Effective Business Management through Micro and Macro-Economics

The assignment discusses how businesses can benefit from understanding micro and macro-economical factors. It emphasizes the need for organizations to concern themselves with these factors to analyze market situations, forecast demand and supply, and prevent excessive loss in profitability. The report also touches on the importance of financial management in business, including the integration of social, environmental, and economic performance, and how it can aid in formulating policies related to controlling business cycles.

Economic and Financial
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
Task 1...............................................................................................................................................1
Impact of economy on business organisation.........................................................................1
TASK 2............................................................................................................................................3
Applications of economical theories to range of contemporary business..............................3
TASK 3............................................................................................................................................4
Analysis of micro and macro economical forces on contemporary business.........................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6
.........................................................................................................................................................6

INTRODUCTION
Economic and financial management can be defined as a process to plan, organise, direct
and control business activities of a company. (Matthew, 2017). The present report is going to
demonstrate micro and macro-economical factors which influence failure of an organisation. For
this purpose, New Look Company is chosen which is a British global fashion retailer, having a
chain of high street shops. Its business has been liquidated over some years in Belgium, China,
France and other countries, which affects UK's economy also. Therefore, some theory of
economics are presented. It highlights impact of Brexit, inflation, competition, labour market and
more on this company.
Task 1
Impact of economy on business organisation
Today, mostly companies focus on identifying and fulfilling the needs of customers in
certain specific niche markets. It serves as an objective to ensure fund adequacy, safety on
investment, optimum utilisation of resources and more. In this regard, economical aspect assist
organisations to take appropriate decisions related to finance or investment. But, their businesses
are almost affected by economical trends and this would also aid managers to take better
decisions (van Duuren, Plantinga and Scholtens, 2016). In context with New Look, it was
established in 1969 and operates a chain of more than 900 stores in international market. These
chain offers fashionable garments including menswear, women-wear and clothing for teenagers.
According to recent article given by Elias Jahshan (2019), it has evaluated that Belgium division
of New Look has filed for insolvency. Its managers have reviewed that its global operations have
swapped after announcing a debt-for-equity. In Belgium, this fashion retailer operates near about
six stores but now, it has filed for bankruptcy on 16 January 2019 by proceedings with the
Brussels Enterprise Court. So, it shows that New Look will now wind up its operations from
Belgium due to low performance and failure in generating profitability as per expectation. In
addition to this, respective company also wind up its operations in China that leads to close near
about 120 stores over there. Henceforth, it has evaluated that closure of business in international
marketplace has majorly impact economy of UK also. Because it affects trading in other
countries due to which UK is not in position to generate higher economy. In addition to this,
decreasing economical condition in respective nation has majorly affect existing companies also
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as, they will also not in position to trade easily at global level also. The reason behind liquidation
of New Look's business over in these areas (China and Belgium), can be identified by analysing
economical impact, as described below:-
Impact of Brexit: The macro-economical effects of Brexit on organisation can be
classified in terms of long-term and short-term. It involves some restrictions on access of UK to
EU marketplace, where new barriers have arisen within trade of UK. In addition to this,
uncertainty which surrounds the outcome of referendum has also deterred investment (Hein,
Detzer and Dodig, 2016). It has been estimated that before Brexit, trade volume between UK-EU
was near about 1196 billion euros. But after Brexit, various risk factors have arisen which affect
New Look and other international organisations, to conduct their business in each other territory.
It includes increasing bureaucracy and administrative expenses, higher fluctuations in foreign
exchange rates, revaluation of supply chain and higher logistic costs etc. After Brexit,
organisations deal in small and large sector faces various issues related to trade their products in
international market. This would bring UK to heavily relies on foreign products which raise
tariffs on import and makes more expensive. Therefore, due to these factors and high import
duties that directly impact on marketing and selling price, New Look under international
countries fails to earn expected profitability. Thus, due to this reason, it has also shut down its
stores that are near about 90 in UK.
Labour market: The strength of labour market is considered as main factor, which
determine a country's policy related to decreasing economical data (Schaltegger and Wagner,
2017). In context with international marketplace, a tight labour market as well as rising wage
rates, create many economical changes. Due to growing demand of labours under industries,
employee seek to get high wages. Therefore, negotiation within labour unions is considered as
main factor which impact on profitability of New Looks' business in negative manner. With this
assistance, it has to shut down its business in UK and other countries also. In addition to this,
other companies which are faces same issues also going to shut their businesses. All these affects
labour market of UK as it arise unemployment in severe manner.
Inflation: Economy in China and EU is fast overheating. All such extra liquidity seems
to drive up prices and wages more rapidly. Therefore, this inflation period of these nations,
general level of price of commodities and services also rises (Burtonshaw-Gunn, 2017). It
impacts on purchasing power of buyers which eventually effect sales performance of both
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domestic and international companies. Therefore, it is also referred as one of the main reasons
due to which New Looks has decided to close its stores under China and Belgium marketplace.
Thus, it affects company's economy in UK also due to which it has to close its stores in
respective country. It majorly impact on developing economy of United Kingdom because due to
liquidation of any business, this country cannot export more products in international market. In
addition to this, government also needs to import commodities from other nations. Therefore,
increase import activities and reduce export one, has increased inflation period at marketplace.
As export boosts economic output while import increase dependency on other countries' political
and economical power. It affects the inflation and interest rates, trading policies and domestic
currency as well. All these high rates impacts small businesses more as they are not in condition
to compete easily with the same. Therefore, closure of small businesses which create
approximate 70% new jobs, affect employment as well.
TASK 2
Applications of economical theories to range of contemporary business.
As per current scenario, New Look is going to liquidate its business from international
and domestic marketplace of UK. The reason behind this is the respective company is not being
able now to pay its debts therefore, it has involved creditors under liquidation process (Xiao and
O'Neill, 2016). This company also announces some plans for pursuing a debt-for-equity swap. It
is part of restructuring scheme which includes reducing the debt of respective company from
£1.35 billion to £350 million. But shuttering business over marketplace of China and Belgium
may impact on existing business of New Look in UK also. Currently, this retailer has run more
than 100 stores in France, Poland and others in UK. Therefore, it is essential for managers to
apply some economical theories to maintain its performance in existing countries. By analysing
the strategies used by major competitors of respective company, managers can determine which
economical theory they have to apply over mention context. Currently some major competitors
of New Look in same fashion industry are ASOS, Lulus, Zalando and more (Giannakis and
Papadopoulos, 2016). It has analysed that due to some supply chain management or ethical
issues under Turkish textile industry, ASOS has decided to close its business in Turkey.
Indulging business in unethical operations has impacted business reputation of ASOS in adverse
manner. Therefore, to resolve this stage of liquidation, its managers has used concept of new
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classical macroeconomics. This theory mainly emphasises on effectiveness of rigorous
foundations which are based on microeconomics.
New classical macroeconomics: Since New Look currently faces issues related to
failure in generating profitability and enhancing sales performance. Therefore, it is
recommended to managers to apply the concept of new classical theory to business. This theory
emphasise to identify circumstances which affect market. New Look provides wide range of
goods (women-wear, menswear, clothing for teens) and services (online and offline selling) at
international marketplace (Reguera-Alvarado, de Fuentes and Laffarga, 2017). Therefore, by
defining commodities, the environment can be introduced into market economy through
constructing demand and supply curves, for respective goods and services. Constructing such
demand curves includes estimating willingness to pay measures as per customer needs and
purchasing power. In this regard, managers of respective retailer can construct a proper demand
curve and determine a range of values. Therefore, intersection of demand with supply curve will
represent the most efficient allocation of resources as per customer's preference. This would help
New Look in enhancing its sales performance in existing countries where it operates stores.
TASK 3
Analysis of micro and macro economical forces on contemporary business
Business environment refers to specific factors and forces which affect ability of a firm to
build and maintain its successful customer relationship. It includes micro and macro-economical
forces that affect sustainability of businesses (Bashir, 2016). Microeconomics concerns on
actions of individuals within an economy such as workers, suppliers, intermediaries and more.
While macro-economics consider economy as a whole and focuses on issues like growth of
production, inflationary rate in prices, level of import and export etc. Since every retailers'
primary goal is to satisfy needs of targeted marketplace and serve its products within market.
Therefore, it is essential for such organisations including New Look, to concerns on micro and
macro-economical forces. It helps in understanding the economical situation of marketplace of
countries, where respective company has operated its business. It indicated how prices of goods
and factors of production can be determined to run business effectively. If price of any product is
increased then it will lead to decline in sales and customers will opt for other alternative
substitutes which will impact on profitability of organisation. Similarly, if they provide their
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products at minimal rate then this will also impact on company's image. As when a company
offers its products on low rates then people points out on quality of products. Economical
situation can have worse impact on organisation. Microeconomics also aid managers in
understanding the conditions of efficiencies in production, consumption and distribution process
to offer services accordingly (Siminica, Motoi and Dumitru, 2017). Similarly, macro-economic
analysis aid in determination of level of aggregate employment and per capita income. Along
with this, it also helps in identifying the general level of prices, economical growth and business
cycles. All these processes, helps New Look in analysing the causes of fluctuations in national
income. This would aid in formulating effectively policies related to control business cycles as
per inflation and deflation period of economy. Thus, by understanding these factors, managers
of New Look can monitor and measure operational activities to maintain its performance in
respective stores. In addition to this, they can also take better decisions in terms of interest for
organisational success.
CONCLUSION
It has concluded from this report that to run business effectively at international
marketplace, it is essential for organisations to concern on micro and macro-economical factors.
This would help in analysing the market situation in terms of economy, per capita income and
more, for forecasting demand and supply of sales accordingly. In addition to this, by
understanding concept of economical and financial management, international organisations also
get opportunity to prevent their businesses from excessive loss in profitability. As per fluctuation
in economical conditions, they can formulate effective policies and strategies to run business
appropriately.
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REFERENCES
Books and Journals
Burtonshaw-Gunn, S. A., 2017. Risk and financial management in construction. Routledge.
Matthew, B. T., 2017. Financial management in the sport industry. Routledge.
van Duuren, E., Plantinga, A. and Scholtens, B., 2016. ESG integration and the investment
management process: Fundamental investing reinvented. Journal of Business Ethics.
138(3). pp.525-533.
Hein, E., Detzer, D. and Dodig, N. eds., 2016. Financialisation and the financial and economic
crises: country studies. Edward Elgar Publishing.
Schaltegger, S. and Wagner, M., 2017. Managing the business case for sustainability: The
integration of social, environmental and economic performance. Routledge.
Xiao, J. J. and O'Neill, B., 2016. Consumer financial education and financial capability.
International Journal of Consumer Studies. 40(6). pp.712-721.
Giannakis, M. and Papadopoulos, T., 2016. Supply chain sustainability: A risk management
approach. International Journal of Production Economics. 171. pp.455-470.
Reguera-Alvarado, N., de Fuentes, P. and Laffarga, J., 2017. Does board gender diversity
influence financial performance? Evidence from Spain. Journal of Business Ethics.
141(2). pp.337-350.
Bashir, Y., 2016. Effects of treasury single account on public finance management in Nigeria.
Research Journal of Finance and Accounting. 7(6).
Siminica, M., Motoi, A. G. and Dumitru, A., 2017. Financial management as component of
tactical management. Polish Journal of Management Studies. 15.
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