Environmental analysis is integral to understanding how the organization operates within the organization itself, with in the industry and within the macroeconomic environment. For this analysis the subject organization will be IKEA. “IKEA Group is one of the world’s largest privately owned companies, engaged in the retail of flat-packed home furniture and other house wares. Operating over 150 large-scale stores in over 30 countries, and with a mail order division, IKEA sells a range of furniture, which is made by over 2,000 suppliers in more than 55 countries. The company is headquartered in Helsingborg, Sweden”. (DataMonitor, 2007). IKEA major retail competition in the US are: ...view middle of the document...
) per unit of input (of labor, materials, equipment, etc.)”(ibid). Employment and unemployment are crucial when understanding the labor force within the macro economy and the retail industry environment. Inflation is significant to the economic system and occurs when the balance within the system has been swayed or when there is an “increase beyond proper limits; esp. of prices, the issue of paper money or an undue increase in the quantity of money in relation to the goods available for purchase; or an inordinate rise in prices” (ibid). Budget balance and finance are important keys as well. Much like the macro economy, this requires balance, so to the retail business needs balance in order to function.
Two of the macroeconomic variables which greatly affect the retail industry are unemployment and inflation. The unemployment rate is “the percentage of the labor force unemployed:
Unemployment rate =unemployed/labor force X 100
(McConnell & Brue, 2004). The unemployment rate is important to the economy because it is one of the main indicators as to the strength or weakness of the economy. Generally, the stronger the economy there is lower unemployment, meaning there are more jobs available. According to McConnell and Brue, there are three types of unemployment. These are frictional unemployment which is a description of workers waiting in between employment opportunities. Structural Unemployment occurs when the demand for a certain type of job decreases to the point of obsolete. Finally, cyclical unemployment is “caused by a decline in total spending and is likely to occur in the recession phase of the business cycle. As the demand for goods and services decreases, employment falls and unemployment rises” (McConnell & Brue, 2004). Unemployment affects the other economic variables with a direct hit on the GDP or gross domestic product.
GDP gap = actual GDP – potential GDP
The above equation demonstrates how the GDP gap is found. Okun’s Law states that “when the economy fails to create enough jobs for all who area able and willing to work, potential production of goods and services is irretrievably lost” (ibid).
Table 1 – US Jobs and Maryland Jobs*
2003 US 2003 MD 2004 US 2004 MD 2005 US 2005 MD 2006 US 2006 MD 2007 US 2007 MD
Workforce (m) 146.5 2.884 147.4 2.906 149.3 2.976 151.4 3.033 153.1 3.016
Employment (m) 137.7 2.754 139.2 2.782 141.7 2.857 144.4 2.916 146.2 2.901
Unemployment (m) 8.8 .130 8.1 .124 7.6 .118 7.0 .117 7.0 .115
Unemployment rate (%) 6.0 4.5 5.5 4.3 5.1 4.0 4.6 3.9 4.6 3.8
*Numbers reflect year end
US labor and statistics information provided by the US Department of Labor (viewswire.com)
Maryland labor and statistics information provided by the Maryland Department of Labor, Licensing and Regulation (www.dllr.state.md.us).
The above chart shows the comparison with workforce levels in the macroeconomic or remote environment and the industry environments.
Inflation is the second...