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!
