Big Drive Auto Milestone 2

Essay by Dottie43 March 2010

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Alternative Economic FutureIn researching Big Drive Auto's history one can conclude the most profitable division's within the company is vehicle sales (163,000) and service of motor vehicles (99,000.) Examining the information gathered can also help to predict future growth. However, several alternative futures exist for the company. Looking at the economic indicators can ensure the company focuses on areas needing more attention. The indicators leads one to investigate is the current consumer price Index (CPI), unemployment, and the gross domestic product (GDP.)Consumer Price IndexAccording to the Bureau of Labor statics (2010) the CPI raised at an annual rate of 2.7% McConnell, Brue, and Flynn (2009) explain that an annual three percent rise in the CPI could double the inflation rate in 23 years. What the rise means for Big Drive Auto could be a raise in the prices for their product and services. The likelihood of inflation increasing over the next five years and the company will have to adjust prices accordingly to cover the cost of running a business and making a profit.

UnemploymentThe unemployment rate according to the Bureau of Labor Statistics (2010) is 10 percent. A five year growth rate could be devastating to the company. McConnell, Brue, and Flynn (2009) used Okun's law to further explain the damage unemployment has on a company, for each one percentage point of unemployment above the natural rate; the U.S. economy suffers a two% decline in real gross domestic product below its potential. Big Drive Auto sales and service will suffer a loss that may lead to a potential bankrupt of the company. However, because the economy appears to be in the trough stage of the economy and the unemployment rates decrease significantly Big Drive Auto could benefit from new car and service purchases. Thus, thrive as become a major...