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ADMS 1010 lecture notes

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York University
Administrative Studies
ADMS 1010
Alex Browning

How do we perceive our Economy? News Items, Housing Starts, Trade Figures, Employment Rate, GDP, Balance of Trade How do we perceive our Economy? Job loss Figures usually measured through changes to payroll date or Unemployment Rate The measure of jobs loindividuals currently looking for work. Current: Following strong gains in recent months, employment was little changed in July, with large full-time declines mostly offset by part-time gains. The unemployment rate edged up 0.1 percentage points to 8.0%. How do we perceive our Economy? Conference Board's consumer confidence index The private sector think tank produces a group of its own indicators, including the well-followed consumer confidence number. The index is a survey of 5,000 households asking people how they see their near-term financial future and whether they will be out of work anytime soon. Current reading: Augusts reading of 53.5. "Consumer confidence posted a modest gain in August, the result of an improvement in consumers' short-term outlook. Consumers' assessment of current conditions, was less favorable as employment concerns continue to weigh heavily on consumers' attitudes. How do we perceive our Economy? Exports/Imports Again, perhaps a bit obvious in that strong growth means businesses are selling more widgets to foreigners. But, the level of exports can be a better indicator of future expansion of facilities than employment growth. Current Report Canadas merchandise trade account to slumped to a record deficit of $1.4-billion in May as energy and automotive exports decreased and the Canadian dollar shot higher, Statistics Canada figures showed. The value of exports fell 6.9% to $28.4-billion in the month, while the volume was down by 4.1%, reflecting both weak demand and a 2.9% decrease in prices. How do we perceive our Economy? Case-Shiller Index The housing price index, named after two of the economists who developed the measurement, is a way to look at housing prices in different regions of the U.S. The Case-Shiller indicator correlates with higher commodity prices and also, in a rising market, shows growing household net worth. Current reading:The S&P/Case-Shiller index of property values climbed by 4.4 percent in the second quarter, after having fallen 2.8 percent in the first quarter. Nationally, home prices are 3.6 percent above their year-earlier levels. How do we perceive our Economy? Housing Starts: Measure of investor and consumer confidence and a leading economic indicator For July 2010, the seasonally adjusted annual rate of national housing starts in Canada was 189,200 units, which was a decline of 1.6% from the revised figure of 192,300 units in June 2010, continuing a cooling trend over the past seven months according to a Canada Mortgage and Housing Corporation (CMHC) report released August 10, 2010 How do we perceive our Economy? Baltic Dry Index is a leading indicator phone survey of the price of shipping a commodity a certain distance. The index provides "an assessment of the price of moving the major raw materials by sea.. Current reading:After crashing from 4,209 in May the Baltic Dry Index has surged by 62.1% from a recent low of 1,700. A glance at the relationship between the manufacturing PMI for stocks of major inputs and the Baltic Dry Index suggests Chinas manufacturers are again rebuilding commodity stocks THE CONCEPT OF COMPETITIVENESS the ability to design, produce and market goods and services, the price and non-price characteristics of which form a more attractive package than those of competitors From: The World Competitiveness Report, World Economic Forum and the International Management Development Institute GLOBAL COMPETITIVENESS Nature of production and distribution in the world economy has changed dramatically in the past 50 years Advent of technologies and introduction of new materials resulted in: Miniaturization of goods Manufactured products are more easily transported Significant increases in international trade of manufactured goods and services We must redefine competitiveness GOALS OF COMPETITIVENESS Viewed in a broader societal context, competitiveness is: A means to an end Wealth creation a necessity Funds social services Produces a high and rising standard of living Needed to achieve higher-order goals such as: Personal freedom Security Better quality of life DEFINITION OF COMPETITIVENESS Increased productive capacity achieved by: Innovation Superior technology Continuous skill-enhancing training Concern with social equity and environmental preservation ECONOMIC GROWTH AND COMPETITIVENESS Emphasizes importance of: Savings and investment Cost of capital Technological learning The wealth of the worlds nations is linked to the long run growth rates of their economies. CANADAS GLOBAL POSITION One of the best nations in which to live #5 in 2006 (United nations) Ranking is steadily increasing BUT Most Canadians feel economy is not competitive! ASSESSING COMPETITIVENESS 1. Factor model Identify critical success areas Compare performance of different economies in each area 2. Trade performance Based on indicators of outputs and efforts at improving inputs 3. Productivity Using cost-based indicators FACTOR MODELS Pillar s 1: Institutions 2: Infrastructure 3: Macroeconomy 4: Health 5: Higher Education/Training 6: Market Efficiency 7: Technical Readiness 8: Business Sophistication 9: Innovation TRADE PERFORMANCE Classifies traded manufacturing industries into: 1. Resource-based businesses 2. Low-wage businesses 3. High-wage businesses Competitive advantage: 1. Each of these businesses compete on a different basis in the international marketplace TRADE INDICATORS 1. Resource-based trade Canada relies heavily on export of raw materials 2. High-technology trade Canada has lack of export orientation in high-tech sectors 3. Geographical distribution of trade Exports primarily to U.S. Narrow range of products 4. Research and development Low investment in industrial R&D PRODUCTIVITY ASSESSMENT USING COST-BASED INDICATORS Macro level: Cost competitiveness affected by exchange and interest rates Rates determined by national policies, global forces.- Beyond the influence of industry Micro level: Cost competitiveness based on wages and productivity Cost competitiveness should be mutually reinforced , but. It is difficult for individual firms and industries to attempt to offset poor macroeconomic policy by productivity improvements at the micro level PORTER MODEL Attempts to integrate: Economic theories of trade and development Corporate strategic theories of creating and sustaining competitive advantage Firms within a nation must be competitive Industries tend to be geographically concentrated within nations PORTERS FOUR-FACTOR INTERACTIVE MODEL OF COMPETITIVENESS - THE DIAMOND 1. Factor conditions distinguish between Basic factors passive, undifferentiated base abilities available to most competitors Advanced factors - involve higher levels of knowledge and lead to more competitive advantage. Reliance on general factors makes an economy vulnerable MODEL OF COMPETITIVENESS - THE DIAMOND Government is not integral to the diamond Role is a facilitator Chance has role in development of competitive industrial structures STAGES OF NATIONAL COMPETITIVE DEVELOPMENT 1. Factor-Driven Stage Competition on the basis of production Transfer of technology into the nation, but not created domestically Poor basis for long-term growth 2. Investment Driven Stage Emphasis on acquiring and improving upon foreign technology Focuses on upgrading institutional structure Economy vulnerable to increased production cost, dependence on foreign technology 1. Innovation Driven Stage Reaps benefits of entire diamond interaction Deepening of clusters of related firms and industries Focus on innovation, especially high-value-added services Role of government- direct intervention 4. The Wealth-Driven Stage Leads to decline Less rivalry within the domestic market Adversarial labour-management relations Increase in non-functional business activities THE CASE OF CANADA Must move to a more innovative-driven economy Barriers to long-term industrial competitiveness: Attitudinal Behavioural Daniel Trefler:
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