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Strategic
decisions & Working Capital (WC)
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Investment
decisions |
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Modes of diversification
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Inter-Organizational relationships
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Others : |
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Long-Term
Financial decisions |
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Investment
analysis and decision |
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macroeconomic
AGGREGATES
Before taking
any strategic decision managers have to indentify
the pertinent macroeconomic aggregates, the
relations between them and their TRENDS.
| Aggregates |
GDP
= C + I + G + X - M |
| GDP |
total value of final goods
and services produced within a nation
during a given year |
| C |
Household consumption of goods and services |
| I |
physical investment (gross private capital
formation) + additions to inventory |
| G |
Government expenditures |
| X |
Exports |
| M |
Imports |
Three
approaches to calculate GDP
| Approaches |
GDP (Gross Domestic Product) |
| Flow-of-product
approach |
C + I + G + (X
- M) (open
economy) (assumptions
: depreciation = 0, indirect taxes=0) |
| Earnings approach |
Sum of earnings received by household
from firms (wages, rents, interests,
profits) |
| Value-added approach |
GDP = total value added produced by
firms |
Relation
between International Trade & Internal
Macroeconomics
GDP =
C + I + G +( X - M)
GDP -
C - G = S = I + (X - M)
(S - I)
= (X - M)
If X is not equal to M,
that is because S (savings) is not equal
to I. If we want to restore the equilibrium
between X and M, we have to restore
the equilibrium between S and I by using
the three macroeconomic policies :
Macroeconomic
Model for Switzerland (million swiss
francs)
Years |
+
C |
+
G |
+
I |
+
X |
-
M |
=
GDP |
1995 |
222'625 |
43'511 |
87'002 |
131'877 |
112'765 |
372'250 |
1996 |
226'273 |
44'303 |
84'277 |
135'499 |
116'359 |
373'993 |
1997 |
231'320 |
43'957 |
84'185 |
151'608 |
130'477 |
380'593 |
1998 |
235'793 |
43'982 |
91'285 |
156'909 |
137'778 |
390'191 |
1999 |
241'996 |
44'293 |
89'171 |
165'832 |
143'398 |
397'894 |
2000 |
249'243 |
46'187 |
96'369 |
189'823 |
166'093 |
415'529 |
2001 |
255'236 |
48'997 |
99'828 |
190'767 |
172'343 |
422'485 |
2002 |
259'342 |
50'398 |
93'310 |
187'974 |
160'497 |
430'527 |
2003 |
262'672 |
52'059 |
91'017 |
188'534 |
159'518 |
434'764 |
| 2004 |
268'920 |
52'156 |
93'586 |
205'524 |
172'877 |
447'309 |
2005 |
274'764 |
51'959 |
98'046 |
218'096 |
187'271 |
455'594 |
Correlation Analysis
Macroeconomic
aggregates for Switzerland : annual variation
rates
Years |
Unemployment
rate |
Inflation rate |
1996 |
4.70 % |
0.80 % |
1997 |
5.20 % |
0.54 % |
1998 |
3.90 % |
0.00 % |
1999 |
2.70 % |
0.86 % |
2000 |
1.80 % |
1.49 % |
2001 |
1.70 % |
1.05 % |
2002 |
2.50 % |
0.62 % |
2003 |
3.70 % |
0.62 % |
2004 |
3.90 % |
0.82 % |
2005 |
3.80 % |
1.12 % |
Years |
G |
C |
I |
X |
M |
GDP |
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Annual
variation rates |
1996 |
1.82 % |
1.64 % |
-3.13 % |
2.75 % |
3.19 % |
0.47 % |
1997 |
-0.78 % |
2.23 % |
-0.11 % |
11.89 % |
12.13 % |
1.76 % |
1998 |
0.06 % |
1.93 % |
8.43 % |
3.50 % |
5.60 % |
2.52 % |
1999 |
0.71 % |
2.63 % |
-2.32 % |
5.69 % |
4.08 % |
1.97 % |
2000 |
4.28 % |
2.99 % |
8.07 % |
14.47 % |
15.83 % |
4.43 % |
2001 |
6.08 % |
2.40 % |
3.59 % |
0.50 % |
3.76 % |
1.67 % |
2002 |
2.86 % |
1.61 % |
-6.53 % |
-1.46 % |
-6.87 % |
1.90 % |
2003 |
3.30 % |
1.28 % |
-2.46 % |
0.30 % |
-0.61 % |
0.98 % |
2004 |
0.19 % |
2.38 % |
2.82 % |
9.01 % |
8.37 % |
2.89 % |
| 2005 |
-0.38 % |
2.17 % |
4.77 % |
6.12 % |
8.33 % |
1.85 % |
Source
: National Bank of Switzerland, Statistical
Monthly Bulletin,September 2006
© Bernard
Jaquier, Professor in Economics & Finance,
Ecole Hôtelière de Lausanne,
2007
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