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  1. Perform research 
  2. Using the chosen company’s domestic and global environments identify the ECONOMIC environment of each and compare and contrast it using Rostow and Galbraith 
  3. Which are the limitations? Why?


  • Minimum 2-3 complete paragraphs; a paragraph is a minimum of 100 words.


Week 7 –the US Economic EnvironmentIn Week 7 we will discuss the impact of the Economic Environment on our selected Best and Worst companies, domestically and in a foreign market where they choose to compete. We will also research a couple of prominent business theoreticians – Rostow and Galbraith – and read some of what they had to say on this subject.

The Environments are simply a construct that might be a useful way to look at business. You could come up w/many other constructs that might be even more useful, especially in a different field of study. For example, if you were looking at our military, you might choose environments like: 1) personnel 2) military intelligence (well-known oxymoron) 3) supplies 4) R&D 5) battlefield strategy 6) technology, etc.

I’ve become a little gloomy about the Economic Environment in the US recently.  Some long term trends seem to be working against the US retaining/re-acquiring global economic leadership (as measured by a return to a GNP growth rate of 3-5%, annual increases in household income, increases in the percentage of adults working full time, etc.), all of which are necessary indicators of a healthy economic environment. Some of the trends suppressing these indices include: job losses from increased automation (a “two-edged sword”), increased regulation, wage and income disparities, increased tax burdens on businesses, increases in entitlement programs, etc.

With respect to automation, US companies are automating every business process they can because it increases productivity, which lowers costs and should increase profits. Automating/eliminating lower paying jobs also helps companies avoid the rapidly escalating minimum wage. Some jobs we haven’t figured out how to automate effectively are being outsourced offshore because it lowers costs and avoids excessive regulation (not all regulation is “excessive” but we seem to have crossed some lines). So the prospects for more good paying “middle class jobs” don’t look good to me.But then again, we have gone through many macro-economic cycles where some surprising and unexpected things emerged to make things better. Not that long ago most people worked in agriculture (and related occupations).  Now almost no one does.  Then everyone worked in manufacturing and mining.  Now only a small percent of the workforce still works there (and No, manufacturing isn’t going to return, no matter what politicians tell you). And now the “service economy” is being automated and outsourced and may soon become a thing of the past.Recently, technology and creative activities (e.g. legal, finance, entertainment, advertising, etc.) have become the drivers of our economy. But not everyone is well suited to work in those areas. What can these people do?  Well, there is still a huge need for skilled trades-people (electricians, plumbers, auto mechanics, etc.) but these are not seen as prestigious jobs (however, they pay well and provide a good degree of job security). The military has been a good option, but we have seen a huge downsizing under President Obama and his new Secretary of Defense, Ash Carter. So I don’t see that as a solution to lower full-time employment and wage gains.

Week 7 – Foreign Economic Environments

There’s an old saying, “when the US economy catches a cold, the world catches pneumonia”. And the US economy recently has at least had a cold, if not the flu. But the implication of the saying is that the US is responsible for the health of the worldwide Economic Environment. To some extent that implication is true because our economy is so large. But it can be argued that this time the US is not the cause of economic woes in foreign countries.

The EU has created their own problems by unrestrained immigration, socialistic policies that discourage productivity, monetary and fiscal policies that do the same, and on and on. Simply look carefully at the economies of Greece, Italy and Portugal for examples. And many economists expect France and maybe even the UK (who is debating withdrawing from the EU to stave off exposure to the rest of Europe’s economic problems) will follow.

China has been a bright shining economic miracle for the past few decades. The Chinese government has promoted business and economic growth, especially heavy industrials, some would say “at all costs”. But the growth rate of China appears to be slowing, which could portend big problems down the road. The Chinese people’s aspirations have been heightened to the point where failure to live up to their expectations could spell doom.

What Business Theorists Rostow and Galbraith Say About the Economic Environment?

Walt W. Rostow is best known for his theory of the Stages of Economic Growth. Rostow’s Stages of Economic Growth model is one of the major historical models of economic growth. It was published by American economist Walt Rostow in 1960. The model postulates that economic growth occurs in five basic stages, of varying length:

  1. Traditional society
  2. Preconditions for take-off
  3. Take-off
  4. Drive to maturity
  5. Age of High mass consumption

Obviously different countries are at different stages of Rostow’s model and are evolving at different rates. US businesses might find this model informative when considering where to target their global ambitions.

John Kenneth Galbraith is best known for his theories and writings on capitalistic societies. In his most famous work, The Affluent Society (1958), which also became a bestseller, Galbraith outlined his view that to become successful, post-World War II America should make large investments in items such as highways and education, using funds from general taxation. Galbraith also critiqued the assumption that continually increasing material production is a sign of economic and societal health. Interesting, these two seemingly obvious conclusions are entirely consistent with the final stage of Rostow’s theory where what he calls “mass consumption” defines the fully developed economic environment.

What can we learn from these pioneering giants of economic and business theories? The answer is, a lot! But they were so prolific we can barely scratch the surface of their ideas here.Summary

The worldwide Economic Environment is currently dominated by the recession in the US and the approaching financial collapse of certain foreign countries like Greece, Spain, Italy and Ireland. Even emerging markets which have experienced phenomenal growth (primarily China and India) are currently experiencing a slowdown for the first time in recent history. Weathering this storm is now the principal concern of most US multi-nationals.What are US multi-nationals actually doing in this Economic Environment?  Well, for starters, they are slowing down expansion and investment, domestically and globally.  They are also shrinking their existing full-time workforce through layoffs, attrition and outsourcing. These actions, of course, result in high unemployment/underemployment and, as a result, lower family incomes.  This can become a vicious downward spiral where all of this leads to less consumer demand for goods and services, and more demand for government services at exactly the same time the government experiences declining tax revenues. This what economists call “a mess” .This has been a much abbreviated discussion of the Economic Environment,  but seems appropriately focused since this slowing of worldwide economies is dominating just about all else.

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