Iceland Economic Environment Analysis

In: Business and Management

Submitted By jeane214
Words 1558
Pages 7
ICELAND: EXCHANGE RATES, BoP & the FINANCIAL CRISIS

From Riches to Rags and Back Again
Since Iceland's financial crash in 2008, the country has been floundering to get back on its feet. The fall this charming and chilly land experienced was nothing short of spectacular – with GDP contracting 12.5% from 2007 to 2010 i and unemployment peaking at 9.4% in 2007 and culminating in a total government collapse on January 27, 2009.ii Altogether, the banks – who owed more than six times the country's GDP in debtiii - defaulted on 85 billion,iv leaving the previously affluent residents angry and afraid. Since that time, the country has taken drastic measures to right the economic situation, and while Iceland is not yet out of danger, the economic future is certainly looking hopeful. How was this tiny country, against all odds, able to crawl back from the brink of disaster?

Looking Back
First, let's back up and take a look at Iceland's recent economic history. The 1990s, Iceland's golden days, combined free-market and capitalist principles with a robust welfare system. At the time, this produced strong economic growth plus low unemployment and a relatively even distribution of income. As a result, Iceland was rated as "having one of the world's highest levels of economic freedom as well as civil freedoms."v In the second quarter of 1998, the GDP growth rate reached 10.20%.vi (For comparison purposes, the current GDP growth rate in the US is 2.4%.vii) Iceland's ability to sustain this expansionary period through the 90's and early 2000's was due to the deregulation and privatization of the banks as well as Iceland's decision to join the EU Single Market in 1994. The single market enabled goods and services to move easily across borders bolstering Iceland's aggregate demand, most notably in the fishing industry. By 2000, marine products accounted for more than 70% of…...

Similar Documents

Economic Environment

...its economic growth is of particular concern (Stewart 2012). Application of Concepts Both economic environment and the concept of corporate social responsibility (CSR) can be demonstrated in this article. In particular, the nature of BHP's mining business, which is regarded as a significant contributor to Australian economy (Maddock and McLean 1987) determines its need to pay close attention to the opportunities and threats posed by the global economic environment (Blainey 2003). For example, slowdown in China's economic growth and recent European economic recession have impact on Australia's resource exports (Stevens 2012). The Australian mining industry which has once benefited from the surge in demand driven by the rapid growth of emerging economies in Asia since 2003 and the shortage of global supply (Stevens 2012) is now facing a difficult period signaled by the drop of China's GDP growth from 10 per cent to a mere 8 per cent (Connolly and Orsmond 2011). China's demand for resources has declined as a result of its slowdown in industrialisation and urbanisation, causing a significant decrease in global steel prices and thus a huge downward influence on BHP's profits (Stevens 2012). CSR raises issue on BHP's reputation by job cuts to sustain profitability. It is conflicting to BHP's attempts to put sustainability a first priority including reducing personnel exposure in underground mining and helping communities to generate livelihoods (BHP......

Words: 794 - Pages: 4

Global Economic Environment

...Global Economic Environment Generally, global economic environment is influenced by various factors such as technological, environment, political, socio-cultural, and demographic that directly affects businesses. Economic environment refers to the nature of economic systems and policies, distribution of income and wealth, and level of income. Indeed, economic environment has a complex and very dynamic nature; it is continually changing along with the changes in political situations and government policies. Global Economic Environment Mainly, global economic environment is comprised of several components including the economic systems, conditions, policies, legislations, and environment. Indeed, the economic policies being imposed in every business unit are significantly influences by the overall condition of economy. This includes the improvements that occurred in economic conditions such as the purchasing power of the public, standard of living, distribution of income, and supply and demand. Mainly, these factors reflect the size of the market. Another factor reflecting the economic condition is the business cycle, which is critical to every business unit. It refers to the different stages such as prosperity, boom, decline, depression, and recovery. The economic condition of a country can be understood through its national income, per capita income, and distribution of income, demand and supply trends, inflation rate, industrial growth rate, trends in industrial......

Words: 812 - Pages: 4

Economic Environment in the Film Industry

...Global Economic Situation The old expression “When America sneezes, the rest of the world catches a cold”, doesn’t always hold true. Since the U.S. has been in a recession, the rest of the world has suffered to a certain degree; however, the film industry in some parts of the world seems to be an exception. The global financial crisis resulted in the most severe worldwide recession and has since been faced with challenges for the last several years. The decline of the U.S. stock market has been the major challenge that viciously spread to various parts of the globe. For the most part, the global market has seen mixed results from film studios worldwide. Despite an increase in box office earnings, U.S. studios have been suffering, by having no choice but to downsize, and cut back on production and development. Although U.S. motion pictures are seen some adversity, interestingly the industry is a major private sector employer. According to the Motion Picture Association of America (MPAA) the industry employs 2.1 million workers and 95,000 companies, which spans from make-up artists to costume designers, stuntmen to set builders, accountants to caterers (MPAA, 2011). Domestically, this powerhouse of an industry has collectively contributed to more than $175B to U.S. GDP. Directly, the industry produces $42.1B in wages, which is approximately 32% higher than the national average. The median salary for film and television that includes high quality jobs as producing,......

Words: 2170 - Pages: 9

Analysing Economic Environment

...ANALYSING THE ENVIRONMENT Analysis of the macro-environment may be analysed into six segments using the PESTEL framework. Political Economic Socio-cultural Technological Environmental Legal THE POLITICAL ENVIRONMENT Government is responsible for providing a stable framework for economic activity and, in particular, for maintaining and improving the physical, social and market infrastructure. Public policy on competition and consumer protection is particularly relevant to business strategy. GOVERNMENT POLICY Government policy affects the whole economy, and governments are responsible for enforcing and creating a stable framework in which business can be done. A report by the World Bank indicated that the quality of government policy is important in providing three things: Physical infrastructure (e.g. transport) Social infrastructure (education, a welfare safety net, law enforcement, equal opportunities). Market infrastructure (enforceable contracts, policing corruption). PUBLIC POLICY ON COMPETITION In a perfect monopoly, there is only one firm that is the sole producer of a good that has no closely competing substitutes, so that the firm controls the supply of the good to the market. The definition of a monopoly in practice is wider than this, because governments seeking to control the growth of monopoly firms will probably choose to regard any firm that acquires a major share of the market as a potential monopolist. Monopoly generally exploits customers, but it may......

Words: 2515 - Pages: 11

Marco Marketing Environment Analysis

...Marco Marketing Environment Analysis There are government regulations and legal issues in political factors. This aspect is important because the stability of political in Finland could affect the whole industry. Finland is one of members of World Trade Organization (WTO), where the country offers large free markets. These large free markets operate without taxation in import as the transactions are based on negotiation and agreement. With this, it will be a great opportunity for Oldtown White Coffee to expand their business in Finland’s market and make a profit out of it. Economics Economic factors affect the purchasing power of consumers and the firm’s cost of capital. The Gross Domestic Product (GDP) in Finland contracted at an annual rate of 0.40 percent in the last reported quarter. Based on statistic, from 1975 until 2010, Finland's average quarterly GDP Growth was 0.56 percent reaching an historical high of 5.00 percent in September of 1980 and a record low of -5.30 percent in March of 2009. Wages and salaries of worker in Finland increase 5.5% of national income from year 2005 until 2009. Finland has continues to attract foreign investment due to its economic success. With the strong economic status, Finland is surely suitable country for Oldtown White Coffee to expand their business. Social-Cultural Social factors are very important because they can easily affect the consumer needs and the size of the potential markets. One of the social factors is the cultural......

Words: 1626 - Pages: 7

Economic Analysis: Monetary Policy & Environment

...In a free market society where firms and households shape the economy, government intervention can significantly contribute to economic stability and improve current economic outcomes. The successful use of government policy tools is evident through an examination of environmental economics, monetary policy and the labour market. With regards to the environment and the labour market, the government have made use of taxes, permit trading systems, general regulations and transfer payments to influence economic outcomes in each of these respective fields. By studying monetary policy it is also apparent that control over the interest rate mechanism is another effective tool used by policymakers to enhance the present and future economic circumstances of a nation. As society continues to expand, the quality of the environment is beginning to deteriorate. Governments to prevent this from occurring and to avoid market inefficiency, can help the economy through policy tools such as enforcing taxes and regulating pollution permit trading systems. As shown in Figure 1 below, market equilibrium (Me) on its own is inefficient because it does not take into consideration the negative externalities that arise during production and does not account for a lack of incentive by firms to incorporate additional production costs. The implications of market failure will mean that a society will not be allocative efficient and as a result output will be greater than it what it should be (Q0......

Words: 1261 - Pages: 6

Global Economic Environment in: Business and Management Global Economic Environment Global Economic Environment Generally, Global Economic Environment Is Influenced by Various Factors Such as Technological, Environment,

...Global Economic Environment In: Business and Management Global Economic Environment Global Economic Environment Generally, global economic environment is influenced by various factors such as technological, environment, political, socio-cultural, and demographic that directly affects businesses. Economic environment refers to the nature of economic systems and policies, distribution of income and wealth, and level of income. Indeed, economic environment has a complex and very dynamic nature; it is continually changing along with the changes in political situations and government policies. Global Economic Environment Mainly, global economic environment is comprised of several components including the economic systems, conditions, policies, legislations, and environment. Indeed, the economic policies being imposed in every business unit are significantly influences by the overall condition of economy. This includes the improvements that occurred in economic conditions such as the purchasing power of the public, standard of living, distribution of income, and supply and demand. Mainly, these factors reflect the size of the market. Another factor reflecting the economic condition is the business cycle, which is critical to every business unit. It refers to the different stages such as prosperity, boom, decline, depression, and recovery. The economic condition of a country can be understood through its national income, per capita income, and distribution of income, demand......

Words: 279 - Pages: 2

Economic Environment

...Macroeconomic and Microeconomic environment Macroeconomics looks at aspects of economies as a whole instead of the individual markets, basically a study looking at the bigger picture of the economy. Offering a broader focus is probably the most important difference between microeconomics and macroeconomics. This branch of economics is one of the two most general fields, particularly looking at the structure, behaviour, decision-making and performance of national, regional and global economies. Through the study of aggregated indicators, macroeconomists understand the functioning of whole economies. By using GOP, unemployment rates and price indices an explanation can be made in regards to the relationships between national income, current unemployment levels, changes in employment, pricing levels, inflation, savings, investment, international trade and the rate of growth. Even though there is a broad field of study where macroeconomics is concerned, two areas of research are of utmost importance: * Understanding the causes and consequences of the business cycle, which include fluctuations in trade, economic activity and trade during periods of rapid economic growth and periods of decline. * Understanding the demands of a particular product, service or commodity during a long period of time in which national income increases. Macroeconomics enables large corporations and governments to analyse variables and behaviour's to find answers to questions such......

Words: 1187 - Pages: 5

The Economic Environment

...Economic Environment This Unit covers the second of the PESTLE elements LEARNING OUTCOMES The application of trade theory to explain the benefits of engaging in International Trade Economic Implications of a country’s membership of a trading bloc for a business Compare the various types of Foreign Direct Investment (FDI) and analyze how they may affect the various countries involved as well as the businesses within these countries INTERNATIONAL TRADE THEORY Four Theories of International Trade are: Absolute Advantage Product Life-cycle Theory New Trade Theory Porter’s determinants of National Competitive Advantage MERCANTILIST THEORY States that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports. Aim is to maximize exports and minimize imports. Rest on the idea that if one country gained, then another must lose. MERCANTILIST THEORY Problems : This theory excludes the fact that in some cases it is good to import. By discouraging import the population will have to do without certain consumer items. ABSOLUTE ADVANTAGE This concept is generally attributed to Adam Smith . Refers to the ability of a country/firm to produce greater output of a good or service than other countries/firms using the same amount of resources. Smith argued that a country should specialize in producing those goods/services for which it has an absolute advantage. Countries would......

Words: 2401 - Pages: 10

Economic Environment of Business

...normal signature and student number above and on the cover of the exam book(s) used. PART A: Multiple Choice Questions (30%) 1. Market supply curves tend to be more price elastic if the time period is long rather than short because— a. Firms are better able to adapt their output rates to price changes in the long run. b. External economies will be realized. c. Consumers are better able to find substitute goods. d. Input prices would be expected to increase with the length of the time period. e. Economic profits are reduced to zero in the long run. Marginal product exceeds average product when— a. Total product is increasing. b. Average product is increasing. c. Average product is decreasing. d. a and b. e. a and c. A frequently cited reason for increasing returns to scale is— a. Increased input prices. b. Greater specialization. c. External diseconomies. d. Larger fixed costs with a larger plant size. e. Difficulty of managing a huge enterprise. 2. 3. C5, Economic Environment of Business, Final Examination, page 1 of 8 1 4. In determining whether to add an additional flight to an established airline, which of the following costs are irrelevant? a. Depreciation on the existing aircraft. b. The salary of the president. c. Insurance on the aircraft. d. Administrative costs. e. All of the above. If the two assumptions of profit maximization and freedom of entry and exit are satisfied, then in the long run each firm will operate where— a. Price equals short-run......

Words: 2513 - Pages: 11

Economic Environments

...Economic Environments within Businesses Economy Great Britain is one of the world's leading industrialized nations. It has achieved this position despite the lack of most raw materials needed for industry. It must also import 40% of its food supplies. The UK has been dependant on the export of manufactured goods in exchange for various raw materials and food. The countries manufacturing sector includes; machines tools, electric power, motor vehicles, metals, chemicals,paper, textiles, clothing etc. Economics is concerned with the process of satisfying the needs and wants of the population, by using the limited resources of the economy in the most efficient way. There are generally considered to be four main objectives of an economy: A low level of unemployment A low level of inflation A high level of economic growth A good foreign trading position Gross Domestic Product (GDP) The value of a country's overall output of goods and services at market prices, excluding net income from abroad. GDP can be estimated in three ways which, in theory should yield identical figures. They are; Expenditure basis: how much money was spent Output basis: how many goods and services were sold Income basis: how much income (profit) was earned. The main criticisms of GDP as a realistic guide to a nation's well-being are that; It is preoccupied with indiscriminate production and consumption. It includes the cost of damage caused by pollution as a......

Words: 960 - Pages: 4

Legal, Social and Economic Environments

...fashion trends as I see fit. The flexibility of ownership forces me to use creativity outside of the norm. Legal, Social and Economic Environments Casual Closet was established in 2009 by a couple who lives in the Suburb areas of Detroit Michigan. The couple opened this retail market in what is called a “Flea Market setting.” Because of the high rents associated with strip malls and shopping malls this was the most economical environment to start a new business. Casual Closet provides upscale urban wear for men and women at affordable prices. The store also carries handbags, scarves belts and a variety of fragrances. Casual Closet provides stylish attire for the consumer and the owners receive profitable income in exchange for a service that is being provided. The owners of Casual Closet would like to have the opportunity to expand in multiple locations and eventually in different cities. The basic legal environment of this retail store is to make sure that employees are treated fairly and the company follows the guidelines imposed by state, local and government authorities. Casual Closet is located in Detroit Michigan where companies have to establish the type of business that it is going to be. The different types of businesses are Sole Proprietorship, Partnership and Corporation. (Authority Direct) A company must establish the legal environment of the country in which the company operates. The owner of a company should make sure that the legal conditions are being......

Words: 1387 - Pages: 6

The Global Economic Environment

...CHAPTER 2 THE GLOBAL ECONOMIC ENVIRONMENT SUMMARY A. The economic environment is a major determinant of global market potential and opportunity. In today’s global economy, capital movements are the driving force, production is uncoupled from employment, and capitalism has vanquished communism. Based on patterns of resource allocation and ownership, the world's economies can be categorized as market capitalism, centrally-planned capitalism, centrally-planned socialism, and market socialism. The final years of the twentieth century were marked by transitions toward market capitalism in many countries that had been centrally controlled. However, great disparity still exists among the nations of the world in terms of economic freedom. B. Countries can be categorized in terms of their stage of economic development: low income, lower middle income, upper middle income, and high income. Gross domestic product (GDP) and gross national income (GNI) are commonly used measures of economic development. The 50 poorest countries in the low-income category are sometimes referred to as least-developed countries (LDCs). Upper middle-income countries with high growth are often called newly industrializing economies (NIEs). Several of the world’s economies are notable for their fast growth; the BRIC nations include Brazil, Russia, India, and China. The Group of Seven (G7), Group of Eight (G-8), and Organization for Economic Cooperation and Development (OECD)......

Words: 8143 - Pages: 33

Economic Analysis

...In any business organization there are two different environments, internal and external environment. Both environments are affect the business in their own ways. The External Analysis examines opportunities and threats that exist in the environment and can be influenced by many factors for example, politically, socially, legally and culturally. Both opportunities and threats exist independently of the firm. External environment can be studies into two parts, general and immediate environment. Firstly, general environment which involves economic, political, legal, and social. Secondly, immediate environment which involves suppliers, competitors, labor, market, and financial intuitions. 1. Environmental analysis: This analysis is divided into five areas: economic, technological, political-legal, sociocultural, and future. Goal: To identify external opportunities, threats, trends, and strategic uncertainties(Marketing and Its Environment, pg 44) Economic What economic trends might have an impact on business activity? (Interest rates, inflation, unemployment levels, energy availability, disposable income, etc) Technological To what extent are existing technologies maturing? What technological developments or trends are affecting or could affect our industry? Government What changes in regulation are possible? What will their impact be on our industry? What tax or other incentives are being developed that might affect strategy development? Are there political or government...

Words: 640 - Pages: 3

Indian Economic Environment

...INDIAN ECONOMIC ENVIRONMENT The Economy of India , ninth largest in the world by nominal GDP and third largest by purchasing power parity (PPP), is going to touch new heights in coming years. The history of Indian economy can be broadly divided into three phases: Pre- Colonial, Colonial and Post Colonial.  Pre Colonial: The economic history of India since Indus Valley Civilization to 1700 AD can be categorized under this phase. During Indus Valley Civilization Indian economy was very well developed. It had very good trade relations with other parts of world, which is evident from the coins of various civilizations found at the site of Indus valley. Before the advent of East India Company, each village in India was a self sufficient entity. Each village was economically independent as all the economic needs were fulfilled with in the village. Colonial: The arrival of East India Company in India ruined the Indian economy. There was a two-way depletion of resources. British used to buy raw materials from India at cheaper rates and finished goods were sold at higher than normal price in Indian markets. During this phase India's share of world income declined from 22.3% in 1700 AD to 3.8% in 1952.  Post Colonial: After India got independence from this colonial rule in 1947, the process of rebuilding the economy started. For this various policies and schemes were formulated. First five year plan for the development of Indian economy came into implementation in......

Words: 1196 - Pages: 5

Oralb PRO 600 rosa cross-action | SHIPPED FROM OVERSEAS Generic 12000mAh LED Dual USB Ports Solar Panel Power Bank Case Charger DIY Kits Box -20% KSh 546 KSh 683 Buy now | WinRAR v5.10 (x86 x64).