Economic Factors

Economic Factors

Strategy and organization are recurrent concepts in business. Strategic and organization management are important disciplines among modern business studies. The abbreviation C2 in organizational literature stands for ‘command and control’. A replacement for the term has been proposed due to repressive connotations. Naturally, as any society, the workplace has its mores, norms and rules. The implications of the anxiety or uncertainty management theory in the workplace behaviour have been examined (Thau, 2008). The interviewers found that situational uncertainty, as well as authoritarian management style, mediated organizational deviance.

Since the advent of the new millennium, positive psychology and related phenomena have flooded the media. Youssef & Luthans (2007) have tested the interrelationship of psychological constructs such as hope, optimism and resilience and work happiness, job satisfaction and organizational commitment, and found that the two sets were correlated and moved in the same direction. However, the authors caution that the study has some limitations and jumping to simplistic conclusions is unwarranted.

During recessions, unemployment tends to go up. Demand and supply shocks also affect the economy. The most talked about financial crises are the Wall Street Crash (1929), Black Monday (1987), the Asian Financial Crisis (1997-98), and the subprime mortgage crisis (2008). Although all sensed the repercussions of market brutality, the last of these was felt differently depending on where one lived.

There were also minor market crashes and many corrections. None have been as severe as the stock market crash precipitating the economic hardships of the 1930s. Interestingly, Agarwal et al. (2009) asserts that macroeconomic theory is poorly suited to analyse the crisis, because of the homogeneity of methods of production assumption.

It is virtually impossible to compete in today’s global economy without a college degree. (Bobby Scott). Illustration by Megan Jorgensen (Elena)

Internet, globalization and outsourcing have emphasized the role that international markets, trade and news play in an economic analysis. Growing up, many children and teenagers are dreaming of one day being involved in international business. The idea of travelling, a distinguished hobby, meeting new interesting people and being paid for it, is indeed appealing. Exports and imports enter in the gross domestic product (GDP) formula calculation together with government spending, investment, and consumption.

Naturally, domestic factors such as money supply and interest rates also matter. These are regulated by the central banks, European Central Bank (ECB) for the European Union, Bank of Canada, the Federal Reserve System and Banco de México for North America. Investment is usually understood as a sum of money or something of value that is injected into some organization or project in the hope of one day reaping the benefits. In contradistinction, as a GDP variable, investment means capital injected by companies doing business. Banking is an old profession started by European jewellers. Commercial banks are different than central banks. Commercial banks hold 80% of all US banks assets, while the rest lies with credit unions and savings institutions (Klein & Newman, 2006). Morrison & Wilhelm (2007) provide the following data. The CPI-adjusted capitalization of top 10 investment banks raised overtime. The CPI consumer price index, is designed to measure inflation and out of a 100. So, the figure went from $1 billion in 1960 to 194 billion in 2000. The number of skilled employees during the same period went from 56, 000 to 205,000.

In addition to investment banking, big corporations also determine some of the outcomes of the economy. Public companies raise capital by issuing shares. Reports state that $355.3 billion in securities sales were underwritten during the quartet from 1980 to 1984. The author proceeds that “of that total value, 24 percent is common stock, 5 percent is preferred stock, 2 percent is convertible preferred stock, 63 percent is debt and 6 percent is convertible debt” (Smith, 1986; p. 3).

Another interesting topic useful in business is game theory, usually offered as course by the Economics department. The class covers ideological constructs such as the famous prisoner’s dilemma (PD), the dominated strategy, trust, communication and the price and production regulating Nash equilibrium.

References:

•     Agarwal, R., Barney, J. B., Foss, N. J. & Klein, P.G. (2009). Heterogeneous resources and the financial crisis: Implications of strategic management theory. Center for Strategic Management and Globalization, Working paper No. 6: 1-35.
•     Klein, G. D. & Newman, C. M. (2006). Call from peerless bank: A case consideration of telemarketing and ethics. Journal of the International Academy for Case Studies, 12 (3): 103-120.
•     Morrison, A. D. & Wilhelm, W. J. Jr (2007). Investment banking: Past, present and future. Journal of Applied Corporate Finance, 19 (1): 8-20.
•     Smith, C. W. (1986). Investment banking and the capital acquisition process. Journal of Financial Economics, 15: 3-29.
•     Thau, S., Bennett, R. J., Mitchell, M. S. & Marrs, M. B. (2008). How management style moderates the relationship between abusive supervision and workplace deviance: An uncertainty management theory perspective. Management Department Faculty Publications, 1-15.
•     Youssef, C. M. & Luthans, F. (2007). Positive organizational behaviour in the workplace: The impact of hope, optimism and resilience. Journal of Management, 33 (5): 774-800.