Economical Enviroment in Kenya

Jay Mehta

• Ganpat Chauhan

• Neha Soni

• Mansi Nandani

• Maunik Ranpara

• Gaurav Kathrani

Guided byProf. PRIYANKA

MEHTA

Main Focusing Part is Economic Environment

Information of Country Kenya

2

What is Economic Environment? Definition :-

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Main Focusing Part is Economic Environment

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COMPONENTS OF ECONOMIC ENVIRONMENT Income and wealth: Income in an economy is

measured by GDP, GNP and per capita income. High values of these factors show a progressive economic environment.

Employment levels: High employment represents a positive picture of the economy. However, there are many forms of unemployment, including partial employment and disguised unemployment.

Productivity: This is the output generated from a given amount of inputs. High levels of productivity support the economic environment.

Classifications of the Economic Environment

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The economic environment can be classified into:

Microeconomic environment: It includes the economic environment of a particular industry, firm or household and is primarily concerned with price determination of individual factors. The main consideration from a microeconomic perspective is the efficient allocation of resources. This is necessary to maximize total output.

Macroeconomic environment: It includes all the economic factors in totality. The main consideration here is the determination of the levels of income and employment in the economy.

Over the course of the twentieth century, the focus has shifted from cities and countries to the global economy being the chief economic unit.

Factors Affecting the Economic Environment

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Inflation and deflation: Inflationary and deflationary pressures alter the purchasing power of money. This has a direct impact on consumer spending, business investment, employment rates, government programs and tax policies.Interest rates: Interest rates determine the cost of borrowing and the flow of money towards businesses. Exchange rates: This impacts the price of imports, the profits made by exporters and investors and employment levels (also through the impact on the tourism industry).Monetary and fiscal policy: This helps in attaining full employment, price stability and economic growth.The economic environment is also influenced by various political, social and technological factors. These include a change in government and the development of new technology and business tools.

Micro Environment:- Firms

There are three Firms generate economy are as follow

Agriculture Industrial Services

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Agriculture

Agricultural production grew by 4.7% annually during the same period, stimulated by redistributing estates, diffusing new crop strains, and opening new areas to cultivation.

After experiencing moderately high growth rates during the 1960s and 1970s, Kenya's economic performance during the last two decades has been far below its potential.

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cont The economy grew by an annual average of

only 1.5% between 1997 and 2002, which was below the population growth estimated at 2.5% per annum, leading to a decline in per capita incomes.

The decline in economic performance in the last two decades was largely due to inappropriate agricultural policies, inadequate credit, and poor international terms of trade contributing to the decline in agriculture.

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Industry Sector Kenya’s industry sectors consist of mining,

horticulture, tourism, manufacturing, electricity and information technology. Agriculture is the mainstay of the Kenyan economy. It engages more than 75% of the population and contributes almost 21% to the country's GDP. However, industrial output accounts for only 16% of the national production.

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Services Accounting for approximately 56 percent of GDP,

the service, or tertiary sector, is the most valuable area of economic activity in the domestic economy. The service sector consists mainly of 2 major areas: tourism and financial activities. Retail , which includes a significant number of restaurants in the urban centers, is dominated by small-scale street vendors, many of whom form part of the informal sector . In total, 144,300 Kenyans were involved in retail in 1996, not counting those that were engaged in the informal sector. The informal sector itself, known in Kenya as "jua kali," employs approximately 64 percent of all Kenyan urban workers.

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Cont…… It is also the most dynamic sector in the

economy in terms of job creation, accounting for about 90 percent of new jobs outside the smallholder farm sector. Informal sector activities, such as carpentry, motor vehicle repair, tailoring, hawking , and selling various fruits, vegetables, and other commodities, are largely service-based. Though the government recognizes the value of the informal sector, the U.S. Department of State Country Commercial Guide 2000 argues that it could do more to develop needed infrastructure.

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GDP= GROSS DOMESTIC PRODUCT

Since 2003, the gross domestic product (GDP) of Kenya has expanded steadily each year after more than a decade of contraction.

The real GDP expansion in 2007 was at 6 per cent, with a projection to climb to 10per cent annually by 2012, as stipulated in the Government plan Vision 2030.

Unfortunately, the economic disruption caused by deep economic inequalities between classes and ethnic groups, the regional economic imbalances and the growing youth unemployment, as well as the post-election instability in 2007, will almost certainly lead to a downward revision of these projections.

Even with impressive economic growth for over five years and a 10 per cent fall in the number of people living below the poverty line.

Essentially , the GDP is a figure which measure the value of the goods and services produced in a given time period.

The GDP in KENYA expanded 2.20% in the third quarter of 2012 over the previous quarter.

In manufacturing sector only 14% of the GDP. Agriculture ( including coffee and tea) is the

main source of revenue for 70% of the population.

GNP=GROSS NATIONAL PRODUCT

Gross national product is also a calculator of economic activity.

When calculating GNP the value of what foreign countries earn in the given country is subtracted from the value.

Ex: if a us business had a manufacturing plant located in India, any profit made by the plant would not be calculated in GDP, but would be accounted for in the GNP.

Consequently , those both GDP and GNP are measured of economic activities.

The two values can be extremely different. GDP concern is border. GNP concern is producer.

EMPLOYMENT

Unemployment rate in Kenya increased in 2011 40% from 12.70% in 2006.

Unemployment rate in Kenya is reported by the Kenya national bureau of statistics.

In Kenya, the unemployment rate measures the number of people actively looking for a job as a percentage of labour force.

Difference

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Economical Rates Kenya India

GDP in 2012

GNP in 2012

Macro Environment

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SocialThe mood and demographics of the population make up the

social area of macro environment factors. For example, a society that places an emphasis on self-guided jobs with room for creativity may cause organizations to redefine job descriptions and adapt the model of the workplace to attract workers.

Technological Technological macro environment factors can

influence how an organization does business. A new type of machinery, computer chip, or product created through research and development can help a company stay modernized and ahead of the market curve.

EnvironmentalEnvironmental concerns are important to businesses both in

the short and long term. In the short-term, things like natural disasters can disrupt production and supply operations, or even destroy company assets.

CONT….. LegalLegal factors can limit or change how a

business operates. For example, they may have to hire additional supervisory staff or purchase safety equipment after a new health and safety law is passed. Child labour laws often limit the hours a minor can work and require set break periods.

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Macro Environment

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Macro Environment Carts Graph Pie charts of food end etc. (from-gcrrepo file)

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FDI

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Even after Congress came to power and reforms began, FDI was not in anyway defined

in 1991 nor was it considered a mechanism for development. In the context of the time

the emphasis is placed on stabilizing the economy. The goals for the upcoming year

were to consolidate gains, bring problems under control and restore “the government’s

Foreign trade acts as a window on the world through which knowledge of new products, processes,

technology, marketing, finance, employee training and management techniques can flow.

CONT…….

capacity to pursue the social goals of generating employment, removing poverty and

promoting equity”16. What this illustrates is that while the new policy had brought in a

dramatic increase in investment activity, there was no clear understanding of FDI as a

proper mechanism for development or its future role.

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Business with telecome and media sector independent radio and television media are

the Kenya Television Network (KTN), the broadcast media arm of the Standard Group; Nation Radio/TV, owned by the Nation Media Group; and Citizen Radio/Television, owned by Royal Media Services. The government owns and controls the Kenya Broadcasting Corporation (KBC) and its subsidiaries. KBC is the only national radio and television network.

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