Introduction
Eli Lilly can be described as a global pharmaceutical company with worldwide operations. The company has its headquarters in Indianapolis United States (Price, 1997, p. 12). It is named after Eli Lilly who started it in 1876 as a pharmaceutical chemist. Currently, it should be known that the company is the largest market player in the world as far as the distribution and manufacture of psychiatric medications is concerned. It should be known that the company is a fortune 500 corporation. As a matter of fact, it has revenues of more than 20 billion (Lilly, 2011, p. 13).
As far as the largest companies in the USA are concerned, Eli Lilly is ranked 148. On the other hand, it is the tenth largest company is sales (this as far as global pharmaceutical sales are concerned). Apart from trading on the New York stock exchange market, the company is a member of other pharmaceutical organizations and associations (Murphy, 2008, p. 23). As far as this paper is concerned, we will focus on the company’s domestic operations. In this case, we will look at economic indicators that are prevailing in the USA market. This is because they have an impact on the company’s operations.
These economic indicators are of great relevance to the company in a broad way. As a matter of fact, the company should respond to such economic indicators with a motive of maximizing its sales and revenues (OECD, 2011, p. 21). This is because they define the environment that the company works and operates in. For Eli Lilly to move forward and enhance its operations in this domestic market, it should come up with good measures to respond to these economic indicators for sustainability. This is based on the fact that shareholders will always want the company to grow its revenues and profitability as time goes by (Tracy, 2000, p. 17).
Economic Indicators
Economic indicators should be interpreted and evaluated as some basic statistics about a given economy. In this case, economic indicators will help us to know the economy’s performance and any other predictions that might dictate its future performance. It should be known that economic indicators will help us in understanding the economy’s business cycles. These indicators have a big impact on the market and that is why they should be evaluated for sustainability (OECD, 2011, p. 34). It important for Eli Lilly and other investors to understand such metrics because of their short term and long term impact on the pharmaceutical market and industry as a whole.
Therefore, we are going to analyze these economic indicators and evaluate why they are important to the company’s operations. In this case, the paper will look at the consumer price index, employment cost index, employment situation, Producer Price Index, Productivity and Costs, Inflation, consumer confidence index and GDP. The consumer price index measures various changes in the price level of consumer services and goods.
This is as far as price changes and the income that they spend on these goods is concerned. All in all, the consumer price index can be used to monitor the changes in prices as time goes by. The consumer price index increased in January by 0.4% (Bureau of labor statistics, 2011, p. 18). This index is important to Eli Lilly because it will have an impact on their approach to pricing. The employment cost index shows various changes in the costs of labor.
In this case, USA salaries and wages and other benefits rose by 0.4%. As a matter of fact, compensation rose by 2.0% (Bureau of labor statistics, 2011, p. 24). The employment cost index is important to Eli Lilly because the company employs USA residents and any increase in the cost of labor will have an impact on its revenues. This means that the company must always respond to such changes to avoid any problems with workers. The employment situation shows the real market position of labor in the country. This is as far as the change of unemployed people and the number of new jobs that are created is concerned.
The USA unemployment rate fell by 0.4% to stand at 9.0% (Bureau of labor statistics, 2011, p. 9). This employment situation is important to the company in a broad way. As a matter of fact, the government is trying to create jobs and it will come up with various policies that will ultimately have an impact on the company’s operations (OECD, 2011, p. 27). This can therefore explain why this indicator is of specific relevance to Eli Lilly in all aspects. The Producer Price Index looks at the changes in prices that are received by various domestic produces like Eli Lilly for their output. Generally, the producer price index in USA was up by 0.8% (Bureau of labor statistics, 2011, p. 12). These as far finished goods in the country are concerned.
Eli Lilly is a manufacturer and distributor of drugs and as such is affected by any changes in the producer price index (Tracy, 2000, p. 23). Productivity and costs are good indicators that can tell the economy’s performance over a given period of time. In this case, the country’s productivity will show the trends that are expected as time goes by. In this case, productivity rose by 2.6% while on the other hand, labor costs were on a decline by 0.6% (Bureau of labor statistics, 2011, p. 21).The Company is a producer and any general increase in productivity means that the economy is doing well. Labor costs have an impact on revenues and that is why such an indicator is important for Eli Lilly.
The consumer confidence index shows the degree of optimism in the state of the economy. This is further expressed and reflected by consumers’ activities in savings and spending. The USA consumer confidence index stands at 60.6% (Bureau of labor statistics, 2011, p. 19). This means that consumers are more positive about the current economic situation and this is good for businesses. Eli Lilly would like to see an increase in sales to enhance its revenues and productivity thereby such an indicator is very important. There must be a good consumer confidence in the country for the company to enhance its activities and operations (Tracy, 2000, p. 28).
Inflation rate can be explained as the general change in the price of goods and services over a given period of time. This is as far as the general economy is concerned. A general rise in the price of goods and services is not good for the economy and this should be a matter of concern for a company like Eli Lilly. The inflation rate in the month of January 2011 was 0.4763%. Eli Lilly should understand such metrics because a rise in inflation will mean that the company has to review its prices.
This might be because of an increase in the factors of production. GDP can be described as the total market value of an economy’s final goods and services (Bureau of labor statistics, 2011, p. 12). This is within a given period of time in an economy. It is estimated that the USA GDP will be 3.5% to 4.2% (Bureau of labor statistics, 2011, p. 32).This means that the economy will grow and raise all the other economic aspects that can enhance the company’s operations (Tracy, 2000, p. 5).
Strategy
All this economic indicators are important for Eli Lilly because they reflect the current economic conditions. Whenever inflation and consumer price index goes up, the company should review its prices in relation to such changes though by respecting the market forces (Tracy, 2000, p. 13). This is because the company needs to increase its revenues and it can not achieve this if it does not review its prices in relation to changes in inflation and consumer price index. Since consumer confidence index has gone up, the company should capitalize on this to increase sales. This can be done by enhancing its marketing activities because consumers are willing to spend.
The GDP is expected to grow and this is good news for the economy. In this case, the company should respond by enhancing customer service and value addition for long term sustainability. The cost of labor and other benefits has been going up and the company should also respond to avoid any backlash. This should be reviewed in relation to its own human resource frameworks and policies (Lilly, 2011, p. 34). For instance, if employees feel that they are being underpaid, they might go on a strike and this will ultimately affect the company’s operations.
Generally, the producer price index in USA has gone up and this has affected prices in a brad way. This puts the company in a unique position because as much as it wants to increase its revenues, it should not hurt consumers. Therefore, the company will be forced to look at its competitors pricing strategies to be relevant in the market. The USA pharmaceutical industry is still growing and this means that the company should be strategic to in its moves in relation to market needs and expectations for sustainability (Lilly, 2011, p. 22).
Reference list
Bureau of labor statistics. (2011). Economic News Release. Web.
Lilly. (2011). About Us. Web.
Murphy, T. (2008). Lilly agrees to settle discrimination lawsuit. Chicago: Chicago Tribune.
OECD. (2011). OECD Main Economic Indicators (MEI) – Relationship between Supporting Elements – Diagram. Web.
Price, N. (1997). Indiana Legends. Indiana: Emmis Books Tracy, B. (2000). The 100 Absolutely Unbreakable Laws of Business Success. Berrett: Koehler Publishers.