Country Snap Shot Usa

Country Snapshot: USA

Country Snapshot United States of America

Prashant Tandon

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Country Snapshot: USA

Contents United States of America .......................................................................................3 1. Introduction.........................................................................................................3 2. Brief Overview of the USA...................................................................................4 3. Economy overview..............................................................................................5 4. Key Economic Indicators.....................................................................................6 a) GDP....................................................................................................................6 5. Labor force..........................................................................................................7 a) Major Agriculture & related products..................................................................7 b) Major Industries..................................................................................................7 c) Exports – commodities & Partners USA..............................................................8 d) Imports - commodities & Partners USA...............................................................9 6. Main factors affecting a Business.....................................................................10 a) Obsolescence....................................................................................................10 b) Prices & Inflation...............................................................................................10 c) Substitutions ....................................................................................................10 d) Income Inequality.............................................................................................10 e) Transportation System......................................................................................11 f) Miscellaneous ...................................................................................................12 g) Culture .............................................................................................................12 h) Geert Hofstede Model: USA..............................................................................13 i) Geographical factors .........................................................................................15 j) Corruption..........................................................................................................15 7. Political Environment Overview .......................................................................16 8. Legal System Overview ....................................................................................17 9. Opportunities in the US market.........................................................................18 10. Challenges in the US Market...........................................................................18 11. References......................................................................................................19

Prashant Tandon

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Country Snapshot: USA

United States of America 1. Introduction USA is the world's foremost economic and military power, with global interests and an unmatched global reach. United States of America is a federal constitutional republic comprising fifty states and a federal district. The country is situated mostly in central North America, where its 48 contiguous states and Washington, D.C., the capital district, lie between the Pacific and Atlantic Oceans, bordered by Canada to the north and Mexico to the south. The state of Alaska is in the northwest of the continent, with Canada to its east and Russia to the west across the Bering Strait. The state of Hawaii is an archipelago in the mid-Pacific. The country also possesses several territories, or insular areas, in the Caribbean and Pacific.

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Country Snapshot: USA 2. Brief Overview of the USA • Full name: United States of America • Population: 308.8 million (UN, 2007) • Population growth Rate :0.9% • Age structure: o 0-14 years: 20.2% (male 31,639,127/female 30,305,704) o 15-64 years: 67% (male 102,665,043/female 103,129,321) o 65 years and over: 12.8% (male 16,901,232/female 22,571,696)

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Capital: Washington DC Largest city: New York City Area: 9.8 million sq km (3.8 million sq miles) Major language: English Major religion: Christianity Life expectancy: 76 years (men), 81 years (women) (UN) Monetary unit: 1 US dollar = 100 cents Main exports: Computers and electrical machinery, vehicles, chemical products, food and live animals, military equipment and aircraft • Main Imports : Agricultural Products, Industrial Supplies, Capital Goods (Computers, Telecommunications Equipment, Motor Vehicle Parts, Office Machines, Electric Power Machinery), Consumer Goods (Automobiles, Clothing) • GNI per capita: US $46,040 (World Bank, 2007)

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Country Snapshot: USA 3. Economy overview • The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $48,000. • In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. • US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. • At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets. • US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment; their advantage has narrowed since the end of World War II. • The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. • The war in March-April 2003 between a US-led coalition and Iraq, and the subsequent occupation of Iraq, required major shifts in national resources to the military. • Hurricane Katrina caused extensive damage in the Gulf Coast region in August 2005, but had a small impact on overall GDP growth for the year. • Soaring oil prices between 2005 and the first half of 2008 threatened inflation and unemployment, as higher gasoline prices ate into consumers' budgets. • Imported oil accounts for about two-thirds of US consumption.

Problem Zones: • Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups. • The merchandise trade deficit reached a record $847 billion in 2007, but declined to $810 billion in 2008, as a depreciating exchange rate for the dollar against most major currencies discouraged US imports and made US exports more competitive abroad. • The global economic downturn, the sub-prime mortgage crisis, investment bank failures, falling home prices, and tight credit pushed the United States into a recession by mid-2008. • To help stabilize financial markets, the US Congress established a $700 Prashant Tandon

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Country Snapshot: USA billion Troubled Asset Relief Program (TARP) in October 2008. • The government used some of these funds to purchase equity in US banks and other industrial corporations. In January 2009 the US Congress passed and President Barack OBAMA signed a bill providing an additional $787 billion fiscal stimulus - two-thirds on additional spending and one-third on tax cuts - to create jobs and to help the economy recover.

4. Key Economic Indicators a) GDP The GPD figures show that USA has a huge GDP of $14.33 trillion. The overall growth rate of the GDP is only 1.3% as compared other developing countries that have a growth rate of 8-10%. USA ranks 181 in the GDP growth rate. The GPD – percapita stands at $44,000 which shows the average income level of the people. The GPD percapita shows that people would be able to afford luxury goods. But there also lies a 12% segment of the population below the poverty line which could also create a segment. The service sector accounts for the maximum GDP of the country at 79.2%, followed by 12.6% by the industry & 1.2% by the agriculture. But on the other part USA is a large marketplace depending on the type of products, is indicated by its GDP.

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Country Snapshot: USA 5. Labor force USA has 155.2 million (includes unemployed) of labor force. This includes skilled as well as unskilled labor force. The average labor compensation is very high in USA. Therefore it is quite difficult for cost competitive industries to survive here. The industries best suited for such an environment is research & development & niche industries. USA ranks 4 in the world among labor force.

The above data shows that USA has a huge labor force, which falls in various categories mentioned above. There also stands a huge unemployed labor force available which might be useful for people investing in new venture. The unemployment rate is quite high due to the recent subprime crisis in USA & stands at 7%. Therefore the wage rates have come down considerably.

a) Major Agriculture & related products The major agriculture products of USA are wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy products; fish; forest products

b) Major USA hasIndustries leading industrial power in the world. It also has highly diversified and technologically advanced petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining industries flourishing. The industrial growth rate of USA is 0.2% & the country ranks 148 in the world. The industrial growth rate does not seem to be an attractive figure. Many industries in US have been loosing out to low cost & competitive industries from the other part of the world like Chine, India. Thus need is to bring down the costs & become Prashant Tandon

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Country Snapshot: USA competitive again during the long run.

c) Exports – commodities & Partners USA

From the above charts that US is a major exporter in the world in a wide domain & its major export partners could be seen in the chart above.

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Country Snapshot: USA d) Imports - commodities & Partners USA

From the above charts we can see that USA imports various commodities for the country. The major Import Partners are shown in the chart. We can infer that US is one of the largest importer & exporter of goods in the world. There is lot of free trade practices followed in the US. Although US have stringent regulations for the quality & standards of the products it imports & exports.

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Country Snapshot: USA

6. Main factors affecting a Business a) Obsolescence The obsolescence rate is very high in USA due to fast advancements in the technological world.

b) Prices & Inflation The US economy has had a stable inflation between 2-3 % for a period of 20002008. For the year 2009 the inflation has gone negative and is at -2.5% for the month of July. We could conclude that people have changed their buying habits due to the ongoing recession. The prices of essential commodities have been going down.

c) Substitutions The threat of substitution is very high for products in USA as its one of the most developed countries in the World & any latest developments in the world are readily available. Therefore except in case of monopoly situations the threat remains very high. As soon as the products are launched in the market the imitates are available in a very short span of time. E.g. The Apple iphones were launched in US, & within a few days the Chinese imitations were available in the market. Also the competitive companies are able to exploit the technology to get the same kind of products in the markets. Like Nokia & Samsung offer nearly same features in same price range.

d) Income Inequality There is great income inequality seen in USA with the difference in remunerations ranging up to 400% in the recent times in the country. Therefore there are wide segments of people existing in the country thereby inducing a need for various segments of products. As we saw that there are 12% people living below the poverty line. This shows that there is a market for the said segment. There should be different varieties of goods available for The Rich, The Middle Men, and The poor & below.

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Country Snapshot: USA e) Transportation System Transportation in the United States is facilitated by road, air, rail, and water networks. The vast majority of passenger travel occurs by automobile for shorter distances, and airplane for longer distances. In descending order, most cargoes travel by railroad, truck, pipeline, or boat; air shipping is typically used only for perishables and premium express shipments. We can see below that multimodal transport system is in place to facilitate the business activities.

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Country Snapshot: USA

f) Miscellaneous The other factors affecting a business could be presence of industry wide unions which is very common in US. The people are divided on the base of jobs they perform & hence are the members of their respective unions like fitter union, plumber union etc. There is no widespread presence of trading blocks in US. There are various treaties in place which allow free trade between US & the other nations. Only certain number of industries is restricted for free trade & investment due to national security reason.

g) Culture The United States of America has a mixed culture. The United States is a multicultural nation, home to a wide variety of ethnic groups, traditions, and values. Aside from the now small Native American and Native Hawaiian populations, nearly all Americans or their ancestors immigrated within the past five centuries. The culture held in common by most Americans—mainstream American culture—is a Western culture largely derived from the traditions of European immigrants with influences from many other sources, such as traditions brought by slaves from Africa. More recent immigration from Asia and especially Latin America has added to a cultural mix that has been described as both a homogenizing melting pot and a heterogeneous salad bowl in which immigrants and their descendants retain distinctive cultural characteristics. The mixed culture of US has been a major advantage to people for starting their business in the US. The people find it easy to adjust to the US culture & receive a less intense cultural shock. As already stated USA has a much diversified culture in place, Therefore culture becomes an important factor of consideration for the businesses. The widely known term is Western Culture, which is one of the most controversial topics of debate throughout the world. Therefore businesses need to decide its actions, such as branding, advertising & other public relations activities very carefully. There is a strong presence of free media in USA, through which even the smallest mistake made could reach millions of people throughout the world. This could result in affecting company’s businesses globally. The conflicts of cultural nature could have lasting effects like French Fries being renamed as US fries recently. People of different culture have different tastes. The tastes are not only limited to food but also includes colors, design, lifestyles. Thus making products to suit to Prashant Tandon

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Country Snapshot: USA needs of people of diverse cultures is a challenge. The fact that needs to be taken care of is that diverse culture induces diverse consumption patterns. Therefore it might be very different between countries. Like people in US like lots of Fast Food, this may not be liked by people in other world countries.

h) Geert Hofstede Model: USA

The high Individualism ranking 91 for the United States indicates a society with a more individualistic attitude and relatively loose bonds with others. The populace is more self-reliant and looks out for themselves and their close family members. The next highest Hofstede Dimension is Masculinity with a ranking of 62, compared with a world average of 50. This indicates the country experiences a higher degree of gender differentiation of roles. The male dominates a significant portion of the society and power structure. This situation generates a female population that becomes more assertive and competitive, with women shifting toward the male role model and away from their female role. The LTO is the lowest Dimension for the US at 29, compared to the world average of 45. This low LTO ranking is indicative of the societies' belief in meeting its obligations and tends to reflect an appreciation for cultural traditions. The next lowest ranking Dimension for the United States is Power Distance at 40, compared to the world Average of 55. This is indicative of a greater equality between societal levels, including government, organizations, and even within families. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural environment. Prashant Tandon

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Country Snapshot: USA The last Geert Hofstede Dimension for the US is Uncertainty Avoidance, with a ranking of 46, compared to the world average of 64. A low ranking in the Uncertainty Avoidance Dimension is indicative of a society that has fewer rules and does not attempt to control all outcomes and results. It also has a greater level of tolerance for a variety of ideas, thoughts, and beliefs.

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Country Snapshot: USA i) Geographical factors The total land area of the contiguous United States is approximately 1.9 billion acres. Alaska, separated from the contiguous United States by Canada, is the largest state at 365 million acres. Hawaii, occupying an archipelago in the central Pacific, southwest of North America, has just over 4 million acres. After Russia and Canada, the United States is the world's third or fourth largest nation by total area, ranking just above or below China. The United States, with its large size and geographic variety, includes most climate types. To the east of the 100th meridian, the climate ranges from humid continental in the north to humid subtropical in the south. The southern tip of Florida is tropical, as is Hawaii. The Great Plains west of the 100th meridian are semi-arid. Much of the Western mountains are alpine. The climate is arid in the Great Basin, desert in the Southwest, Mediterranean in coastal California, and oceanic in coastal Oregon and Washington and southern Alaska. Most of Alaska is subarctic or polar. Extreme weather is not uncommon—the states bordering the Gulf of Mexico are prone to hurricanes, and most of the world's tornadoes occur within the country, mainly in the Midwest's Tornado Alley. Altogether, the government owns 28.8% of the country's land area. Most of this is protected, though some is leased for oil and gas drilling, mining, logging, or cattle ranching; 2.4% is used for military purposes. We can conclude from the above that USA is a big country having multiple climates at its advantage, thus giving it an edge over other major developed countries which are small in area & thus don’t have such a wide variety of climatologically advantages.

j) Corruption USA has a world ranking of 18 for corruption index in 2008. That is it one of the most corruption free country in the world. Red Tapeisim is hardly seen in US.

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Country Snapshot: USA 7. Political Environment Overview The US has a two-party system. Since the 1850s the political system has featured rivalry between the Democratic and Republican parties. Although each party embodies a broad coalition of interests, the Democrats tend to be pro-labor and have, especially since the 1960s, been more inclined to espouse socially liberal attitudes towards civil rights and welfare expenditure. The Republicans tend to promote low tax rates and a limited welfare system, combined with a strong military and a tough criminal justice system. Powers are constitutionally divided between the executive, legislative and judicial branches, and between the federal and state governments. The president heads the executive branch. The federal legislature, Congress, consists of a House of Representatives, whose members are elected from constituencies based on population, and a Senate, whose members are elected state-wide (two per state). The president is elected every four years and House members every two years. Senators serve a six-year term, with one-third elected at each congressional election. The US political system has been seen as relativity stable as compared to many other countries in the world.

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Country Snapshot: USA 8. Legal System Overview The law of the United States consists of many levels of codified and un-codified forms of law, of which the most important is the United States Constitution, the foundation of the federal government of the United States. The Constitution sets out the boundaries of federal law, which consists of constitutional acts of Congress, constitutional treaties ratified by Congress, constitutional regulations promulgated by the executive branch, and case law originating from the federal judiciary. The Constitution and federal law are the supreme law of the land, thus circumscribing state and territorial laws in the fifty U.S. states and in the territories. In the unique dual-sovereign system of American federalism (actually tripartite when one includes Indian reservations), states are the plenary sovereigns, while the federal sovereign possesses only the limited supreme authority enumerated in the Constitution. Indeed, states may grant their citizens broader rights than the federal Constitution as long as they do not infringe on any federal constitutional rights. Thus, most U.S. law (especially the actual "living law" of tort, criminal, and family law experienced by the majority of citizens on a day-to-day basis) consists primarily of state law, which can and does vary greatly from one state to the next. The legal system consist of the supreme court as the supreme decision making body in the country. The system also has the many lower levels of courts, thus it makes the system robust. The people are protected from evils & wrong doings could be questioned. The system is quite transparent. Therefore people enjoy the freedom to do things which are legal in nature. Business benefit from the legal & political system as they find that their investments are protected & rights are safe. There is a fair taxation system present in USA. The companies are not very heavily taxed. People get huge benefits in taxes & there are treaties existing with other nations which help in prevention of double taxations.

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Country Snapshot: USA

9. Opportunities in the US market • Food retail sector. • Food processing sector. • Fruits Juice Segments. • Green & Renewable segments of Energy Generation. • Carbon efficiency sector. • Green Datacenters Revolution. • Pharmacy Sector: Vaccines for Swine Flu &more. • Intellectual Property Rights. • Health Care Sector: Yoga, stress reductions, mental rehabilitations. • Real estate sector. • IT Sector. • Research &Development.

10. Challenges in the US Market • U.S. Economy going through turbulent times affecting how, where, what, when US consumer is spending their dollar on. • Bio-Terrorism Act – increased registration, monitoring and record-keeping of imported products • Food Safety Legislation – recent national food scares have focused attention on food safety, particularly of imported products. Currently 30 bills proposing changes to food legislation on Capitol Hill • Exchange Rate – fluctuating. Recent strengthening forecast to continue, improving returns for Irish exporters. • Food Labeling – different requirements to EU; different bar codes. • Route to Market – Complex (Importers; Brokers; Wholesalers; Key Accounts) • Increased security issues. • Liquidity crunch. • On spread of pandemic like Swine Flu. • Stringent standards, regulations, specifications to be met. • Market is sophisticated, quality-conscious, high tech and competitive.

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Country Snapshot: USA 11. References • www.google.com • www.wikipedia.com • www.buyusa.gov • http://www.transparency.org/policy_research/surveys_indices/cpi • http://www.geert-hofstede.com/hofstede_united_states.shtml • https://www.cia.gov/library/publications/the-world-factbook/ • www.economist.com • www.bbc.co.uk

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