CIMA and an Entrepreneur Answer Your Questions: This Month ... 'CIMA Offers Courses in Macroeconomics. I Think the Subject Sounds Fascinating, but Is It Useful to Know about GDP Forecasts and the Balance of Payments? Most Senior Managers Don't Seem to Care.'

Article excerpt

A.CIMA

It could be that the term puts them off. "Macroeconomics" sounds very academic and theoretical. However, senior managers would be familiar with and use SWOT analysis in their strategic planning. Since half of this framework - opportunities and threats - arises from the external environment, SWOT analysis draws heavily on macroeconomic data, such as unemployment, GDP or inflation. As do other corporate planning tools such as PEST or PESTLE.

Macroeconomics is fascinating. It's the study of what influences an economy, what makes it fluctuate in the short term and grow in the long term. Many macroeconomic indicators are very informative. Leading indicators help predict what is likely to happen in the economy - for example, a slowdown in the housing market seems to predict a recession is looming. Lagging indicators reflect the impact the economy has (after a few months) on unemployment or business failures. It will be several months after the economy has hit rock bottom that these two indicators are at their worst. Again, useful to know.

Organisations base their strategies (exploiting their strengths and ensuring their weaknesses barely matter) on the opportunities and threats they face. Analysis of the macroeconomic environment enables organisations to appreciate, and to an extent predict, how investors, lenders, suppliers, customers and competitors will react to interest rates, inflation, stock market indices or measures of productivity and new orders. For example, just think how useful the Purchasing Managers' Index is - a basket of measures which include productivity levels, employment and new orders from customers and is therefore really informative about current activity and confidence in the manufacturing and service sectors.

The best primer is CIMA's one-day Masterclass course: Economics, An Introduction.

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A. Greg

CEOs of big businesses have good reason to worry about fiscal policy, yield curves and the like - they sell papers, for one thing. …