offers and investing opportunities. Had it not been a US enterprise, it would have likely had had more complications entering the market or getting noticed by Zero2IPO.

The second strength of SCV is its experience on the market. SCV has been operating continuously since 2005, looking for undervalued organizations and helping them generate larger revenues. By the moment, the firms turned to the Chinese market, it had already accumulated a portfolio, containing numerous successful cases. The managing partners of SCV are experienced managers with appropriate reputation. Having worked with many boards, they have knowledge of the limiting factors in any business and decisions needed to alleviate them. Any investors with such experience and expertise will receive substantial attention and be a welcoming voice in younger business settings.

The third strength is that SCV is backed by Charlie Eubanks. As he is one of the anchor investors, he is in a unique position to see the firms financial situation. The idea of investing a significant proportion of the portfolio in Chine belongs to him. Eubanks has comprehension of proper structure of investing portfolios as well as potential investing targets. He can offer insight into any complications and opportunities the firm might encounter in China, which John and Danny might not see on their own. Finally, Eubanks is a wealthy investor whose money are in demand by other venture enterprises, which adds further credibility to SCV.

The fourth strength of SCV is its small size, which allows it to exercise flexibility in decision-making. The firm is headed by two managing partners, thus removing the necessity to call large board meetings. All important communication can be handled via a single phone call, which is a privilege not possessed by larger entities. The fact that such a small firm has produced results comparable with larger competitors is a definite selling point that is likely to attract many business opportunities.

The main weakness of SCV is its lack of experience in China. The firms eye-catching portfolio consists primarily of American entrepreneurs. At the same time, an important part of SCV strategy is its mentorship ability, yet it is admitted that the managing partners are concerned with cultural differences. The lack of experience communicating with Chinese business representatives might undermine Johns and Dannys mentorship. If at any point, SCV is not satisfied with their partners performance, they might impose American business practices, thus potentially creating a conflict of cultures.

The second weakness of SCV is its high dependence on third side capital and contracts. The firm experiences both domestic and foreign pressure to adjust the strategy. Charlie Eubanks exerts substantial influence on the firm since a sizable portion of SCVs portfolio belongs to him. Meanwhile, Gavin Ni could use the offers of SCVs competitors as leverage against John and Danny. Essentially, the managers have found themselves at a disadvantage since they have to satisfy conditions from both sides. However, the responsibility for any error will be placed solely on John and Danny.

Investing in Zero2IPO

Investing in Zero2IPO has a number of benefits for SCV. First, it is the fastest way of entering the Chinese market. The current point in time is especially advantageous since SCV has both the backing of Eubanks and the offer from Zero2IPO. As the Chinese market becomes increasingly saturated, delaying entrance will make entering the market more complicated in the future. Second, there is a small probability of the investment failing to meet its expectations. Both managers admit that their greatest concern with Zero2IPO is that it will not yield high enough return of investment, while at least some success is assured.

Third, Zero2IPO is an objectively attractive investment target due to steady growth and its sources. Three revenue streams hedge the company from any sudden financial problems. In case one source is compromised, the company will remain profitable due to income diversification. Furthermore, Zero2IPO is aware of all significant developments in the sphere of venture capital, which enables it to foresee most negative changes. Fourth, Zero2IPO has insight into the demand for venture capital among Chinese enterprises. Working with it would provide SCV with a stable supply of customers. Finally, Zero2IPO hit the broader market due to its status as a services company. Had it been a technology exclusively company, it would have had fewer chances of success.

The first argument against investing in Zero2IPO is that it is overvalued. John has noted himself that tripling its revenues is not likely, and the overall performance might be mediocre. Besides, tricking American investors into supporting overvalued Chinese enterprises is a standard practice in China. Second, Zero2IPO does not meet SCVs criteria for the target niche. SCV specializes in technology enterprises, while Zero2IPO focuses on services, which might compromise John and Dannys expertise. They know how to advise a company on handling issues related to technology, but are not as well-versed in services. Third, Zero2IPO is a relatively young company with an inexperienced manager, who might not be able to hit the financial target set by SCV. Finally, SCV had better alternatives where risk-reward ratio is more favorable, although they are not part of the Chinese market.

Conclusion

Altogether, it should be evident that SCVs managers are not as interested in investing in Zero2IPO as third parties are. There are numerous risks relating to Zero2IPOs business model and market history that dissuade SCV from partnering with it. Nevertheless, SCV does have expertise and experience that are in demand in Chinese technology market. Even though Zero2IPO is not a technology company, partnering with it will give SCV exposure to other Chinese startups, this way reaching its intended market niche. Therefore, SCV should invest in Zero2IPO, as the long term benefits outweigh the risk stemming from Zero2IPOs potentially mediocre performance.

Reference

Wen, J., Yang, D., Feng, G. F., Dong, M., & Chang, C. P. (2018). Venture capital and innovation in China: The non-linear evidence. Structural Change and Economic Dynamics, 46, 148-162. Web.