Important Macro-Economic Indicators for Novartis - Essay Example

The three macro-economic indicators that I believe have the greatest impact on the operations and planning of Novartis are:

1. GDP: The gross domestic product of a country is the market value of all final goods and services produced in a country in a given year, and is an indicator of the health of the nation’s economy. GDP is important for Novartis in terms of investment decision-making in the country. If a country has a high GDP, it means it is healthy and has low unemployment, higher wages and hence higher spending power. Hence, Novartis would be more profitable in countries with higher GDPs where it can sell its products at a higher price.

Differences in interest rates would affect the relative worth of currencies in relation to one another (esp. forex changes between euro, CHF and USD).
1. What do these indicators suggest about the current or future condition of your organization?
With regards to the current economic crisis in the US, the macro-economic factors would have a negative effect on the condition of Novartis Pharmaceuticals Corporation. The US Congress recently passed a $38 billion spending cut bill (Reuters) that is anticipated to cut budgets of various government-run healthcare and social programs. The future condition of Novartis hence is bleak unless it engages itself in cost-cutting management techniques or diversifies its risk in other areas such as specialty drugs for cancer etc.
2. Of the three indicators you selected, choose what you feel is the single most important macroeconomic indicator for your organization. Find out and report the most recent level of that indicator and write a paragraph on the implications of its recent monthly or quarterly change for your reference organization.

Even though all the three macro-economic indicators listed above are important to Novartis, I feel that, in the current fiscal environment and landscape of healthcare financing, Balance of Payments (BOP) is the single more important macro-economic indicator for Novartis. The recent most level of US BOP recorded by IMF in 2010 was USD -410.244 billion (IMF). It is projected to rise to USD -493.875 billion in 2011.

The U.S. current-account deficit—the combined balances on trade in goods and services, income, and net unilateral current transfers—decreased to $113.3 billion in the fourth quarter of 2010, from $125.5 billion in the third quarter of 2010.

The implications of a positive change in the current account deficit of the US employs that the economy is recovering but the rate of growth is slow. The fact that the current account has a deficit and not a surplus indicates that government will be aggressive towards spending cuts on the federal budget. Part of Novartis growth projections depends on the reimbursement of drug sales by the government (especially for Medicare and Medicaid). Hence with a deficit, the government will be asking Novartis to reduce its prices and hence the profitability of the company. With a marginal improvement in the deficit situation in the US in the last quarter of 2010, it reveals that the employment rate is increasing, hence people can afford medicines on their own, and hence will have a positive impact on Novartis. Read More