Marita Sanders Wal-Mart Economic Indicators November 14, 2010 According to About. com (2010), economic indicators are economic statistics that indicate how well the economy is doing and how well the economy will do in the future. Economic indicators can range from unemployment to the inflation rate. Economic indicators are not the same across the board, and will vary from industry to industry and company to company. Although Wal-Mart is a very successful company, there are still many areas of improvement they need to consider.
The problem a lot of companies make is that once they reach a certain revenue dollar amount they feel they have arrived. Although having increasing revenues consistently is key to success, there are many other factors that measure a company’s success. There are six major economic indicators that are of particular relevance to Wal-Mart. Those six economic indicators are consumer price index, employment cost index, employment situation, product price index, productivity and costs and U. S. import and export price indexes. These economic indicators are their statistics are vital to the successful operation of a business.
The consumer price index (CPI) is considered the most important measure of inflation. It also compares a fixed list of goods and services to a base period. The CPI is a major economic indicator for Wal-Mart because it measures inflation. Whether the economy is experiencing inflation or not is crucial for Wal-Mart as it relates to pricing and availability of products. Also, being able to compare good and services to a base period is a great way for Wal-Mart to see how their products performed in a certain period. The employment cost index (ECI), is a quarterly economic series detailing the changes in the costs of labor for businesses in the U.
S. economy. EPI shows whether employment cost changes are rising or falling. ECI is crucial to Wal-Mart because it details labor cost changes. This is important because if Wal-Mart is not compliant it could affect not only their labor, but their company as a whole. If employment cost changes are rising then employment wage, compensation costs, etc. must be adjusted. Employment situation report is a report that is released on the first Friday of every month. This report has two major components: the change of unemployed people working in the United States as well as the number of new jobs created.
The second part measures the average number of hours worked each week as well as the average compensation earned by employees during those hours. This report is important because Wal-Mart need to be aware of the employment situation for the economy as a whole, not just Wal-Mart’s employment situation. Also, the second part of the report is crucial so that Wal-mart can ensure their average number of hours worked and average compensation earned during those hours worked are comparable to their industry competitors.
Product price index (PPI), measures the average change over time in the selling prices received by domestic producers for their output. The PPI also shows what areas increased and decreased during a certain period. This is imperative to Wal-Mart and its success. Wal-mart has to maintain its edge over industry competitors. The PPI also affects how much product and for what price Wal-Mart will sell to other countries. It is also key that Wal-Mart know how much product they are moving and at what output.
Productivity and costs is a quarterly release from the Bureau of Labor Statistics that measures the level of output that is achieved by businesses per unit of labor. Productivity and costs is crucial to Wal-Mart because by this Wal-Mart can determine whether they need to hire additional employees or whether they can skim back. As well, this is a sure way Wal-Mart can track their output, and in turn they can increase or decrease accordingly. The PPI can also vary depending on where a business is in the business cycle. U. S. import and export price indexes measures average changes in prices of goods and services that are imported and exported.
These price indexes are crucial to Wal-Mart for several reasons. First, Wal-Mart needs these indexes to see how their products are doing domestically opposed to globally. As well, these indexes allow Wal-Mart to see if prices are increasing or decreasing domestically and globally and adjust their pricing accordingly. All of these indicators are crucial to the success of most companies, but Wal-mart specifically. Wal-Mart can use all of these indicators to increase market shares, increase profitability, make key decisions regarding price and product placement and to keep abreast of their overall market conditions.
In my previous paper I listed as a weakness for Wal-Mart the fact that they do not have a focused product line. Wal-Mart can use the PPI and the U. S. import and export price indexes to establish what products are doing good and where. These economic indicators are very useful when it comes to product life cycles, business cycles, product pricing, hiring and firing employees, going global and importing and exporting pricing. When it comes to product pricing, although Wal-Mart is a leader in pricing, they still need to stay abreast of current pricing trends, promotions, etc.
As far as products are concerned, there are three indicators that directly relate to products and they are product price index, productivity and costs and U. S. import and export price indexes. When the stock indexes fall that influences the stock market falling or rising. One of Wal-Mart’s other weaknesses is the fact that Wal-Mart does not have a huge global presence. There are over 190 countries in the world and Wal-Mart only has stores in 15 countries. Wal-Mart needs to make opening more global stores in more countries a top priority. Increasing their global presence is key, and the economic indicators will be a big help in doing so.
Studying the U. S. import and export indexes will be extremely helpful for this weakness. Wal-Mart can use this index to see what goods and services are changing as it relates to average price. The key to economic indicators is not only having them readily available to you, but also knowing how to analyze and interpret them. These economic indicators can give true insight into the financial health and stability of a company. The employment cost index and employment situation can give insight into the overall employment conditions of the nation as a whole. These two indicators are key as it relates to expanding, hiring, etc.
In closing, economic indicators can give a potential investor, the Federal Reserve, the President and other countries insight into the U. S. economy. These economic indicator reports are public information, free to anyone, so it imperative that it is used wisely. Wal-Mart can definitely benefit from having a team that specializes in economic indicators and reporting to see how they measure up. These economic indicators are vital to all businesses domestic and globally.
References About Online. Retrieved November 17, 2010 http://economics. about. com/cs/businesscycles/a/economic_ind. htm