Samsung: Economic Indicators

Samsung: Economic Indicators

Abstract

This paper will explain the economic indicators of the global giant Samsung Corporation. The paper will explain the relevance to the company; provide a strategy of the way in which the company may respond to the indicators, establish goals to maximize revenues for the future and explain what economic indicators are. Economic indicators are sequence of statistics gathered together to exhibit economic tendency and support in predicting future trends (McConnell, Brue & Flynn, 2012). The types of indicators that will be relayed in this paper include; Unemployment, Monthly retail sales, Durable goods, Gross Domestic Product, Consumer price index and US International transactions.

Economic indicators

Economic indicators are simply economic statistics that indicate how the country is doing and the potential forecast for the future. Statistics used include data from the unemployment rate, the inflation rate and the Gross Domestic Product (Moffatt, 2014). There are three attributes to economic indicators. Procyclic is the indicator that moves in the same direction of the economy. If the economy is good the indicator increase, but if the opposite is true than the indicators are decreasing. An example of a procyclic is the Gross Domestic Product. The countercyclical indicator goes in the opposite of the way the economy is going. An example is the unemployment rate. Last is the acyclic indicator which has no real relation to the economy of how it develops. An example would be how many touchdowns are scored in an NFL game before halftime in a given year. Also included in the attributes of economic indicators is frequency of data (an example is Dow Jones Index) which releases data every three months while unemployment is released monthly. The last attribute is the relation to the business cycle.

Three Timing Types

The three types of timing economic indicators are lagged, coincident and leading. Leading indicators change before changes occur within the economy. An example is the stock market. Trends of the stock market usually indicate the status of the economy (or the prediction of). Investors rely on leading economic indicators. Lagged indicators exhibit no change until after a few quarters have passed after the economy has changed. An example is unemployment rates. Coincident indicators move as the economy does. An example is the Gross Domestic Product (Moffatt, 2014).

Unemployment

The unemployment rate is the number of the labor force divided by the number of unemployed. According to the Bureau of Labor Statistics, unemployment rate includes not having a job, actively looking for work for the past four weeks. Even if you were a temporary worker and were laid off you will still be counted. If an individual is no longer seeking employment they are not counted (Amadeo, 2014). There was a decrease in the unemployment rate to 6.10 percent in the United States in the month of August 2014. In the United State the unemployment rate has reached a record high of 10.83 in November of 1982 and a record low of 2.50 in May of 1953. Between the years of 1948 to 2014 the medium rate of unemployment was 5.83. The unemployment relates as it is a lagging indicator and therefore it measures economic events after a recession has occurred. The Federal Reserve uses this data when it sets monetary policy (Amadeo, 2014).

As of January 2014 Samsung Corporation has 11,909 employees (6,101 overseas). Currently Samsung has nearly 800 jobs posted in the United States and more overseas. This data is an indicator that the availability of these positions could potentially reduce the unemployment rate in the future. Samsung is rapidly increasing its innovations and continuing to provide consumer with what they are in need of. Samsung has staying power and therefore is a good investment in the future of the economy.

Monthly retail sales

Samsung uses monthly retail sales as an economic indicator that closely follows the significance of commodities as it relates to its timing. Monthly retail sales are known as a coincident economic indicator because it relates to the activity of the economy. Investors find this indicator valuable because it shows how the economy is moving. By using the monthly retail sales reports investors, shareholders and stakeholders can help forecast and make better decisions as to how the company is doing in relation to the economy. Samsung sales as of second quarter 2014 dropped from $7.58 billion (last year) to $6.1 billion. This data is a result of a decrease in Smartphone and tablet sales. Critics and Samsung executives view the next quarter as a “challenge” as Chinese manufacturers of the Huawei have increased their sales thereby causing a shift in the market share contributing to the decrease in sales (McCormick, 2014). After each report is published on sales this information is used to help Samsung to shift its focus on what areas of the company need attention. The economic indicators are a response from the consumers as to what is in demand or what is failing. The monthly retails sales provide Samsung with great insightful information into the progression of it goods and products.

Durable goods

Goods that are not immediately consumed and gradually wear out during the period of use are called durable goods. Durable goods are goods that can be used for three or more years (McConnell, Brue, & Flynn, 2012). In comparison non durable goods consists of clothing, food and items that are used in the three year time period. Investors and Samsung executives can use the statistics from durable goods to potentially forecast ad/or calculate future profits. Samsung is an innovator and is growing from each technological advance. The market it hold for appliance and television is ever growing. Samsung is one of the industry’s giant when it comes to televisions. Consumers are becoming more and more fascinated with size and type of televisions. As Samsung grows in its pursuit of becoming the number one in its industry, this will help keep the company on the competitive edge.

Gross Domestic Product

Gross domestic product is the rate of all finished goods and services produced within a country during a certain time period. The measurement for GDP is nominal and real and used as a business cycle. As the growth in GDP rises in output a decrease in output creates the business cycle. Real GDP considers price increases while providing accurate results of production increases. Forecast earning, sales and stock prices are real GDP and based on quarterly reviews of the most recent information provided. Samsung is 25% of South Korea’s GDP. As the situation of leadership is changing as a result of Lee Kunhee has been in the hospital with bad health conditions, his son Lee Jae Yong is reported to take over his role (Pesek, 2014). Succession of a new leader will definitely have economic indicators that will influence the future of Samsung.

Consumer price index

Consumer price index measures the amount of change in the fixed costs of precise services and products (McConnell, Brue, & Flynn, 2012). Things such as electrical, sewer and water services and products that consumers receive are included in these fixed costs. The relationship between the consumer price index and inflation are close because they help predict or forecast information for the company and their investors. Inflation rates help determines the consumer price index. The rate of inflation also determines how services and products increase. Although inflation raises the income of its consumer’s does not. This is an important factor in how Samsung regards its pricing. As inflation increases so must the prices of Samsung products and services. Keeping or managing inflation rates, Samsung can continue to compete with fair prices and continue to provide the best consumer value.

US International transactions

A report that is produced by the Bureau of Economic Analysis providing international data on goods and cash flow is called U.S. International Transactions. This is a published quarterly report that displays an array of information. Data such as financial and capital account (through cash flows) as well as exports for the time period are included in the report. Samsung is the leading global company. Half of its employees are spread throughout the world. Samsung’s goal is to continue to build risk management systems and global operating systems internationally. Already established as a global giant, Samsung reaches out to world class partners to create new opportunities. Together Samsung wants to continue to grow and provide the best products and services to its valued customers.

Conclusion

Economic indicators are important to the economy of any country. The data retrieved from indicators help determine the direction a company or country is leading to. Samsung is a global giant that is mastering the use of economic indicators in its pursuit of its vision of 2020 to become number one in its industry. Over the past 75 years Samsung has attributed its success to its people and its products. Samsung will continue to manifest into a leader as the priorities of the corporation remain the same; understanding what the consumer wants and placing their employees in a place of important value.

References

Amadeo, K. (2014). Unemployment Rate. Retrieved from About News: http://useconomy.about.com/od/economicindicators/p/unemploy_rate.htm

McConnell, C., Brue, S., & Flynn, S. (2012). Economics, 19th Ed. New York: McGraw-Hill.

McCormick, R. (2014, July 30). Samsung sales and profits down despite Galaxy 5S launchf . Retrieved from The Verge: http://www.theverge.com/2014/7/30/5953603/samsung-sales-and-profits-down-q2-2014

Moffatt, M. (2014). A Beginner’s Guide to economic indicators. What are economic indicators? Retrieved from About education: http://economics.about.com/cs/businesscycles/a/economic_ind.htm

Pesek, W. (2014, June 24). Samsung’s role in South Korea GDP is risky. Retrieved from Malaymail online: http://www.themalaymailonline.com/opinion/bloomberg/article/samsungs-outsized-role-in-korean-gdp-is-risky-william-pesek