Introduction
Most of the organisations are sensitive to economic expansion; (upswings) and contractions (downswings or recessions). The notion of economic cycle, also known as Business cycle, explains the difference in economic activity level as observed in developed economy. This cycle is however divided into two; i.e. booms and recessions. Booms are linked with tough economy while recession is associated with a weak economy.
How General Motors is to Economic Expansions and Contractions
It is very important for general motors’ to keep proper books of account. It includes; balance sheet, trading profit and loss account, cash flow statement and statement of affairs. The company needs to do the following; to maintain proper books of account, ensure the accounts are in agreement with the book of accounts, and ensure sound accounting policies has been followed in the presentation and preparations of financial statement at the year end. The benefit of carrying out this activity is for the company to determine its financial position at the year end. General motors’ company will be able to determine if the business is running at a loss or not. An organisation can determine if the company is running at a loss or not by simply comparing the previous year account with the current years account. (Daniel J. Ikenson’s)
For instances, demand for General motors’ had fallen from time to time over a number of years. For example, if the demand for motors falls from 28% to 30%, the resulting difference should be fully investigated. This may be due to tradition auto making, as a result of idled plants and lazy workers. However, the auto makers and federal government are not supposed to base their policies on what is to happen during cyclical recession period.
Instead they should concentrate on demand for cars of 2010 and 2020s and be able to compare and analyze what might have caused the difference. After the recession the General Motors’ demand accelerated. However, during the recession period most of the creditors are expected not to lend any money to the debtors. Furthermore, if there would be any creditor willing to lend money to the General Motors, then it would be at a higher interest rate. In addition consumer are expected to reduce their level of borrowing to finance any car buying
Whenever the country experiences recession, Politian’s and the communities at large must weigh their ability to withstand the effects of recession. The economic fall causes a severe discipline that affects the inefficient, encourages all people to become much more efficient and it encourages invention and innovations,(use of technology ). Thus opening the door wide for Google Inc. This notion of economic cycle works well, but these activities can be devastated by the human costs. Failure f inefficient business leads to unemployment, investors with no money and the community becomes less stable.
Feds states that, if the rate of inflation increases as a result of recession, the market committee is required to formulate a monetary policy that will be centralised on mounting the demand of the economy. Feds further explains that; the only weapon of dealing with high rate of inflation is by reducing/lowering the interest rate. This will however, reduce the level of inflation, thus allowing the consumer to purchase more. More so, there would be high purchase made for motors since the consumer would have the accessibility to loans that will further facilitate their purchase of MGs. Where consumer purchasing power for motor increases, the level of motorists sold shall also increase, and as a result increase the profits made for that year.
Where the interest rate is high, it reduces consumer purchasing power for the motors, and thus reduces the amount of profit to be made by the company. Effects of recession are usually associated with inflation. Where there’s high inflation rate, most business organisation tends to suffer since they have to incur more expenses. This at times is very expensive. If general motors’ makes constant payments by credit card, it may be difficult to know how much expense it has been incurred per month or annum. As a result, Motorists may find it difficult to pay off its credit card debts (Moulton, 1975).
How GM can adjust to, or cope with the prevailing, conditions
Regardless of the economic stability of the general motors, the company should be able to create a good relationship with both the suppliers and the customers. For instances, if the suppliers price shoots up, so is the companies (General motors’) wallet too. Before the company experiences economic crisis, it is very important for an general motors’ company to be honest (this implies both the employer and the employees) to both the supplies.
Acquaint the customer with information about the crisis. Building a good connection with the supplier and the customer will help to form a mutual understanding to get you out of the situation if need arises. When price of vehicle hike as a result of inflation, you may request the suppliers to reduce the price of purchasing the required materials. However, if there’s an increase of price at any moment, inform the customers of the percentage increase of the vehicle. This helps the consumer to be able have an idea of changes in price of the vehicle in the market (United Nations. Dept. of International Economic and Social Affairs, 2007).
A surprise visit should be carried out to assess the level of the employees and employers competence in the general motors’ department. By doing so, the department will be able to cope with future emergencies that are bound to occur in the course of its work. Understand the major contributors to your organisation and what extra baggages are. A business which plans its strategy more careful, it bid stability to the employers. It is very important to discuss with the employees about the plan of the general motors. Negotiating with the employees will prevent them from going to a more competitive market (Moulton, 1975). Where there is a decrease in sales of about 20 percent but you are not sure if you should let off 20 percent of the employees.
Conclusion
An alternative of this kind of situation in the general motors’ department shall be to reduce 20 percent of the employee’s earnings. If you consider paying all the cuts, it will be fallback in recession. Make sure all cuts off are fair and are understood by the employees. Where a general motors’ limited ranges from small to medium, it is very easy to meet with all the employees one by one. To explain to the employees what has caused their decrease in their salaries.
These will help the employees to know the motives of GMs. Give them a sample of how the check will look like after the cut off has been done. Be more ready for the recessions. Use the available opportunity you have to reduce any unnecessary costs in the organisation (Moulton, 1975).
References
Federal Reserve District (2009). Summary of Commentary on Current Economic Conditions. Web.
Moulton, H. G. (1975). Financial organization and the economic system. Wall Street and the security markets. New Jersey: Ayer Publishing.
United Nations. Dept. of International Economic and Social Affairs, (2007). World economic surveyAuthors, NY. United Nations Dept. of Economic and Social Affairs.