The Economy of USA

The economy of USA 

USA GDP figures

The US is currently the biggest economy in the world, its economy is worth a massive $15 trillion dollars today, this is very productive for a country that has 4 times less than the population of China and half the population of India. Only 50 years ago, the USA economy had $579 billion GDP comparing that to the $15 trillion dollars today the economy has become 26 times bigger than what it was back then. This is a huge rate of growth for the US's GDP however, China's economy valued at $7.2 trillion dollars was worth only 50 million 50 years ago. That means that there GDP has grown by a staggering 144 times the size of what it was 50 years ago. This shows that it roughly 5 to 6 years time China will surpass the US economy providing these rates of GDP growth remain the same.

Population 

The population of America currently stands at around 311 million people. Over the last 50 years the country has grown slowly in comparison to rival countries such as China. Fifty years ago the population of America stood at around 226 million people which means there was an increase of 85 million. Therefore the country grew at a rate of 38% over the last 50 years. However, America still has the third largest population in the world and roughly 1 in every 25 people are American.

Imports

In the first half of this year,United States imports were worth 227.9 Billion dollars, the US is the second largest importer in the world. Its main imports are non-auto consumer goods, fuels, production machinery and equipment, non-fuel industrial supplies, motor vehicles and parts, food and beverages.US gets its  main imports from the European Union, China, Canada, Mexico and Japan.

Exports 

In the first half of this year,United States were worth 185 billion dollars, which is $43 billion dollars lower than the amount of imports to the country. However, the United States is the third largest exporter in the world, selling machinery and equipment, industrial supplies, non-auto consumer goods, motor vehicles and parts, aircraft and parts, food, feed and beverages as its main exports. The US mainly exports to Canada, European Union, Mexico, China and Japan. 

50 facts about the American economy 

1. A staggering 48 percent of all Americans are either considered to be “low income” or are living in poverty.

2. Approximately 57 percent of all children in the United States are living in homes that are either considered to be “low income” or impoverished.

3. If the number of Americans that “wanted jobs” was the same today as it was back in 2007, the “official” unemployment rate put out by the U.S. government would be up to 11 percent.

4. The average amount of time that a worker stays unemployed in the United States is nowover 40 weeks.

5. One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers.

6. There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.

7. Since December 2007, median household income in the United States has declined by a total of 6.8 percent once you account for inflation.

8. According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006. Today, that number has shrunk to 14.5 million.

9. A Gallup poll from earlier this year found that approximately one out of every five Americans that do have a job consider themselves to be underemployed.

10. According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.

11. Back in 1980, less than 30 percent of all jobs in the United States were low income jobs. Today, more than 40 percent of all jobs in the United States are low income jobs.

12. Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job. In July, only 81.2 percent of men in that age group had a job.

13. One recent survey found that one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.

14. The Federal Reserve recently announced that the total net worth of U.S. households declined by 4.1 percent in the 3rd quarter of 2011 alone.

15. According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.

16. As the economy has slowed down, so has the number of marriages. According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married. Back in 1960, 72 percent of all U.S. adults were married.

17. The U.S. Postal Service has lost more than 5 billion dollars over the past year.

18. In Stockton, California home prices have declined 64 percent from where they were at when the housing market peaked.

19. Nevada has had the highest foreclosure rate in the nation for 59 months in a row.

20. If you can believe it, the median price of a home in Detroit is now just $6000.

21. According to the U.S. Census Bureau, 18 percent of all homes in the state of Florida are sitting vacant. That figure is 63 percent larger than it was just ten years ago.

22. New home construction in the United States is on pace to set a brand new all-time record low in 2011.

23. 19 percent of all American men between the ages of 25 and 34 are now living with their parents.

24. Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.

25. According to the Bureau of Economic Analysis, health care costs accounted for just 9.5 percent of all personal consumption back in 1980. Today they account for approximately 16.3 percent.

26. One study found that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.

27. If you can believe it, one out of every seven Americans has at least 10 credit cards.

28. The United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

29. It is being projected that the U.S. trade deficit for 2011 will be 558.2 billion dollars.

30. The retirement crisis in the United States just continues to get worse. According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.

31. Today, one out of every six elderly Americans lives below the federal poverty line.

32. According to a study that was just released, CEO pay at America’s biggest companies rose by 36.5 percent in just one recent 12 month period.

33. Today, the “too big to fail” banks are larger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

34. The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.

35. According to an analysis of Census Bureau data done by the Pew Research Center, the median net worth for households led by someone 65 years of age or older is 47 times greaterthan the median net worth for households led by someone under the age of 35.

36. If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.

37. A higher percentage of Americans is living in extreme poverty (6.7 percent) than has ever been measured before.

38. Child homelessness in the United States is now 33 percent higher than it was back in 2007.

39. Since 2007, the number of children living in poverty in the state of California has increased by 30 percent.

40. Sadly, child poverty is absolutely exploding all over America.  According to the National Center for Children in Poverty, 36.4 percent of all children that live in Philadelphia are living in poverty, 40.1 percent of all children that live in Atlanta are living in poverty, 52.6 percent of all children that live in Cleveland are living in poverty and 53.6 percent of all children that live in Detroit are living in poverty.

41. Today, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.

42. In 1980, government transfer payments accounted for just 11.7 percent of all income. Today, government transfer payments account for more than 18 percent of all income.

43. A staggering 48.5 percent of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.

44. Right now, spending by the federal government accounts for about 24 percent of GDP. Back in 2001, it accounted for just 18 percent.

45. For fiscal year 2011, the U.S. federal government had a budget deficit of nearly 1.3 trillion dollars. That was the third year in a row that our budget deficit has topped one trillion dollars.

46. If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.

47. Amazingly, the U.S. government has now accumulated a total debt of 15 trillion dollars. When Barack Obama first took office the national debt was just 10.6 trillion dollars.

48. If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

49. The U.S. national debt has been increasing by an average of more than 4 billion dollars per day since the beginning of the Obama administration.

50. During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

Type of economy

America is considered to be a mixed economy, this is where the country is run by a consistency of both public and private companies. Public companies in America have their fair dominance of different markets around the world. For example, Apple dominates a large proportion of the music player market, Microsoft dominating a lot of the software market and Nike dominates the sports wear market. America also has many private companies such as Mars a large food company and there are also many other private companies such as the US health service which is private all around the country. 

Joint Venture

Economic factors 

Exchange rates 

US Dollar	1.00 USD	inv. 1.00 USD
Euro	0.794850	1.258099
British Pound	0.630298	1.586550
Indian Rupee	55.527500	0.018009
Australian Dollar	0.968523	1.032500
Canadian Dollar	0.986250	1.013942
Emirati Dirham	3.673300	0.272235
Swiss Franc	0.954500	1.047669
Chinese Yuan Renminbi	6.349800	0.157485
Malaysian Ringgit	3.124850	0.320015
New Zealand Dollar	1.244555	0.803500

This table shows some of the current exchange rates for the US dollar. As the table shows the currency is very weak against the pound however against the rate of India and China the US dollar is very strong. This would be good for America to import goods from these countries as importers will benefit from produce being cheaper than other countries. America is likely to lose out on business with other countries because of China and India's low exchange rate values importers will more likely buy from these countries.

Interest rates

Since the recession of 2008, interest rates in America have fell from around 6% to record lows of around 0.25% today. This indicates that banks are desperate for people to take loans by making the interest rate so low. If a person took a loan of $1000 they would have to pay back only $1002.50, which is hardly any gain of profit for most banks. However, this is more likely to stimulate the economy because if more people take loans they have more disposable income therefore they will spend more on consumer goods which helps raise the levels of GDP.

The economy of India

Competition

Perfect Competition 
This occurs when there is many competitors each with an even amount of market share. 


Imperfect competition 
This occurs when there is one clear market leader and there is not an even distribution among the other competitors. 
Oligopoly
 An oligopoly is a market structure with few firms in a market, all of who consider rivals’ reactions before introducing new policies.


Monopoly- Is a theoretical market situation where a single producer supplies a particular market. 


A Cartel operates when a group of producers set prices and sometimes share their markets, this is illegal in most countries.


Game Theory

The game theory is a mathematical method that can be applied in business for calculating circumstances. A game theory is mainly to do with predicting the outcome of strategies that competitors may use when competing in the same market. This may be risky in anticipating a competitor’s strategy as it is possible that they may have a completely different strategy to what you anticipated. 

Brand proliferation 

This is where more items are brought in with new brand names. A business would have several brands in the same product category that are all categorised under the same brand type such as unilever who has more than 25 brands of ice cream. This is good because it increases the companies retail by offering a variety of products this increases the chances of the company making a profit because customers enjoy variety rather than the same product. Another benefit of this is that it keeps staff constantly motivated because of the range of products.However, there are downfalls relating to this method and one of the obvious factors would be that it increases the chances of competitors replying with competition. This could see competitors increasing advertisement to try and reduce the sales of the businesses products. Another downfall would be what’s known as brand cannibalization this is where a business has too many brands and therefore eliminates the competitions of their other brands. A prime example of this would be Heinz they have over 57 brands of sauces but most customers are unaware of these brands because Heinz tomato ketchup is too dominant.

Contestability 

 A contestable market is a market structure where there is freedom of entry and exit within the market; it involves a lot of non recoverable costs such as advertising. In a contestable market competition isn't a threat but monopoly power can be. It is therefore essential that businesses discuss the contestability of markets to ensure that their businesses don’t lose to other competitors. They need to take procedures such as market research so they can review what competitors are doing and take action on this. If they do not take action they run the risk of being out sold by competitors and not gaining enough market shares, therefore they could also have a market which is completely monopolized.

Limit Pricing 

This is where a business sets their prices so that it discourages more competitions to enter the market; this is illegal in many countries. This strategy makes it very difficult for a business that is entering this market as they have already spent a lot of money on promoting the product and developing the product. Therefore, the business needs to regain this money when they sell their products on the market however this is difficult if competitors are attracting customers to their businesses due to low pricing. It would benefit a business because it would mean they have less customers therefore they may have more potential to gain new customers within their market. However, a disadvantage would be that businesses entering the market for the first time may take a risk and reduce their prices despite this. 

The Marketing Mix

Product

In terms of the product in the four p’s the product should be a niche in the market so that it sells many of its product in the market. Therefore, the business should spend a lot of time developing the product and investing a lot of money into making sure that the product is correctly tested and appeals to its target market. In addition to this, they need to conduct primary and secondary research to have a reasonable amount of knowledge about the market they are going into. If they aren’t aware of the target market they are selling to and information about there they may not be able to prepare strategies allowing them to compete with their rival’s market share.

Price

Within the pricing aspect we have to consider the following: what strategies will be used to price these products and also how much will be charged on certain products to regain the total revenue used to develop the products. There are various ways to price a certain product such as competitive pricing, cost plus pricing, price skimming, loss leader and penetration pricing. Competitive pricing is quiet common in organisations such as supermarkets; it is useful when a business wants to encourage customers to shop at their supermarket rather than anywhere else. Another strategy is cost-plus pricing; this is when the business allocates a percentage of profits towards covering development costs. The third type of strategy is price skimming this is where a business is aware they have high demand for a product and take advantage by covering all costs and having a large profit margin. Following this, is a loss leader, this is where a business sells a product at a loss in the hope that customers will be attracted to a range of other products the business has. Finally, there is penetration pricing, this is where a business sets a low price in order to attract high demand. It aims to get customers to look at highly price products and also to gain a large market share rapidly eliminating competition.  When pricing a product a business must always consider how much demand on the market there is for the product. Another factor they need to consider is how much of their cost of making the product is they covering for this product to be making the business a profit.

Promotion

The promotion of your product is crucial because promotion can really influence the sales of a product if done correctly and on the other hand can be bad for sales if sending out the wrong image. There are two types of promotion that we particularly look at when we are selling products. The first is above-the-line promotion and the second is bellow-the-line promotion. Above- the-line promotion is when there are high expenses involved such as TV, radio broadcast and national newspapers. Despite having such high expenses attached to it, it can benefit in the long run as these campaigns are seen by millions of viewers within a country. On the other hand, there is bellow-the-line promotion; this is where a business has lower cost attached to promoting their products. Some examples include leaflets, flyers, local newspapers and shop windows. These can be useful in the long run also because if a business has the right locations and are promoting well in a certain area(s) then it can help them expand quickly.

Place

The location of the business and where it assembles is crucial and the decisions involved in terms of how they will sell their product. Where a product sells it products can determine the profit margins of the business and how much the business can charge for a product. For an example, if a product was sold in Oxford Street higher prices could be charged in comparison to Ilford high street. However, a business must be aware of the location they are selling in terms of how much funds they have because in an expensive location it could cause a business to liquidate if they don’t have enough funds to pay to rent the place or buy it. Location is also important in terms of how the product is sold. Naturally, more people will be aware of a place that is on the high street in comparison to a newly started website. This is why location will affect a business because a high street shop could say money on advertisement because more people will be aware of a shop when it starts compared to an internet website. On the other hand, an internet website would have lower start-up costs in comparison to a high street shop.

Price Wars 
This is when two or more businesses are continually charging extremely low prices to make companies suffer who are smaller than them suffer this is to eliminate competition.

Takeovers and Mergers 
A takeover occurs when a business is bought by a company or a wealthy individual normally they take over by buying just over 50% of the business. A merger occurs when two companies combined together the business merged as one means that the owner has an 100% share in the business.

Product extension strategies 
Here are some examples of product extension strategies:

• Sales promotion 
• Modifying the product 
• Loss leader 

Market Analysis

Market orientation 
When firms base their planning on the customers needs and wants this can be based on trailing and testing. 


Product orientation 
When firms based their planning on its own requirements, it doesn't base any of its decisions on customers. 


Asset-led marketing 
When a firm bases its planning on customer needs and wants and its own strengths. 


Adding Value
A company bases it prices in relation to the benefits it may have for the business. When a business adds value is  the amount of benefits something will have in comparison to its price. This means that it doesn't necessarily have to be cheap but if it is good value for money then it will be worth it for the customer. 








Sales of the product  X 100% 

Total market size 

Markets 

• Market-Any place or process bringing buyers and sellers with a view to agreeing a price. 
• The bases of how an economy operates- through production and subsequent exchange. 

The difference between a Geographical and non-geographical market? 

Considerations for starting business in a market

• Types of market 
• Size of the market 
• Cost of resources/ overall costings
• Marketing mix( Product, price, place, promotion) 
• Pricing strategies
• Promotion 
• Distribution 
• E-commerce( selling online) 
• Cost to break-even 
• Target Market 
• Advertising- sponsorship 
• Tax implications
• Promotional activities- Above/ bellow the line 
• Running cost e.g. Electricity, Gas, Water
• Copywrite 
• Customer Satisfaction- Measured through quality
• Morals/ ethics(fair trades) 
• Stakeholders e.g. Government, community, customers
• Wages for staff/ training of staff(minimum wage) 
• Laws- health & safety, government laws (discriminantion) 

Entrepreneur- A person who is willing to take risk to ensure the success of their business.

Examples of Entrepreneurs: 
Alan Sugar 
Richard Branson 
Bill Gates 


Market Analysis 
Niche in the market 
Competitors
Market Share/ Market Growth 
Time periods 
Investigator Price 
Start up, market cost ( product/price) 
Bank Conditions(Economy) 

Effects recession has on smaller business' 

• Less competotrs 
• less profit/ lower prices 
• less investments 
• Smaller variety of products 
• less customers 
• lack of demand 
• more cost (overheads, running cost) 
• change pricing strategies 
• more likely for banks not to lend 
• more owner's funds used 
• higher failure rate (75% of smaller businesses fail) 
• resources more expensive 
• prices for supplies increase 
• less trade credit- minimize risk 

Business start-up 

1. passion/hobbie 
2. to make a profit 
3. gap in the market 
4. work on hours 
5. own boss (independance) 
6. Improve circumstances 
7. Enjoy feeling of risk 
8. Cashing in on a business idea 
9. Discovery of a gap in the market 
10. Providing assistance to the economy 
11.  New business idea- provide a legacy 
12. Jobs for unemployed 

Possible problems with ( start-up) 

• Lack of investment 
• Competitors(too much competition) 
• Lacks of risks 
• Location 
• Inflation( prices to high) 
• lack of security 
• employment 
• market mix( product, prices, place & promotion) 
• Marketing 
• Economies of scales 

Customers & Sales- Big vs Small 

Small 

• Smaller cost 
• Lower tax rate 
• Less variety 
• less sales 
• Better quality product( job production)
• More customer loyalty 

Big 

1. Larger income 
2. Higher tax rate 
3. More sales 
4. Retain smaller percentage of profit 
5. Higher market shares 

The size of the market 

• Profits made by business 
• Market share of business
• Value of Sales 
• Number of employees
• Volume of sales

A large market means lots of potential customers.

 A small market means potential profits could be limited. 

Market Share & market growth

Market share- Worked out as a percentage.

Firms with large market shares have greater power over suppliers and distributions.

They can demand preferential treatment & better rates.

Market growth

• Market growth refers to an increase in the size of the market for a particular product. 

If the market is shrinking, how would it effect competitors? 

• Less competition 
• Fierce competition 
• Larger opportunity profit 
• Price increases 
• Liquidation of companies 
• Less room for venture

Why enter a growing market?

More chances of success 

More money to be made 

Higher demand 

Less fierce competition 

Less chance of failure

Benefit from economies of scale more

Room for expansion 

Expansion 

• Company develops 
• Overseas(multi-national) 
• More products 
• Sales increase 
• More customers 
• More employees 
• Location 
• More brand awareness
• More accessible 

Market Segments 

• A market segment is an identifiable group with similar needs and want wants within a market. 

Examples:- Age- Based on a particular age group e.g. over 18's 

1. Gender- Differs between male & females and unisex
2. Income- E.g. Rolex and Porsche highly priced 
3. Socio- economic groupings- Based on income and jobs e.g. A,B,C,D,E
4. Demographics- Area you live in (Poverty/rich area) Religion
5. Purchase occasion- Bought on occasion e.g. flowers, birthday cards.