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Macroeconomics Assignment

1) To exhibit relationship between business performance and economic performance of a


The economic performance of a firm is a function of its success in producing benefits for its owners in
particular through product innovation and the efficient use of resources. When we talk about this type
of economic performance in a business, people typically understand you to be speaking about some

The definition of economic profit is the relation between revenue and the opportunity cost of all the
resources used to produce the items sold. This includes implicit returns as cost. For our purposes, it
may be simplest to think of economic profit as a form of accounting profit where profits are achieved
when the revenues are more than its costs in a given period of time.

Before moving on to business performance, its important to note that customers play an important role
in business profits. Profits accrue to firms because customers are willing to pay a certain price for a
product or service, as opposed to a competitors product or service of a higher or lower price. If
customers are only willing to make purchases base on price then a firm, at least in the face of
competition, will only be able to generate profits.

The success of a business requires better decisions, based on the analysis of the information received
from in and out of the company. The companys economic performance analysis and the assessment of
its growth capacity implies a continuous process, which is a part of the basic responsibilities of the
management. This is a necessary instrument able to supple information to the various stakeholders.

The main objective of the managements action targets the increase in efficiency and profitability,
financial analysis techniques must underline the quality if the leaders decisions. Their actions
determine the optimum capital budgeting, the efficient use of all resources, aspects that can lead to
growth of the business value if integrated into the right financial strategies and policies.

The company must show that the business will continue through its activities and resource
management. At the same time, the capital owner are interested in the possibility of the company to
improve the financial profitability on the long term to increase the value of the owned shares and of the
collected dividends. The firms growth capacity also satisfies the employees interest, because this
ensures their jobs safety. The salary packages often includes clauses regarding remuneration from the
companys profit. The local communities and the national economy in its whole benefit from the growth
of the company potential because the economic environment of the enterprise become factors of the
economic growth at a macroeconomic level and the paid taxes and duties will contribute to achieve the
local objectives.

The conclusions can be generalized and adopted by companies in order to increase competition and
satisfy the interest of those involved in their activity:

The economic growth is a major objective of the companys functioning, being at the same time
a condition to maintain the company in the competition system of the market, because its a tied
to the profound value to creating mechanism and especially to the efficient functioning.
To have economic growth capacity it must have efficient management that ensures an optimum
administration of all its economic resources. The operational, investment and financial activates
will be able to generate positive cash flow and too favourable contribute to forming profits only
with rational a well sustained managerial decisions.
The net worth indicator offers information about the owners equity of a company, which are
largely constituted as a result of the obtained and reinvested profits. In other words, the level of
the net assets widely reflects the quality of the previous earnings management. The growing
dynamic of the net worth shows a company in economic expansion, which generates profits and
is strengthening its financial position. Maintaining such a trend is a warranty of the companys
growing economic value and of the financial advantages that are given to the shareholders,
creditors, managers, employees and other interest groups.
The annual economic growth potential of a company is given by the growing rate of the equities,
whose essential element is the amount of the obtained net profit.
The firm has an economic growth potential only to the extent to which it rationally allotted the
financial resources, so that the invested capitals for financing the assets are efficiently managed
and generate net profit.
2) Indian Macroeconomics scenario: Inflation, Output Growth, Unemployment.

Inflation: In August, consumer prices rose 0.97% from the previous month, which followed Julys 1.67%
jump. Augusts reading mostly reflected higher prices for vegetables and fruits. Inflation accelerated to a
five-month high of 3.4% in August (July: 2.4%). The reading slightly overshot market expectations of 3.2%.
Despite the increase, inflation is still below the Central Banks medium-term target of 4.0%.

The wholesale price index (WPI) in August increased 0.79% from the previous month, which followed Julys
1.06% rise. Sharp price rises for vegetables and fruits, along with higher prices for power and fuel, were
behind the increase. Wholesale price inflation gathered further pace in August, hitting 3.2%, which was up
from 1.9% in July. The trend continued to point upward, with the annual average wholesale inflation rate
rising to 2.8% from 2.6% in July.

Growth: The Indian economy slowed significantly in the first quarter of FY 2017, recording the worst result in
three years. According to recently-released data from the Ministry of Statistics and Programme
Implementation (MOSPI), GDP expanded a weak 5.7% annually in Q1 FY 2017, which was sharply below the
6.1% increase in Q4 FY 2016. The result notably undershot market analysts expectations, who had forecast
that growth would bounce back after a demonetization-induced slowdown in Q4 FY 2016.

Behind the economic downturn was a deterioration in the external sector combined with weak domestic
demand. Export growth slowed notably from 10.3% in Q4 FY 2016 to 1.2% in FY 2017, the worst result since
Q4 FY 2015. A strong rupee and confusion over the looming implementation of the Goods and Services Tax
(GST) likely weighed on the result. Anecdotal evidence suggests that firms were unsure of how to price
products, with some even providing pre-GST discounts, which likely caused disruptions to economic activity.
Meanwhile, import growth rose to 13.4% in Q1 from 11.9% in Q4 FY 2016, a multi-year high. The rise was
partly driven by rising demand for gold, as consumers front-loaded purchases before the introduction of the

On the demand side, fixed investment growth was sluggish, coming in at 1.6% (Q4 FY 2016: -2.1% year-on-
year). Investment has been a weak spot in Indias economy, largely due to a stressed banking sector and
many over-leveraged firms. Private consumption increased 6.7% in Q1, below Q4 FY 2016s 7.3% rise. In
addition, government consumption growth slowed from 31.9% in Q4 FY 2016 to 17.2% in Q1. Many analysts
had predicted a pick-up in public spending to offset moderate household consumption thanks to the earlier
presentation of the budget for this year; however, this failed to materialize.

Overall, the weak GDP print illustrates the toll that the governments ambitious reform agenda is taking on
the economy. The lingering effect of demonetization combined with confusion over the GST are having a
dampening effect on activity, which has slowed notably in the past two quarters. On the bright side, these
measures should only amount to a temporary shock, and the economy should gain steam in the coming
Unemployment: From 1983 till 2011, Unemployment rates in India averaged 9 percent reaching an all-
time high of 9.4 percent in December 2010 and a record low of 3.8 Percent in December 2011. In India,
the unemployment rate measures the number of people actively looking for a job as a percentage of the
labour force. The number of unemployed people in India decreased to 39963 thousand in 2009 from
39974 thousand in 2007. Unemployed persons in India and Kenya averaged 36933 thousand from 1985
until 2012, reaching an all-time high of 41750 thousand in 2001 and a record low of 24861 thousand in
1985. In India, unemployed persons are individuals who are without a job and actively seeking to work.
According to India Skills Report launched in the 3rd CII National Conference on Skill Development 3.4%
were found employable Out of about 1, 00,000 candidates. The Report not only captured the skill levels
of talent pool but also brought out the hiring estimates across major Industry sectors in the country. As
per the reports findings, the coming year would not see bullish hiring in any of the sectors. Out of about
10 sectors surveyed, majority of the sectors (like BFSI, BPO/ITES, Manufacturing etc.), are not expecting
a major change in their hiring numbers. Engineering & Core, Hospitality and travel, came out as the only
sectors where there will be a significant increase in the hiring numbers. The report also brings out a
general trend amongst the employers to look for skills rather than qualifications in candidates. Apart
from this, the report has in-depth analysis of the skill pool based on the gender, age-group, and domain
along with the states where the most employable pool can be found. It also shows the domain wise
hiring trends for the coming year.
Based on the gender, it was found that the quality of female candidates is better than the males. This
and many more such insights are part of the first India Skills Report, which is an effort to capture the
skill levels of the supply side and needs of the demand side of Talent and perform matchmaking
between the two ends. Reaching out to over 1,00,000 students spread across the length and breadth of
country parallel to almost 100 employers spread across 10 Industry sectors, the India Skills Report has
helped to create an agenda that can function to solve the talent supply-demand challenge the country is
facing. According to NSS(66th round) Report from Ministry of Statistics and Programme
Implementation, Government of India published on 2013 Kerala has the highest unemployment rates ,
while Gujarat has the least unemployment rate among major States of India. National average for
unemployment rate stands at 50.

Case 1: Sky Airways

Q1: What problems does Peter Greenwood face?

A: The problems faced by Peter Greenwood are:

Increasing Number of Complaints

Expected problem: Link between number of complaints and minutes of delays
Unexpected problem: Complaints about on-board catering
Revenue passenger Kilometre declined by 5% over the past three years
Last minute passengers
Need more meal in short time
No choice for customers to order customized meals
Stress for the crew members
Not enough space for more meals
Incorrect quantity of meal
Delay in delivery of meal
Portions and cost of menus have a wide variations in quality and quality in various airports
around the world
Biggest problem in furthest destinations

Q2: If you were Peter Greenwood what would you say to the board?

A: If I were peter greenwood. I would recommend the appropriate solution which is as follows:-

No complete meals on short hauls for tourist-class passengers, just snacks

Reducing meal variety and increasing food quality
Special meals have to be confirmed during the reservation
Request meal contents information to the food suppliers
Focus on customer satisfaction
Shorter hauls between connecting stations
On time boarding of passengers and on time arrival and departure of flight
Case 2:
Q 1: What are the service concepts currently delivered by the Lilliput?

The organizing idea The idea behind setting up Lilliput ltd is to provide best quality custom
Play Houses to the customers at minimum cost.

The service experiences Lilliput ensures that the children are satisfied with their products
because their mission is to maintain Family Friendly feel to the business

The service outcome Final result of the outcome of the service rendered is customer
satisfaction which is categorized into two criteria, that involves both good quality products at
minimum cost and Childrens experience

The service operation - At Lilliput all the engagements undertaken by them is On-site where in
the custom playhouses are designed and built at the Client Location only which provides a
personal touch in their projects as the customers can have a first-hand experience in their
personal projects.

Lilliput as also developed a Brochure which concentrates on delivering a detailed overview

about the designs, style, sizes, installation and maintenance, sources of timber and con.

The value of the service - Lilliput also provides scope for mid-project changes/modifications in
the design of the Play houses at a bare minimum cost based on the customers requirements,
thereby achieving Family Friendly relationship.
Lilliput also concentrated in delivering the play houses within the 5 weeks deadline till 2004
without compensating on their quality terms and customer satisfaction.

Q 2: How would clarifying these service concepts assist Reg in deciding how to focus these
service operations?

Operational Hindrances or Problems faced by Lilliput Ltd in their current Business Models:

Problem 1: Lilliput ltd as a practice does not accept Credit Card as a medium of payment, since
narrowing their range of services away from the broad market segment a one size fits all
service. This results in affects the Service Experience aspect of the respective sale or

Problem 2: Lilliput Ltd assignments /Engagements at the clients location, comes with certain
disadvantages such as the project area must be fenced for safety reasons which increases the
labour time.
Lilliput also undertakes Mid-Project changes /modifications on request of the customers at a
very less cost which in turn adds on to the project costs and the other important as aspect is the
Time constraint, because these customisation services provided during the project execution
might increase the stipulated delivery time resulting in customer dissatisfaction and delay in
initiation of the next assignment or engagement.

Problem 3: The customer order handling and project management services were handled by
Mavis Williams who was not able to attend to all the customer enquiries which led to Potential
Business Opportunity loss. Maviss Job Description was to attend to Customer Enquiries and
provide them with the respective information about the assignments undertaken by Lilliput ltd
Since Lilliput ltd had only on Back office operator and three on-site carpenters, they were not
able to meet up to the customers wants/ requirements.