Impact of Euro Crisis on the US economy and business decision-making
Increasing borrowing costs for the low developed economies and the trouble banks that loaned money to these economies have characterizes euro crisis. Trade, borrowing costs, credit spreads, and exchange rate integrate the US economy with other economies all over the world. The euro crisis poses a severe oblique effect on the US financial system. This is because risk need to be priced again upwards while pushing stock downwards. In addition, commercial banks holding securities against Europe need to adjust their balance sheets. In addition, they may need to raise their cost of capital to cover resulting losses. Therefore, the net effect is the fall in interest rates of government bonds. Credit spread and cost of borrowing goes up. Further, as the US dollar weakens and the euro strengths the value of exports go down. This results to trade deficits. Euro crisis causes negative impact on US balance sheet. American businesses need to lower their leverage and dependence on credit financing. This is because rising cost of capital impact of the profitability of the business. In addition, they should request for adequate hedging of foreign transactions.
The factors to consider when making the decision to outsource or integrate forwards or backwards
Businesses use outsourcing and integration strategy for several reasons such as cost minimization, efficiency, improvement of organizational initiatives, improvement of focus, and growth. A number of factors need should be considered when making decision on outsourcing or integration. These factors are profit maximization, overall business strategy of the company, technical expertise, quality, and vendor’s expertise in the scope of the business. Apart from profit maximization, business strategy is also a necessary factor. This is because outsourcing impacts on the business strategy and internal processes.