usa - pestel

8/12/2019 USA - PESTEL

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Group EffortsBy :-

Ankit Gakhar

Antil Sethi

United States of America


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Global Trade of United States

Economic/Political/Legal System, tradeVolume, Composition, Macro Economic

Challenges, BoP, GNP, GDP, Per-Capita

Income, Purchasing Power, Debt Problem

Objectives

To do brief Economic/Political/Legal Systemanalysis of USA

To study BoP, GNP and GDPTo identify various economic indicators

To identify Macroeconomic opportunities andchallenges


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BRIEF HISTORY The indigenous peoples of the U.S. mainland,

including Alaska Natives, are believed to havemigrated from Asia, beginning between 40,000and 12,000 years ago

Britain's American colonies broke with the mothercountry in 1776 and were recognized as the newnation of the United States of America followingthe Treaty of Paris in 1783.

Buoyed by victories in World Wars I and II andthe end of the Cold War in 1991, the US remainsthe world's most powerful nation state.

They could cement their supremacy withpossession of Atomic Bombs and sending man tomoon


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FLAG HISTORY

The flag consists of thirteen horizontal stripes, seven redalternating with 6 white. The stripes represent the original

13 colonies, the stars represent the 50 states of the Union.

The colours of the flag are symbolic as well:

Red - Hardiness and Valour

White - Purity and Innocence

Blue- Vigilance, Perseverance and Justice


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GEOGRAPHICALSIGNIFICANCE North America, bordering both the North Atlantic

Ocean and the North Pacific Ocean, between Canadaand Mexico

Diverse - Vast central plain, mountains in west, hillsand low mountains in east; rugged mountains andbroad river valleys in Alaska; rugged, volcanictopography in Hawaii

Resources - Coal, copper, lead, molybdenum,phosphates, rare earth elements, uranium, bauxite,

gold, iron, mercury, nickel, potash, silver, tungsten,zinc, petroleum, natural gas, timber

4th Largest country in terms of area (9,826,675 sqkm)

Lowest point: Death Valley (86 m)

Highest point: Mount McKinley (6,194m)


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QUICK FACTS Number of States50

CapitalWashington D.C

Largest CityNew York

Independence Day4th

July 1776 3rdmost populous country

National Language - English

National BirdBald Eagle

Chief Justice - John Roberts

The country accounts for 41% of global militaryspending


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QUICK FACTS

White72%

Black/AfricanAmerican

13%

Asian5%

merican Indiannd Alaska Native

1%

Pacific Islander

0% Other6%

Two or more races3%


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POLITICAL SYSTEM Federal presidential constitutional republic Two-party system - Democratic Party (founded in

1824), and the Republican Party (founded in 1854) President - Barack Obama (D) Vice President - Joe Biden (D) Speaker of the House - John Boehner (R) First President - George Washington

INFLUENCERS

Environmentalists; business groups; labor unions;churches; ethnic groups; political action committees orPAC; health groups; education groups; civic groups;youth groups; transportation groups; agricultural groups;veterans groups; women's groups; reform lobbies


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Federal Presidential Constitutional

Republic

Federal republicis a federation of states with arepublican form of government

Clear division of Power between federalgovernment and state government

RepublicNot governed by Monarch but bypeople

PresidentialThe head of country is president

Constitutionis a set of fundamental principles orestablished precedents according to which astate or other organization is governed. It bindsthe states.


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Levels of US Government

Federal Governs Country

State

50 States + District of Columbia + (in some areas) Puerto Rico Governs States

Local

commonly split between county and municipal governments.

fire protection, sewer transit, manage school and service water 36000


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Levels of US Government


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BRANCHES OF FEDERALGOVT

Legislative

BicameralCongress

(Ruling +Opposition)

Impeach Makes

Federal law Declareswar

Executive

President Commander

in Chief Appoints

Cabinet andJudges

Judicial

SupremeCourt and

Federalcourts

Law keepers


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POLITICAL SYSTEM Permanent member of the United Nations SecurityCouncil and has veto power. It is a member of the G8, G20, WTO and NATO Organization for Economic Co-operation and

Development. Claimed superpower status after disintegration of

USSR, it is now challenged by China. Centre of World Major differences - Greater power in the upper house

of the legislature, a wider scope of power held by theSupreme Court ,the separation of powers betweenthe legislature and the executive, and the dominanceof only two main parties. Third parties have lesspolitical influence in the United States than in otherdeveloped country democracies


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CAMPAIGN FINANCE

Fundraising plays a large role in getting acandidate elected to public office. Without largesums money, a candidate has no chance ofachieving his goal.

Democrats depended on donations fromorganized labour while the Republicans relied onbusiness donations


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1 .Democratic Party

2. Republican Party

3. Constitution Party

4. Green Party

5. Libertarian Party6.Independent party

7.Socialist party


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MAIN SECTORS OF THEECONOMY RETAILING ENERGY

AGRICULTURE

MANUFACTURING FINANCE


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RETAIL SECTOR

The retail industry is the second largest industry in theU.S.

Responsible for approximately 12% of all US

employment Over $3.8 trillion in sales annually ($4.2 trillion if food

sales are included). Although the vast majority of all retail stores in the U.S.

(approximately 90%) are single-store businesses,

however these single-store businesses account forsubstantially less than half of all retail sales. Thus the majority of the revenue in the retail industry is

generated by companies that run retail "chains". The biggest retailer in the world is Wal-Mart which

generated over $344 billion in revenue in its last fiscalyear.


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As per reports, India is 5thmost attractive retail market. Big

players like Wal-Mart couldnt resist and entered through

licensing route.

Market size and potential are sufficient inducers.

Huge Potential $580Billion (Source Retail Forum at

Amity University)

High youth potential with high disposable income.

OPPORTUNITY INDIA


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FINANCE SECTOR The New York Stock Exchange is more than three times

larger than any other stock exchange in the world. As ofOctober 2008, the combined capitalization of all domesticNYSE listed companies was US$10.1 trillion.

New York City is the financial capital of the worldalongside London.

NASDAQ is another American stock exchange and theworld's 3rd largest exchange after the New York Stock

Exchange and Japan's Tokyo Stock Exchange. HoweverNASDAQ's trade value is larger than Japan's TSE.

NASDAQ is the largest electronic screen-based equitysecurities trading market in the USA. With approximately

3,800 companies corporations, it has more trading


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CHALLENGES IN FINANCESECTOR It's hard to know just how big the financial sector is

because financial companies have created manytrillions dollars worth of various securities andderivatives of securities.

Morgan Stanley Investment Bank for example has$77 trillion in derivatives. Which is more than fivetimes the official US GDP

The financial sector cannot be more than 100% of theUS economy. But apparently their losses can bemany times more than the US GDP. They havecreated an almost unlimited amount of debt and

financial obligations. Which must be honoured and


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RANK-4TOPIC

RANKINGS

DB 2012 DB 2011 CHANGE IN

RANK

1.Startingbusiness 13 11 - 2

2.Construction per 17 17 No change

3. Electricity 17 16 -1

4.Registering

property

16 11 -5

5. Getting credit 4 4 No change

6.Protectinginvest

5 5 No change

7.Paying taxes 72 70 -2

8.Trading acrossborder

20 20 No change

9.Enforcingcontracts

7 7 No change

10.Resolvinginsolvency 15 14 -1http://www.doingbusiness.org/data/exploreeconomies/united-
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BUSINESS MEETINGS - USA

Meetings include relevant & well-researched formal

presentationsto demonstrating competence &create an impression.

Frequent use of Management Jargon & humour

Value straight talking &'getting to the point

Debateare direct & open.

Dress code vary from formal/dark business suit, shirtand tie to literally T-shirt and shorts.

Giving gifts is unusual in US Remember- Time is money

Early breakfast (7 am) & dinner (5:30-6 pm)


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ECONOMIC SYSTEM Laws and institution in a nation that determineWho owns economic resources

How people buy and sell resources.

How the production process make use ofresources in providing goods and service


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ECONOMIC SYSTEM OF USA Market Economy Individuals own and operate the buildings, machinery,

property of production

Production and distribution are price and profit

orientated Standard of living is high

Prices depends on availability, demand and supply

All factors of production - Natural resources, Labor ,Capital, Entrepreneurship are traded in markets. Alsocalled factor market

It is Government Role is nil in economic decision

However, USA isnt purely market economy asgovernment has its say.


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ROLE OF GOVERNMENT DefenseAssistance programs to lower income groups

Interstate highways and airports.

Provides incentive to encourage the productionand consumption of certain type of products andvice versa too

It establishes safety guidelines that regulates

consumer products, working conditions andenvironmental protection


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QUICK FACTS World's largest national economyAccording to Reuters, approximately 23.7 millionAmerican workers are either unemployed orunderemployed right now.

The U.S. debt to GDP ratio has now reached 101percent.


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LEGAL STRUCTURE Law enforcement in the United States is primarily the

responsibility of local police and sheriff's departments,with state police providing broader services

At the federal level and in almost every state,

jurisprudence operates on a common law system

State courts conduct most criminal trials; federal courtshandle certain designated crimes as well as certain

appeals from the state systems

Among developed nations, the United States has above-average levels of violent crime and particularly high

levels of gun violence and homicide.


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COMMON LAW SYSTEM Legal system that gives great precedential weight

to common law on the principle that it is unfair totreat similar facts differently on differentoccasions

The body of precedent is called "common law"and it binds future decisions

Developed by judges through decisions of courtsand similar tribunals (as opposed to statutesadopted through the legislative process orregulations issued by the executive branch)


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QUICK FACTS ON LEGALCONDITIONS

In 2007, there were 5.6 murders per 100,000 personsthree times the rate in neighboring Canada

The U.S. homicide rate, which decreased by 42%between 1991 and 1999, has been roughly steady since.

The United States has the highest documentedincarceration rate and total prison population in the world

At the start of 2008, more than 2.3 million people wereincarcerated, more than one in every 100 adults. Thecurrent rate is about seven times the 1980 figure

African American males are jailed at about six times therate of white males and three times the rate of Hispanicmales


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CURRENT SOCIAL ISSUES

AFFECTING LEGAL FACTORS

LEGAL BARRIERS FOR


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LEGAL BARRIERS FORBUSINESS Zoning restrictions Licensing and training requirements

Restrictions on the legality of the business

Protection of crucial business processes bycopyrights and patents

Special legal regulations, such as ingredientlabelling for food products


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BALANCE OF PAYMENT

In the words of RBI, a statistical statement but systematically summa-

rises, for a specific time period, the economic transactions of aneconomy wit the rest of the world.

The IMF publicationBalance of Payments Manualdescribes the

concept as follows:-

The BOP is a statistical statement for a given period showing:- Transaction in goods and services and income between an economy and

rest of the world.

- Changes of ownership and other changes in that countrys monetary

gold, SDRs and claims on and liabilities to rest of the world.- Unrequited Transfers and counterpart entries that are needed to balance,

in the accounting sense, any entries for the forgoing transaction and

changes which are not mutually offsetting.


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EXIM Figures Exports: $1.511 trillion (2011 est.)

Country comparison to the world: 4

$1.289 trillion (2010 est.)

Exports are increasing (Canada 19.4%, Mexico 12.8%, China 7.2%, Japan

4.7% (2010)

Exports partners:

Canada 19%, Mexico 13.3%, China 7%, Japan 4.5% (2011)

Imports:




Imports - partners

China 19.5%, Canada 14.2%, Mexico 11.8%, Japan 6.3%, Germany

4.3% (2010)
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2087rank.html?countryName=United%20States&countryCode=us&regionCode=noa&rank=1https://www.cia.gov/library/publications/the-world-factbook/rankorder/2087rank.html?countryName=United%20States&countryCode=us&regionCode=noa&rank=1


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GNP:

Basically, GNP is the total value of all final goods and services produced

within a nation in a particular year, plus income earned by its citizens

(including income of those located abroad), minus income of non-residents

located in that country.

GNP measures the value of goods and services that the country's citizens

produced regardless of their location.

GNP is one measure of the economic condition of a country, under the

assumption that a higher GNP leads to a higher quality of living, all other

things being equal.

GNP = GDP + Net Income from abroad


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GNP Measurement:

Current market prices (Nominal GNP): In this method, the prices of goodsand services are measured at prices prevailing in the current year.

Constant prices (Real GNP): Using this method, GNP is measured at a

fixed price of a particular base year.

Real GNP is an effective tool for making yearly comparisons of changes

in the physical output of a country, as it is not affected by changing prices.

This helps to reflect the economic growth of a country in a better manner.


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GDP:Developed by Simon Kuznets for a US Congress report in 1934, was brought in

use after the Bretton Woods conference in 1944, when it became the main toolfor measuring the country's economy.

The Gross Domestic Product is the market value of all final goods and

services produced within a geographical entity within a given period of time.

It is:

"Gross" because the depreciation of the value of capital used in the

production of goods and services has not been deducted from the total value of

GDP;

"Domestic" because it relates only to activities within a domestic economy

regardless of ownership (alternatively: "national" if based on nationality);"Product" refers to what is being produced, i.e. the goods and services,

otherwise known as the output of the economy. This product/output is the end

result of the economic activities within an economy. The GDP is the value of

this output.


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In order to avoid double-counting, it is important that GDP measures

each product or service only once, i.e. the final value.

Under expenditure method;-

GDP (Y) = C + I + G + (X-M)

US had the highest share of 32.24% of worlds GDP in 2001.

While its share has been declining each year since 1999 (23.78%), it is

still the highest in the world.


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GROSS DOMESTIC PRODUCT (GDP)

The GDP is the broadest measure of a country'seconomy, and it represents the total market valueof all goods and services produced in a countryduring a given year.

Since the GDP figure itself is often considered alagging indicator, most traders focus on the tworeports that are issued in the months before thefinal GDP figures: the advance report and the

preliminary report. Significant revisions between these reports can

cause considerable volatility.


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GDP FIGURESGDP (purchasing power parity):


country comparison to the world: 2 $14.82 trillion (2010 est.)


GDP - real growth rate:

1.5% (2011 est.) country comparison to the world: 171

3% (2010 est.)

-3.5% (2009 est.)

GDP - per capita (PPP): $48,100 (2011 est.)

country comparison to the world: 11

$47,800 (2010 est.)

$46,800 (2009 est.)

Note:data are in 2011 US dollars

GDP FIGURES (C td )


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GDP FIGURES (Contd.)

GDP - composition by sector :

Agriculture: 1.2%

Industry: 22.1%

Services: 76.7% (2011 est.)

Labour force :

153.4 million


Farming, forestry, and fishing: 0.7%

Manufacturing, extraction, transportation, and crafts: 20.3%

Managerial, professional, and technical: 37.3% Sales and office: 24.2%

Other services: 17.6%

Urban population: 82% of total population (2010)


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GDP vs GNP


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MACRO ECONOMIC CHALLENGES:

Macro economic indicators are statistics that indicatethe current status of the economy of a statedepending on a particular area of the economy(industry, labor market, trade, etc).

Inflation Rate

Unemployment Rate (9.1% (2011 est.))

Infrastructure


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GDP PER CAPITA INCOME

The value of all final goods and servicesproduced within a country in a given year dividedby the average (or mid-year) population for thesame year.

2011- $48,100

2010 - $47,800

THE STATES HAVING HIGHEST &


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THE STATES HAVING HIGHEST &LOWEST PER CAPITA GDP

(1). Maryland ($69,271)Delaware ($69,667)

Alaska ($65,143)

(2). South Carolina ($35,717)

West Virginia ($35,053)

Idaho ($34,250)

THE CONSUMER PRICE INDEX


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THE CONSUMER PRICE INDEX

(CPI)

The Consumer Price Index (CPI) is probably themost crucial indicator of inflation.

It represents changes in the level of retail pricesfor the basic consumer basket. Inflation is tied

directly to the purchasing power of a currencywithin its borders and affects its standing on theinternational markets.

If the economy develops in normal conditions, the

increase in CPI can lead to an increase in basicinterest rates. This, in turn, leads to an increase inthe attractiveness of a currency

CPI as of August - 230.379 i.e 130.379%


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Unemployment Populati

on

Taxes Labour Force

District ofcolumbia

8.9 617,996 7%

Delaware 6.8 907,135 0%

Alaska 7.7 722,718 7%

SouthCarolina

9.6 4,679,230 9%

WestVirginia

7.4 1,855,364 6%

Idaho 7.5 1,584,985 6%

C AS G O A


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PURCHASING POWER PARITY

This entry gives the gross domestic product

(GDP) or value of all final goods and servicesproduced within a nation in a given year. Anation's GDP at purchasing power parity (PPP)

exchange rates is the sum value of all goodsand services produced in the country valued atprices prevailing in the United States. This isthe measure most economists prefer when

looking at per-capita welfare and whencomparing living conditions or use of resourcesacross countries.


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DEBT PROBLEM IN THE UNITED STATES

The United States public debt is the money borrowed bythe federal government of the United States through theissue of securities by the Treasury and other federalgovernment agencies.

Historically, the US has incurred debt during wars andrecessions, but then debt subsequently declinedafterwards.

The level of government borrowing has risen sharply as a% of GDP (95), and given current spending commitmentsthe forecast for borrowing is to continue to grow

EVOLUTION OF THE DEBT


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EVOLUTION OF THE DEBTPROBLEM

During the presidency of George W. Bush, debt heldby the public increased from $3,339 billion inSeptember 2001 to $6,369 billion by the end of

2008, In the aftermath of the Global Financial Crisis,debt held by the public increased to $11.12 trillion bythe end of July 2012 under the presidency of BarackObama

On August 5, the credit-rating agency Standard &Poor's downgraded the credit rating of USgovernment bond for the first time in the country'shistory.


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REASONS FOR DEBT PROBLEM IN THE

UNITED STATES

1. Cyclical Factors / DiscretionaryspendingIncome decreased, Taxrevenue along with stamp duty

decreased2. Unemployment spendingLarge rise inunemployment led to paying of socialsecurity

3. Pensions13% of above 65yrpopulations

4. Reluctance to Increase TaxesDue to

opposition from Republicans


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HEALTH CARE COST
http://www.economicshelp.org/blog/wp-content/uploads/2011/07/800px-GAO_Slide.png


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DEBT FIGURES

Debtexternal : $14.71 trillion (30 June 2011)


$13.98 trillion (30 June 2010)
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html?countryName=United%20States&countryCode=us&regionCode=noa&rank=2https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html?countryName=United%20States&countryCode=us&regionCode=noa&rank=2


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