Economic indicators are pieces of data that are used by investors to deduce the current and future investments in a business or organizations (Rosenberg, 2011). These indicators are usually categorized at macroeconomic level in order to assist in assessing the overall performance of an economy (McEachern, 2011). However, such data can differ among different investors and organizations. In this case, different investors pick dissimilar and specific pieces of data from organizations in order to perform their overall evaluation (Rosenberg, 2011).
So far, an approximate of 25 economic indicators have been identified and applied in economic forecasting (McEachern, 2011). In Macy’s case study, there are four major economic indicators that have been utilized to assess and predict both the current and future economy of the organization. These indicators include GDP, CPI, Interest Rates and Employment Rates. This paper explores and evaluates the impacts of indicators in the operation of organizations and how organizations responded after the 2007 global recession.
Importance of economic indicators
The identified economic indicators are essential in predicting the current and future trend of an organization. For instance, through the use of Gross Domestic Product (GDP) it is possible to monitor the rate of economic growth in an organization in relation to that of a country (Rosenberg, 2011).
This is due to the fact that this indicator assists organization to measure the quantity of goods and services produced over a period of one year. In this case, organizational economists are in a position to express economic growth in terms of percentage change. From the outcome, it will also be possible to evaluate the effectiveness of administrative policies. Moreover, is also a viable starting point on the best strategies to put in place in order to counter poor economic performance in an organization.
Besides, Macys stores use consumer price index to measure its pricing mechanism throughout the process of buying and selling. In this case, use of CPI has helped to determine the current economic state in the organization in terms of inflation and deflation (Roubini, 1998).
Additionally, use of CPI scale has enabled the organization to predict trends in pricing of consumer goods. Moreover, CPI has been instrumental in the organization to weigh the overall consumption rate of consumer goods. This has enabled the organization to determine future price trend particularly in a yearly period.
Additionally, Macys uses employment rate as an economic indicator in order to assess the amount of labor required to enhance sustainable production of goods. In most cases, increased employment rate is expected to increase the rate of productivity in any organization (Eveland, 2008).
Therefore, current and future economic performance can be evaluated by assessing the rate of employment. Furthermore, when the labor demand is high, it indicate that the current performance of the organization is also high and thus there is a possibility that the future trend will be more promising.
Impact of economic indicators on the operations and/or planning for Macy’s
The organization uses economic indicators as tools to forecast its economic progress (Eveland, 2008). In this case, members of the organization use these indicators as guidelines to establish initiatives and better ideologies in which to enhance stable economic trend in future. Furthermore, the organization is able to make economic related decision to enhance success in present and future times (Eveland, 2008).
In this case, one of the impacts of the indicators is that, they help to reorganize existing plans to adapt more sophisticated strategies that will increase productivity. It is definite that, such indicators increase the organization’s operation efficiency (Amos, 2011). This is achieved through assessment conducted through the scales thus help the organization to improve its workforce, processes and production cycles.
How sensitive do you think Macy’s was to the latest economic recession that began in 2007?
To begin with, it is evident that due to the occurrence of economic recession in 2007, the organization became very sensitive on issues that would affect the current and future progress. In this case, the consumer price index was reduced significantly throughout the year by 8% (Rosenberg, 2011). This measure was meant to decimate inflation rate while maintaining apparel prices for consumer goods. In line with this, the organizations adjusted the price of consumer goods seasonally all along until the end of the year.
It is vivid that the organization suffered greatly during the mid 2007 and the recession weakened its economic performance thus lowering the shoppers’ confidence (Eveland, 2008). Due to this occurrence, the volume of production of consumer goods decimated and to some extent the organization’s operating capital was also lowered (Rosenberg, 2011). To evade such complications, the organization identified a strategy in which it simplified it target of its produced goods.
This enhanced that, produced goods were only meant for targeted customers thus overcame competition from its competitors. For instance, Macy’s specialized in producing ladies wears such as shoes, dresses, pants and skirts which whose demand was high than other goods. Having met specific need of customers by producing unique retail goods, the organization became the one stop shop for consumers from different regions.
Nevertheless, the organization reported sales decline since a large number of its customers reserved money for other expenditures (Eveland, 2008). This triggered the organization to lower employment rates in order to stabilize its economy.
Notwithstanding the aforementioned scenario, some of the underperforming departmental stores were closed down to reduce operation costs (Rosenberg, 2011). All the same, the organization was able protect itself from collapsing by reorganizing its operational plans that brought liquidity throughout recession period.
References
Amos, O. (2011). A Random Walk through Some economic statistics. A Pedestrian’s Guide to the Economy. Web.
Eveland, D. (2008). Economic Indicators in Macroeconomics. New York: TUI University Press.
McEachern, A. (2011). Macroeconomics. Masons: Cengage learning, Inc.
Rosenberg, M. (2011).The concise encyclopedia of the great recession, 2007-2010. New York: Scarecrow Press, Inc.
Roubini, N. (1998). Understanding the World Macro economy (Chapters 1 and 2). Web.
