Measurements of Unemployment and Inflation - Essay Example

 Measurements of Unemployment and Inflation The measurement of unemployment rate is quite significant within the context of effective management strategies development. This is so because of the major effect that unemployment rate can cause in relation to business activities. It has been noticed that when the prevailing rates of unemployment are high in the economy, the wage rates are comparatively low (Ahuja, 2008). It is quiet essential for the organizations, especially for those which are operating in a perfectly competitive market, to carry out timely measurements of the unemployment rates in order to take effective management decisions. This is so because when a firm is working in a perfectly competitive market where employment rates are high, it is not likely to be possible for such a firm to fix the wage rates. Therefore, in order to fix the wage rates, the organizations need to measure the unemployment rates (Ahuja, 2008). Furthermore, the output and the productivity of a business organization are significantly dependent on the employment as well as unemployment rates. This is because Productivity = Output/Employment and therefore, Employment = Output/Productivity. Hence, it can be stated that the productivity of a business organization is directly proportional to employment. Therefore, it is quite important for the organizations to measure the unemployment rates in order to determine their productivity. These measurements further facilitate the organizations to prepare for the fluctuations that generally take place in the economy (Blanchard, Solow, & Wilson, 2012). Apart from unemployment, the business organizations need to measure the inflation as well. This is because of the reason that consumers’ spending and investment activities are chiefly dependent upon the rate of inflation. A high inflation rate discourages the investors and consequently reduces the amount of investment in the economy. Moreover, high inflation rates are likely to reduce the return on investment and further can result in a downfall in terms of demand in the economy. These reasons make it quite imperative for the management of an organization to carry out timely measurements of the inflation rates (National Grid for Learning, 2009). Furthermore, it is quite essential for business organizations to manipulate the price of their goods which is likely to be valuable when there is a high inflation rate in the economy. Re-pricing is a quite expensive process and in order to avoid frequent re-pricing of the products, the management of the organizations needs to measure the inflation rates. In addition, inflation causes the prices of the raw materials to grow high as well as the prices of other components to rise. These factors compel the business organizations to explore for contemptible raw materials and subsequently increase the cost for the organization. Owing to this, the management of the business needs to measure the inflation rate to minimize these costs. Moreover, with increase in inflation rates, the business organizations face the demands for increasing the wage rates. This further leads to negotiation activities with the employees as well as the labor unions causing chaos in the management system. Therefore, in order to mitigate these threats the managements of the organizations are required to measure the inflation rates (National Grid for Learning, 2009). 1. What Analyses Might A Manager Do To Learn More About A Specific Company Or Industry? In order to learn more about a specific company of industry, a manager can carry out various analysis strategies such as the value chain analysis, Porter’s five forces’ model analysis and SWOT analysis among others. The SWOT analysis of a company or industry would facilitate the manager to get acquainted with certain aspects of a company such as strengths as well as weaknesses of the particular company. SWOT analysis also explains about the future opportunities that are quite likely to be available to the business and reveals threats associated the particular business or industry. For example, if a manager intends to learn more about Ford Motor Company then he/she can perform the SWOT analysis of the company. For instance, the SWOT analysis of Ford reveals that one of its major strengths is its hybrid technology for which the company holds patent. Whereas, it’s major weaknesses are insignificant protection in terms of data loss and the decreasing wage rates of its employees. The major opportunities of the company for future are its high focus on innovation and “Fuel efficient technologies” among others. One of its major threats is the strict emission laws that prevail especially in the UK as well as in the US (Scribd, 2011). The five forces model analysis assists in analyzing the market environment within which a company or an industry operates. It provides clear outlook about the probability of new players to enter the market, power of the suppliers as well buyers in the market, substitutes of the products that the company offers and the competitiveness of the market in which the company operates. For example, if a manager intends to analyze Apple Inc, he/she can utilize the five forces model developed by Michael Porter. The analysis can reveal the fact that in terms of Apple, the existing rivalry within the market is quite high due to numerous companies within the sector. The threat of new entrants is also quite high as result of new smartphones carrying Google Android operating system. Bargaining power of the consumers is likely to be high as a result of the numerous substitute companies/products (SlideShare Inc, 2012). Apart from these, a manager can also implement the value chain analysis in order to gain a better understanding of a company or industry. The value chain analysis illustrates the various operations that are carried out to run the company. This analysis also describes the competitive strength of the particular company or industry. It essentially evaluates the value that every specific activity adds to the products or services that the company is associated with. For instance, if a manager desires to understand more about McDonald’s, he/she might carry out its value chain analysis. The value chain of McDonald’s reveals the strength of its infrastructure to be its brand recognition, financial strength and intellectual property. It’s weaknesses in this context are likely to be the lawsuits and cultural insensitivities that are faced by the company in certain countries during its operations. In terms of inbound logistics, the major strengths of the company are economies of scale, sustainable packaging and supply chain control. While, the major weakness in relation to inbound logistics is the media backlash (Texas Wesleyan University, n.d.). 2. What Role Does Trade Have Pertinent To How An Organization Plans Strategically? Strategic trade policies are those trade policies which can have an effect on the strategic communications between the different business firms in terms of an international oligopoly. The ideology behind this particular issue signifies that the trade policies are quite likely to enhance the welfare of a domestic firm by encouraging the profitability in the national market (Barbara & Brander, 2008). In the present day context, trade plays a significant role in the strategic plans of an international business organization. The major reason behind this is the significant impact of the trade policies on the position of the business organizations in terms of competitiveness. It is not possible for a business organization to evade international competition just by limiting its operations within the domestic market. This strategy is likely to only increase the exposure of the business organization to the global market competition. Therefore, it can be stated that trade policies play a crucial role in the strategic planning of an organization (Shah, Surve, & Tharval, 2012). Furthermore, trade policies also have a considerable effect on the opportunities that are available to a business organization. In this context, the business organizations need to consider the trade policies in its strategic plan in order to take the advantage of the available opportunities. Trade policies further indicate the extent of risk associated with business organizations. Hence, in order to mitigate the risk factor, trade policies play a crucial part in the strategic planning of a business organization (Shah, Surve, & Tharval, 2012). Furthermore, it is worth mentioning that trade policies play a vital role particularly among the international companies. The trade barriers tend to weaken the international relationship among the companies which is quite significant particularly for the international companies. Hence, in order to adapt with the fluctuating trade barriers, the companies significantly require considering the policies while planning the strategies. Furthermore, it is worth mentioning that an increase in terms of trade barriers tends to intensify the control of government over the economic matters. Owing to these reasons, it can be stated that trade policies play major role in the strategic plan of an organization (Shah, Surve, & Tharval, 2012). The trade policies of a country have significant effect on the amount of investment in the domestic as well as in the foreign business sectors. Investment further has been recognized as a crucial factor for the economic development of a business organization. This fact also confirms that trade policies perform an essential role in the strategic planning of a business organization. Furthermore, trade policies have a noteworthy impact on the import as well export business activities of a country. Hence, in this regard the trade policies are likely to play a significant role in the strategic planning of those companies which are associated with import or export business activities (OECD, 2005). References Ahuja, H. L. (2008). Business economics. India: S. Chand & Company Limited. Blanchard, O., Solow, R., & Wilson, B. A. (2012). Productivity and unemployment. Retrieved from http://economics.mit.edu/files/1909 Barbara, S., & Brander, J. A. (2008). Strategic trade policy. Retrieved from http://strategy.sauder.ubc.ca/spencer/strategic%20trade%20-%20Palgrave.pdf National Grid for Learning. (2009). Inflation and its impact on business. Retrieved from http://www.ngfl-cymru.org.uk/inflation.pdf OECD. (2005). A policy framework for investment: Trade policy. Retrieved from http://www.oecd.org/dataoecd/10/57/35488872.pdf Scribd. (2011). Ford motor and auto industry analysis. Retrieved from http://www.scribd.com/doc/50009756/14/Table-4-SWOT-analysis-of-Ford-Motors Shah, N., Surve, J., & Tharval, S. (2012). International trade barriers. Retrieved from http://www.slideshare.net/nikunj1986/international-trade-barriers SlideShare Inc. (2012). Porter’s 5 forces analysis. Retrieved from http://www.slideshare.net/jontymohta444/porters-5-forces-model-case-apple-inc Texas Wesleyan University (n.d.). McDonald’s value chain analysis. Retrieved from http://faculty.txwes.edu/trdanderson/course1/documents/McDonaldsValueChainAnalysis_001.pdf Read More