Edinburgh Business School MBA AUC Academic Partner Strategic Planning Module 4 The Company and the Economy Instructor: Moataz Darwish, MBA Contents 4.1 The Company in the Economic Environment 4.2 Revenue and Costs: The Basic Model 4.3 The Workings of the Economy 4.3.1 Understanding and Using Economic Information 4.3.2 Supply and Demand in the Economy 4.3.3 Unemployment and Inflation 4.3.4 The International Economy 4.4 Forecasting: What Will Happen Next? 4.5 PEST Analysis 4.6 Environmental Scanning 4.7 Scenarios 4.8 The Economy and Profitability 4.8.1 Implications for Company Sales and Revenues 4.8.2 Competitive Reaction and the Economic Environment 4.8.3 Implications for Inputs and Company Costs Introduction – Moataz Darwish 2 The Model Introduction – Moataz Darwish 3 Lincoln quote during the civil war I don’t claim to have controlled events but confess plainly that events have controlled me. Introduction – Moataz Darwish 4 Introduction Introduction – Moataz Darwish 5 The Company in the Economic Environment Systematic view involves much more than general awareness. Environmental Scanning provides information which can be used to construct (PEST) review of the environment and (ETOP). In the face of this quantity of information: identify important variables, simplify them as far as possible, and subject them to appropriate analyses. Introduction – Moataz Darwish 6 Revenue and Costs: the Basic Model Economy-wide changes can have significant effects on revenues and costs. The model is constructed by identifying the variables which determine revenue and costs and determining the factors which affect these variables. Revenue = Total Market x Market Share x Price Outlay Number of Workers x Wage Rate + Units of Capital x Price + Units of Material x Price = A sensible interpretation of macroeconomic factors can prevent the company from undertaking strategic moves too early. Introduction – Moataz Darwish 7 Revenue an