Mar 26, 2020 in Economics Essays

International Economics essay example

An organization under analysis has both U.S. and international presence. The company selected is Logicalis, the activities of which are impacted by the Congress, President, Federal Reserve, and policy makers within the U.S. economy. Logicalis is an international information technology (IT) solution and managed services provider. It builds, supports, and designs information and communication technologies (ICT) solutions for customers throughout North and South America, Asia-Pacific region, and Europe (Cook, 2013). The President and the Congress, in a broader context, play a significant role for the company by stimulating or contracting the economy. Through their collaboration, they embrace short-term and temporary fiscal expansion, which enhances the creation of more job opportunities (Mundell, 2012).

In its efforts to stimulate the economy, the Congress acts as a second stimulus. It is illustrated by the fact that in 2009, the U.S. Congress passed a 787-billion-dollars economic bill inclusive of $ 500 billion for investments in various industrial sectors and approximately $ 300 billion in tax cuts (Cook, 2013). As an international IT solutions company operating within the American economy, Logicalis has benefited from these actions that have led to its growth and enhanced the aspect of customer satisfaction (Cook, 2013). Another method that the Congress uses to better the economy is invoking successful or failed precedents in the past. If taken into consideration while the economy is in its struggling state, these policies promise inflow of hundreds of billions of dollars in the government budget, while little is done to revitalize economic activities. In addition, the President and the Congress consider the aspect of tax policy that means a lot to corporations and organizations to a great extent. If the tax on capital increases, it will lead to a rise in the capital cost and low investment return. Therefore, big corporations will not be able to make profits (Ellram & Cooper, 2014). Other facts indicate that the President and the Congress contract the economy by having control over the federal budget.  The Congress can delay or do not pass certain bills that would have had a positive impact on the economy. An example of this scenario occurred in 1995 and 2013 when the Congress refused to approve the budget that led to the government shutdown (Ellram & Cooper, 2014).

The Federal Reserve System consists of a seven-member board of directors controlling twelve regional banks and the one in Washington D.C. Just as the President and the Congress have control over fiscal law, the Federal Reserve System also affects monetary policy (Mundell, 2012). The latter stimulates the economy in three ways, such as reserve ratios, whereby banks are urged to keep some proportion of their deposits as a “reserve” against withdrawals. Through “reserves,” the Federal Reserve has control over the quantity of money circulating in the economy. The second way it stimulates the economy is open-market operations, which involve buying and selling government securities. It means that when the Federal Reserve buys treasury securities, there will be surplus money circulating in the economy. The third way is through a discount rate, whereby banks borrow from the Federal Reserve to acquire necessary funds to meet their reserve expectations (Mundell, 2012).

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Nevertheless, the Federal Reserve System contracts the economy through discount rates and open-market operations. Considering the second aspect, when the Federal Reserve decides to contract the economy, it sells treasury securities to private dealers getting custody of surplus money. Another thing the Federal Reserve System does to contract the economy is raising discount rates. As a result, banks are limited to borrow and have to reduce their lending and increase the interest rate. Therefore, it results in less money supply into the economy (Mundell, 2012).

In most cases, policymakers are motivated by the government’s capability of providing a stable environment for economic growth and development, and oversight that assures private investors that their transactions are accounted for to the utmost. The Federal Reserve goals incorporate ensuring stability in the financial system, which has been one of the greatest concerns for policy makers for a long time. The second policy goal is economic growth. The Federal Reserve System states it clearly that the United Sates economy is growing when more citizens have jobs, as well as businesses can produce and sell abundantly, for example Logicalis (Ellram & Cooper, 2014). Another goal of the Federal Reserve System is interest rates stability. Organization owners and consumers are both concerned about this aspect. It is evident that when interest rates are unstable, it becomes difficult for the government, individuals and organizations to have a plan for the future (Mundell, 2012). Currency stability also refers to the goals of the Federal Reserve System. The value of the U.S. dollar has a direct impact on economic balance. When the currency gains stability, the U.S. can import less expensive commodities from foreign countries. Lastly, other goals include price stability and full employment, the achievement of which makes the U.S. economy grow (Mundell, 2012).

According to the information provided by the Federal Reserve System on the strength of the economy, the labor market has improved, even though the economic growth has slowed for the last year. It presents Logicalis with great employment opportunities and qualified workforce. In addition, inflation has continued to be below the system’s 2% objective, and market-based inflation measures compensation has further declined (Ellram & Cooper, 2014). The strength of other economies outside the U.S. is of great importance for Logicalis with its headquarters in the United States. Nevertheless, being an international information and technology company, it is affected by fluctuations in foreign economies. However, the research by Ellram and Cooper (2014) indicates that the U.S. economy is more self-sufficient. It means that the stronger the economy, the greater growth Logicalis will incur. Therefore, exchange rates will be favorable to the organization as compared to weak savings (Ellram & Cooper, 2014).

Additionally, as an international organization, Logicalis should take into account the aspect of supply chain. One of the most important strategies that the company needs to consider is differentiating its corporate strategies and supply chain. It means that the company should ensure that the supply chain helps to implement critical points of organization’s strategies (Cook, 2013). Another aspect that Logicalis should consider is the creation of a modern end-to-end supply chain. It will combine both operational excellence and strong analytical capabilities. Lastly, Logicalis has to set performance standards to promote the delivery of value to the company and eliminate the biggest risks (Ellram & Cooper, 2014)

In conclusion, from the discussion above, it is evident that the President, Congress, Federal Reserve System, and policy makers can either stimulate or contract the economy. The research above has provided a detailed analysis of an organization that has both U.S. and international presence, namely, an IT solutions company known as Logicalis. In addition, the most important bodies that determine the growth of the United States economy are the Congress and the Federal Reserve System. In its efforts to stimulate or contract the economy, the latter uses three aspects, which are a reserve ratio, open-market operations, and a discount rate. Applying these strategies, the Federal Reserve System can determine what amount of money flows into the economy and at what time. Lastly, considering the influence of this body, Logicalis should follow three powerful strategies, namely, differentiating corporate strategy and supply chain, creating a modern end-to-end supply chain, and setting performance standards, which will help the organization to a greater extent.

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