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ECO 550 Expansion and Merger

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Economics

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Interpreting Macroeconomic Conditions
Interpreting Macroeconomic Conditions - Assignment 4
Managerial Economics and Globalization – ECO 550
Interpreting Macroeconomic Conditions
This assignment involves analyzing several indicators of the of the
macroeconomic conditions in an economy, such as interest rates,
income, and other indicators such as CPI, inventory levels, wage rates,
consumer confidence, etc. Analyze these indicators and prepare a 3-4
page report explaining the expected short impact on firms in the
following industries, retail business and automobile industries in terms of
product sales and operating costs.
I feel it would be better served to explain exactly what macroeconomics
means. Macroeconomics evaluates or examines the overall performance
of the economy as a whole and in this process we can determine what
causes the economy to grow and how indicators such as interest rates,
income, wage rates, employment and unemployment can affect the
overall performance of our economy in its current state as well as
forecast predictions for the future. This type of activity and performance
is often measured through the GDP (Gross Domestic Product); the total
value of all goods and services in the market. This information can be
applied to any firm/business to evaluate how these changes impact their
product sales and operating costs in the United States.
If were to evaluate a local retail business in the Birmingham area, we
could observe a company called Kirkland’s Home. Kirkland’s Home is a
leading retailer that specializes in home décor. They were founded in
1966 in Jackson, Tennessee and have spread throughout thirty five
states. Kirkland’s is among a few elite businesses that claim they are
debt free; all revenue is in the black, never in the red.
Interpreting Macroeconomic Conditions 3
I’ve had the privilege to work for this company for the past five years and
got an inside view of their operations, sales strategy and business model
be applied to changes in the economy to product positive results.

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When the economy started falling into a recession product sales were
affected greatly; managers across the United States realized
merchandise was not moving, but inventory levels continued to increase
and the customer demand had diminished, they simply were not buying
items as frequent due to changes in their personal income, lack of
income and high unemployment rate. Kirkland’s recognized the signs
and developed a strategic marketing approach to reignite consumers
interest to generate traffic flow throughout their stores to generate an
increase in sales. To increase product sales the management staff used
tactics such as new credit accounts received lower interest rate for an
extended period, extra reward points when opening a new credit
account, deeper discount on their first purchase using the new credit
card for new account holders. This approach was great and it increase
sales slightly but the excitement was short lived, stores continue to fail at
meeting their daily sales goals. The next sales approach consisted of
offering additional coupons to customers that printed on their sales
receipt. Their often referred to as “bounce back coupons”. They simply
give the customer a discount based upon the amount of their total
purchase if they returned by the designated date. This small change
generated a significant increase in traffic throughout all the store and
lead to large revenue; it worked! The management team continued to
meet with their marketing team, managers and sales persons regularly
to receive input and ideas on ways to continue and increase revenue.
Kirkland’s evaluated other retailers sales approach and begin
implementing those as well and as a result, Kirkland’s now offers special
sales during major holidays i.e. Memorial
Interpreting Macroeconomic Conditions 4
Day, Independence Day, Labor Day, Halloween, Christmas etc. They
have gone as far as discounted merchandise for a special pricing for
items that are normally not discounted to short periods of time. Kirkland’s
revisited the type of merchandise they purchased, the volume and the
various variety they offered to their customer base to bring affordable
merchandise to all income levels in today’s market.
Once the sales approach was adjusted to a successful model, Kirkland’s
revised their operating expenses for ways to reduce or eliminate
unneeded cost. Their primary areas of concerns included, reducing
inventory volume/cost, employee hours, and loss acquired through
damaged merchandise. Kirkland’s approach to changes in their

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inventory consisted of adding new buyers to their staff to understand the
needs of their client base and streamlining their merchandise to include
items of high demand in all stores. They also eliminated those items that
didn’t move off the shelves or ended up in the clearance section of the
stores. Many of the customers noticed these changes immediately and
the response was positive. Kirkland’s increase working hours of their
management team and reduced the number of hours for non
management employees. This move was beneficial to the company as
salary employees are paid regardless to the number of hours worked or
not and as sales increase working hours increase to lower level
employees. Lastly Kirkland’s was losing a tremendous amount of money
through write offs of damaged merchandise whether it occurred in the
store by customers, employees or the loading and unloading process.
Now this does not occur unless it’s absolutely necessary and the
merchandise has been evaluated by the store manager and the write off
amount has been approved by senior management.
Interpreting Macroeconomic Conditions 5
When a business such as Kirkland’s is in tune with the changes in our
economy structure they must evaluate the impact of these changes and
how they will affect their business and their customers and be willing to
make adjustments that is beneficial to both relationships.
If the consumer is unable to spend money due to higher interest rates,
loss of income, unemployment, etc… businesses will feel these affects in
the short run as well as the long run and will ultimately lead to many of
them closing their businesses for good. It is important that we stay
informed of the changes in our economy because they can have a direct
impact to all.

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