Microeconomics studies individual parts of the economy and guides financial decisions. Rather than focus on large economic climate factors like global exchange, microeconomics tries to determine how small choices effect profit, meaning microeconomics focuses on budgets.
International business budgets
The most basic business budgets include
1-expenses (goods, labor, maintenance, advertising, shipping, travel, taxes, insurance)
2-income (sales, interest)
- International Businesses incur higher costs for shipping, customs, exchange rates, travel, and communication than national businesses.
-There are other variables such as unexpected losses or other assets not accounted for, such as donation, but they still fall under the large categories of expenses and income. A company may also have money or assets that simply sit in investments but again these are placed under income as they earn interest.
-Many international businesses show top-down budgets and spending by supporting corporate jets but outsourcing to cut costs on low salary.
Relationship between top-down priorities and the crisis.
Another challenge, other that top CEO pay is excessive costs for advertising and promotion.
Global advertising budgets & the Olympics
-Example non-Olympic year global ad budgets include Apple’s at $486 million / Microsoft's at $945 million
-Olympic advertising is some of the most expensive in the world. Highest tier for Olympic advertising is $100 million for 4 year cycle “official” status, often debated if “official status” works because there are many un-official brands that also participate in smaller ways. Major advertisers include global brands like Coca-Cola, McDonald's, UPS, Adidas, Visa.
-The top price paid for a 30-second spot on NBC during the swimming competition of 2008 was $750,000. NBC sold an additional $10 million in ads after the games started due to American wins.
Olympic ads:
The “financial crisis” and global effects
-There are both Macroeconomic and Microeconomic theories on financial crisis
-Microeconomics blames budgets
-Macroeconomics sees crisis as normal, meaning re-current. The US has been through economic crisis 3 times in the past century. Crisis helps to contain increasing prices.
-All crisis comes from not recognizing risk. In economics there is usually also an over-estimate of resources and over-extending of credit that cannot be re-paid.
-In general, financial crisis is made worse when people panic and pull out their investments and freeze spending. Crisis is made better with spending and circulation.
- The “Tequila Crisis” happened in 1994 when many countries over-extended credit to Mexico. It was speculated that Mexico could not repay and the IMF lowered the peso value. The problem was mainly in Mexico but there was also a negative Tequila Effect on South American countries with which Mexico traded, especially Brazil.
-The current US crisis began to be identified in 2007 when there were problems with personal and corporate debt, specifically the collapse of the US sub-prime mortgage market. There has also a freezing of foreign credit to the US that has complicated the matter. This limited business expansion, especially international business. It is estimated at $14 trillion dollars loss in business
-The US crisis is one of the first to also become a global crisis because of globalization and many shared networks.
-Foreign companies like Volvo sold 73,102 units in 2008 and 106,213 in 2007. The drop caused budget cuts across the board.
-Iceland had 3 major banks dependent on outside investment collapse at the same time, causing a major drop in the currency and nationalized banks.
-Russia has shown the second greatest European decline
-Food prices have risen in poor countries and aid has deceased to Africa.
Image Iceland, www.jeffsweather.com and statistics www.wikipedia.org
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