Thursday, July 30, 2015

FIN 260 Strategic Planner and Macro Data Interpretation

If you were a strategic planner for a large firm think about how you would interpret the macro data (jobs, inflation, interest rates, GDP) with what you know from your order book and your customers.
Each organization’s ultimate goal is to grow and be profitable. In order to achieve that managers have to be ready for various changes that get on the way and adjust the business activities. This process is called strategic planning. It involves defining the organization’s strategy or direction and deciding on allocation of the organization’s resources. The selected strategy also influences what goals have to be achieved in order to pursue this strategy.  The organization’s strategy and goals depends on numerous aspects but one of them is macro environment. It is a set of uncontrollable factors that influence the decision-making process. The organization cannot control these factors but can come up with a quick response plan to change. Macro data is analyzed at the situation analysis step of the strategic planning. This macro data examination is also known as PEST or PESTLE analysis: political, economic, social, technological analysis, legal and environmental.
Economic macro data strongly affects the purchasing power and spending of the people. Some of the economic macro data examples are jobs, inflation, interest rates, and GDP. There are several interpretations of this macro data that could be derived from looking at the order book and paying attention to the customers buying behavior and their reviews. The macro data can also help make forecasts in various areas such as revenues, sales, materials cost, labor costs, and other important areas. Example of the economic macro data would be unemployment rate or jobs. It could indicate the overall economic health of the country and therefore the spending power of the potential customers. If the people are employed, they have set household income. Any discretionary income left is what they spend on various goods and services in addition to the necessity products. If the unemployment rate is high in the area where the company is offering its goods or services, then the projected sales are not going to be as much. If the organization is not in the essential product and services area, then its sales would be decreased by the high unemployment rate.
As far as the interest rates are concerned, they also influence the strategic planning in the organization. Whether the interest rate is high or low requires an adjusted strategic plan. The customer’s spending can also indicate if the interest rates are low or “affordable”. Low interest rates can help increase the expenditure and therefore decrease the unemployment rate. If the spending goes up, I could make sure the organization has enough stock for the suggested period of the potential increase in spending. If the interest rates would be too high, it would be also hard to take out loans for the business to fund the operation. Higher rates mean higher prices, and therefore some customers may not be able to purchase the products any more.
One of the important aspects that could also affect the strategic planning is the inflation. It is the rate at which the prices rise for the goods and services during a certain period of time and the purchasing power falls. Unfortunately, the relationship between the inflation rate and the income growth is not direct. Therefore, while the prices rise, many consumers do not get paid adjusted for the inflation. So it is important to keep track of the inflation rate so that the organization does not operate at a loss. However, some companies like H&M prefer to keep the same prices even though the cotton prices rose enormously.
Another economic factor that can influence large business operation is the GDP (gross domestic product) number. This measure is used to indicate the overall country’s economic health. If the GDP is low, then government would try to implement certain policies to increase the number. For example, keep the interest rates low, so that it would facilitate purchases. This in turn would mean that the savings that the consumers have in banks would not accumulate enough interest credit to cover for the inflation. This would affect the purchasing power of consumers once again.

All things considered, the economic macro data if analyzed on a daily basis could help prevent drastic changes or failure of the business. Organizations have to be proactive when it comes to responding to macro environment changes. All of the aspects are related to consumer purchasing power and therefore wise strategic planning would also take them into consideration.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.
If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it!

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