MBA Managerial Economics Discussion Forum
Students, you are required to use this forum to discuss the programme. Feel free to raise your questions, thoughts and comment on your classmate posts
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Dear students,
As we move into new topics this week, I would like you to read the article here https://theconversation.com/microeconomics-explains-why-people-can-never-have-enough-of-what-they-want-and-how-that-influences-policies-166129
Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?
- This reply was modified 2 years, 1 month ago by
Siti Nur Zahara.
Government intervention would refer to government policies that are imposed on organizations that organizations would need comply with. One example of such government policy is the No Plastic Bag Initiative which is introduced by the government of Malaysia not too long ago.
Looking at the consumer of Malaysia behavior prior to the implementation of the No Plastic Bag policy we can draw the conclusion that Malaysian really love their plastic bags by looking at the scenes of trolleys full of plastic bags being pushed to the cars after an hour of grocery shopping. However, when the No Plastic Bag policy was imposed there is a charge for the plastic bag of 20 cents and in some states no plastic bags at all. (the policy is governed by local state legislature).Understanding the consumer behavior when the policy was first implemented the supermarket began selling their recyclable / reusable bags placed at the check out aisle. This bag go for a couple of ringgit to tens of ringgits for fancy branded ones. In the initial months of the implementation of the No Plastic Bag policy, supermarkets made a killing selling such reusable bags as it was evident many consumers are not bringing back the reusable bags and needing to purchase new bags each time they shop.
But over time, this practice of being your own reusable bag was slowly catching on and the sale of reusable bags would fall. Understanding this behavior change, supermarket then focus on other ways instead of just selling the reusable bag. They introduce reward system like points to their loyalty program (i.e. Tesco – Green Points, Village Grocer – Bites Points) on the number of reusable bags you use. The more bags you bring the more points you get. It is my opinion here this is done in a way to encourage more purchases to fill up the many reusable bags that is brought to the store.
Understanding the consumer behavior in response to the No Plastic Bag policy in my opinion would provide opportunities for the supermarket to gain extra revenue streams and provide a continual revenue stream in conjunction with their existing market strategies.This is a good one Leonard!
Understanding business strategies to earn profit from government policies and seeing the pattern of behaviour changes.
Do you think there is any role of business to ensure we can move to a successfully ‘zero plastic use’ country in the near future?
Yes the business definitely have a critical role in the success of the No Plastic Bag policy in Malaysia. The business will act as the gatekeeper for the policy and the business is the one that is interacting with the consumer. However in Malaysia there is a particular behavior that if the authorities are not looking out, nobody will follow the rules. The business would need to be responsible to ensure that this policy is strictly enforce and at the same time create the awareness to the public with regards to the importance of reducing plastic bags and it’s impact on the environment. The business would need to do this regardless if the authorities is looking out or not.
In addition, as a hotelier, we have begun to participate in projects that promote environmental preservation and long-term sustainability, our mission statement is to eliminate single-use plastics by the year 2022. Our current endeavours include converting bottled amenities into soap / shampoo dispensers in rooms, using non-woven laundry bags, removing biodegradable packaging from our premises, using sugarcane straws and number of other projects.
Your suggestions are good Leonard but I also think we need to put focus on developing entrepreneurship for waste recyclers Globally. Governments can give subsidies for startups and behaviour change campaign can be launch at large level to ensure people’s participation in plastic waste management. The other option is there should be a practical plastic packaging substitute to move to an eco-friendly living by using natural products replacing the plastic disasters. The government of all countries should promote using of reusable bags that are environment unfriendly and implement laws strictly that were made for avoiding the use of plastic bags.
It’s a good idea Karen, we at the consumer level can do our part, but efficient waste management will really help the environment.
Definitely a good insight Leonard. My takeaway from your input is sometimes government policies can encourage innovations. If we keep an eye on any upcoming government policies and shift in consumer behaviours, probably we too can capitalize on that (eg the mask mandate)
Good sharing. Thank you Leonard
A consumer is the individual or business who purchases the products or services for his/her/their own consumption and not for manufacturing or resale. They are the end-users of the produced goods/services.
Consumer behavior is the study of knowing how the individual or business choose, purchase, utilize and dispose goods/services to satisfy their needs and desire. It refers to the actions of the consumers in the marketplace and the causal motives for the behavior.
After reading the article, I can summarize that understanding consumer behavior is all about satisfying needs and desire of the consumer. The consumer always attempt to maximize their utility. It is a fundamental marketing concept that need to be understood by business owner to succeed. By understanding how consumers think, feels, and decide, we will be able to plan our business strategies and stay ahead of our competitors by consistently providing better value to consumers.
In terms of government intervention, we could strategies our business plans to take advantage of the situation by anticipating consumers demands on goods/services.
For instance, recently Malaysian government launched an incentive program to encourage consumers to purchase energy savings electrical appliances. Ref 1: “The Sustainability Achieved Via Energy Efficiency (SAVE) 2.0 is a program which grants a RM200 e-Rebate to domestic households that purchase energy efficient air-conditioning units or refrigerators with 4 star or 5 star energy efficiency labels from the Energy Commission (ST) in 2021.”
With the government providing financial incentives, consumers are encouraged to decide and purchase these electrical appliances and as a business owner, we can take advantage by investing in this field or produce more energy saving air conditioning units or refrigerator as the demand for these appliances will increase. Ref 2: “About 150,000 households are expected to benefit from the government’s latest scheme to spur efficient use of electricity.”
In other instance, Malaysian governments also intervene in markets to promote general economic fairness among people by providing tax relief on electronic gadgets such as personal computers, smartphone, and tablet. Besides that, government also encouraging people to opt for healthy lifestyle by providing tax relief on purchases of sports equipment, magazines, journals and printed newspapers. [Ref 3] “Tax Relief for Resident Individual.”
As a business owner, to gain competitive advantage, we need to be agile and focus to supply goods/services to cater the consumers demands that rises from these government incentives.
Ref 1: http://www.seda.gov.my/saveprogram/
Ref 2: https://www.thestar.com.my/news/nation/2021/01/08/150000-households-to-benefit-from-save-20
Ref 3: https://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=1&bt_posi=3&bt_unit=1&bt_sequ=1
Hi Pavala Malar,
Do you think the energy-saving electrical appliances program is a success? Did Malaysia create awareness among the consumer on that program?
Hi Miss Zahra, main objectives of SAVE 2.0 Program are as follows:
1. To increase the total number of 4 and 5 star energy efficient electrical appliances in the market.
2. To increase public awareness to encourage them to purchase energy efficient appliances that will save consumers’ electricity consumption.
3. Implementation of this program will be for 1 year (January 2021 till December 2021)
Popular e-commerce platform in Malaysia such as Lazada and Shopee supports this program and promote it among its customers.
Ref 1: https://www.lazada.com.my/program-save
Ref 2: https://shopee.com.my/m/program-save
Possible reason for this SAVE 2.0 program might not be popular among Malaysian consumers because the program currently limited to locally-made refrigerators and air conditioners that have a four or five-star energy rating. So only those consumers who are looking to purchase refrigerator and air conditioner will be interested and eligible to enroll in this program.
Based on the article in NST dated 19th April 2021, some 40,000 households have benefitted from this program, so we can conclude this program is a successful attempt by Government to encourage consumer to purchase energy savings appliances.
Ref 3: ” So far, some RM8 million, out of the RM30 million allocation under the Save 2.0 programme, has been spent, benefitting some 40,000 households.
In my opinion, SAVE 2.0 energy saving electrical appliance program will be popular among Malaysian consumer if more appliances such as electrical oven, microwave oven, television, washing machine etc are included. Besides that, government should consider extending the duration of this program because 1 year duration is very short for consumer to support this program.
- This reply was modified 2 years ago by Pavala Malar Nadan A/L Mariappan ..
- This reply was modified 2 years ago by Pavala Malar Nadan A/L Mariappan ..
- This reply was modified 2 years ago by
Government may exercise its fiscal measures to stimulate or regulate market at large (Macroeconomics) as well as on household level (Microeconomics).
On macro level, goverment may set up initiatives for companies to take part in special schemes in order to boost market fluidity and regenerate domestic consumptions. Another examples is goverment creating initiative for foreign investors to open a business or plant in Malaysia, as what we’ve seen in 1980s. Since Covid-19 Pandemic hitting the world in a sudden since early 2020, global economic including domestic has been hit badly. Business activities have to be temporarily halted by Movement Control Orders; which was gazetted by government as one of the strategy to reduce the spreading of the virus thru social activities. Although large companies were hit by these MCOs, the Small and Medium Enterpreneurs as well as daily earners have been impacted the biggest.
As a measure to rejuvenate domestic business, during Special Budget for Covid-19 tabled by then Government, an initiative was set to give tax exemptions up to RM 1000 to tax payers to go for domestic holidays. Furthemore, government has given tax payers as well as companies for tax exemptions on laptops, in order to help companies to be able to operate remotely from home during MCOs.
Companies should proactively participate in government led market intervention, to be abreast of consumer behaviour. In simple terms consumer and households will always reacted according to market movement, and a good company should be able to anticipate these situation.
If we look back at the situation during pandemic, during MCO being implimented, physical shopping activities have halted, and most of the shop that continue operate business as usual were essential business such as grocery shops, hardware shops, restaurants catering take away shops, courier provider and others. The remaining business have to think on how to continue making revenue while not be able to operate as normal.
During these situation I have personally experienced seeing a personal quran recital teacher utilizing online platform to conduct classes, same method was taken by small artists, using online platform to reach to bigger audience, while normal business approach was not possible to be done.
Another examples of business that understands consumer behaviours can be seen from emergence of online influencers, where these influencers are being hired by certain company to review or place their products in their online postings, since these influencers have many followers. These situation, on the otherhand create demands of influencers for companies to collaborate with. Although not all influencers are able to get bigger cake from revenues, better market reach is a good reason for companies to use this method.
The recent increase in popularity of Choco Jar also can be seen as one of the examples of understanding of consumer behaviour. When Choco Jar became viral and popular through online platforms, company after company started to tap in the demand by consumer by creating a similar products. Then they created sales and marketing structure by hiring agents and dropshippers.
Is there any business that will lose the battle as more businesses move to a digital platform in your opinion? Any ideas on how they can stay afloat?
Traditional business or business owner with limited digital literacy due to access or age, who are not able to ride the digitalization wave will surely be left out, in my opinion.
To add on, I feel stagnant and really old business have yet to migrate to a digital platform. They just continue to serve their current clients and have no plans to grow their operations.
In my opinion, it is vital to maintain a balance between digital and traditional type of businesses, at least for several years to come. Government need to assist in ensuring traditional non-digital platform type business to stay afloat if they are lacking of consumer support.
One of the reason is, while more businesses switching to digital platform, these businesses are opening more opportunity for cyber attackers. When everything are connected to everything else, it is not surprising if there will be some sort of “ransomware pandemic” affecting globally in near future.
During this global “ransomware pandemic” phase, most digital platform businesses might need to shutdown their operation and consumers who are heavily depending on these digital business will encounter difficulties. This will be further exaggerated if there is no non-digital platform business to backup during this period.
A wide range of organizations and government entities were impacted, including those in financial services and travel, according to cybersecurity firm Sophos. According to studies, the United Kingdom, South Africa, Canada, Argentina, Mexico, Indonesia, New Zealand, and Kenya were among the countries affected. (Bajak, 2021)
Reference:
Bajak, F. (2021, July 6). Fallout continues from biggest global ransomware attack. AP NEWS. https://apnews.com/article/joe-biden-europe-government-and-politics-technology-business-88c51d8041b1afdd42fa9f571c3de446
Government intervention is when government intervenes in the market and takes action to help improve economic efficiency. This is very relatable especially when covid-19 pandemic hits the country and brought along health, socioeconomic and financial crisis. Started with the first MCO, where Malaysian economy has been adversely affected, leading to the devaluation of the Malaysian Ringgit and decline in the country’s GDP.
This pandemic situation has brought intensifying negative impacts on jobs, incomes and livelihoods, and disrupting supply chains, causing hardships especially among the most vulnerable. Therefore it prompted the government to come out with interventions to sustain the people’s welfare and to support the businesses, and stimulate the economy (E.g. PRIHATIN stimulus package, PENJANA National Economic Recovery Plan). These economic initiatives were helpful for consumer spending, in order to keep the country’s economy moving.
Businesses need to plan for customer strategy in order to sustain, survive, and recover from the pandemic. Not being able to keep up with the consumer behavioral change will risk businesses being left behind, and eventually kicked out of the game. One obvious point to note is that with higher percentage of people remote working, e-commerce trend have been accelerated, so businesses need to quickly strategize towards digital transformation. Local business starting to sell products online; large companies starting to use data and technology for dynamic optimization. We can already see virtual selling platforms that showcase both products and services; we even have makeup product companies using augmented reality to sell lipsticks.
With that change, unlike before the pandemic, now consumers want to always be connected and hold options in reduced spending. Businesses need most importantly to earn customers’ trust by building rapport and providing consistent level of service. Businesses need to strategize and identify the priorities of the customers in order to maintain customer engagement while attracting new customers.What are the challenges, Jessy? To transform to a digital platform and online business. What do you think are difficult to transform business in this era of the online world.
Yes there are definitely challenges on the road to digital transformation. For example on small business owners, although having e-commerce platforms such as Shopee and Lazada are extremely convenient, but everyone started using it, the platforms eventually became a competitive space for them, where everyone face tough competitions among themselves.
As for SMEs, the hurdle for digital transformation would exist if they lack IT skills and budget. SMEs would less likely use those ready-made platforms available for them, and they may have to create their own online platform such as website or social media marketing page. Creation and maintenance of these marketing tools would require certain amount of IT skills and budget, depending on how sophisticated the business owners wants it to be for them.
However I feel regardless of the challenges businesses have to face in moving over to digital platform, the effort would definitely be worthwhile, especially when you look at the long term sustainability of the business.
Company will lose if they fail to analyze consumer behavior. Understanding consumer behavior will help the organization to convert more customers. An organization should design best product and service based on the current needs and demands of the consumers at affordable price. Thus help in shaping the company’s business strategy. For Example, marketing using consumer behavior insight is how Apple succeeds. Once a consumer purchases a product or downloads iTunes Apple has access to data the company leverages. Apple uses this information to gain significant insight into the consumer and what drives purchase behavior.
Sometimes there are situations where market does not work well. When one person’s behavior imposes cost on somebody else so it’s a type of market failure. In this case government can intervene to improve the market and the outcome. For example, to tax cigarettes and use this money to finance rural development.
https://www.stephenzoeller.com/apple-consumer-behavior-marketing/
Hi Pavithra!
Any idea on the government intervention and business response?
Microsoft was considered a monopoly in 1990 by the government. This can be negative for consumers since it allows companies to charge prices that shoppers must pay or go without. After the European Union threatened to penalise the company in 2003 for its monopolistic practises, the company agreed to change its ways. As a result, Microsoft was fined billions of dollars for not permitting competition amongst rival applications.
Government intervention into economics can be in forms of regulations, taxes, subsidies, to monetary and fiscal policy that leads to many advantages to consumers or people. Few of the example advance will be improvement of people income and wealth, regulating fair competition among companies , sustainability of environment and many more[1]. The most recent Malaysia government intervention is implementing full tax exemptions for zero-emission cars[2]. This explains government takes serious on the sustainability of environmental that on same time change consumer behaviour to shift interest to EV vehicles. This is because the tax incentives helps reduce the vehicle price to more affordable.
Car manufacturers should take this government incentive as opportunity to improve production of EV vehicles that can boost the company revenue. According to UMW Toyota Motor Sdn Bhd, EV cars sold about 32 cars in 2019 which seen some improvement compare with 2018 with only 2 cars sold in total year but number is still a far cry from the volume in advanced markets[3]. The reason due to the EV vehicle prices that way too high and may categories EV cars as luxury cars. Also since government give tax rebate for charging station, car manufacturer can start producing the charging station devices to consumer that can contribute to their revenue[4].
[1] https://penpoin.com/government-intervention/
[2] https://www.freemalaysiatoday.com/category/opinion/2021/11/01/electric-vehicles-get-a-tax-free-boost/
[3] https://themalaysianreserve.com/2020/02/19/ev-market-slows-on-low-awareness-limited-charging-stations/
[4] https://www.wapcar.my/news/budget-2022-zero-tax-for-bevs-zero-road-tax-too-with-rm-25k-income-tax-rebates-35812Good example and suggestions there Logan!
Thanks Ms Zahra😀
Tax exemptions for cars are really tempted 🙂
a) Discuss your opinion on government intervention?<div><div>
Governments intervene in markets to address inefficiency. In an optimally efficient market, resources are perfectly allocated to those that need them in the amounts they need. In inefficient markets that is not the case; some may have too much of a resource while others do not have enough. Inefficiency can take many different forms. The government tries to combat these inequities through regulation, taxation, and subsidies. Most governments have any combination of four different objectives when they intervene in the market.
i) Maximizing Social Welfare
In an unregulated inefficient market, cartels and other types of organizations can wield monopolistic power, raising entry costs and limiting the development of infrastructure. Without regulation, businesses can produce negative externalities without consequence. This all leads to diminished resources, stifled innovation, and minimized trade and its corresponding benefits. Government intervention through regulation can directly address these issues.
Another example of intervention to promote social welfare involves public goods. Certain depletable goods, like public parks, aren’t owned by an individual. This means that no price is assigned to the use of that good and everyone can use it. As a result, it is very easy for these assets to be depleted. Governments intervene to ensure those resources are not depleted.
ii) Macro-Economic Factors
Governments also intervene to minimize the damage caused by naturally occurring economic events. Recessions and inflation are part of the natural business cycle but can have a devastating effect on citizens. In these cases, governments intervene through subsidies and manipulation of the money supply to minimize the harsh impact of economic forces on its constituents.
iii) Socio-Economic Factors
Governments may also intervene in markets to promote general economic fairness. Government often try, through taxation and welfare programs, to reallocate financial resources from the wealthy to those that are most in need. Other examples of market intervention for socio-economic reasons include employment laws to protect certain segments of the population and the regulation of the manufacture of certain products to ensure the health and well-being of consumers.
iv) Other Objectives
Governments can sometimes intervene in markets to promote other goals, such as national unity and advancement. Most people agree that governments should provide a military for the protection of its citizens, and this can be seen as a type of intervention. Growing a large and impressive military not only increases a country’s security, but may also be a source of pride. Intervening in a way that promotes national unity and pride can be an extremely valuable goal for government officials.
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b) How understanding consumer behaviors shape your business strategies?
i)Reinforce positive new beliefs
According to behavioral science, the set of beliefs that a consumer holds about the world is a key influencer of consumer behavior. Beliefs are psychological—so deeply rooted that they prevent consumers from logically evaluating alternatives and thus perpetuate existing habits and routines. Companies that attempt to motivate behavioral change by ignoring or challenging consumers’ beliefs are fighting an uphill battle.
ii) Shape emerging habits with new products.
Companies can nudge consumers toward new habits through product innovation. For instance, the COVID-19 crisis has spurred consumers to become more health oriented and increase their intake of vitamins and minerals. Unilever reported a sales spike in beverages that contain zinc and vitamin C, such as Lipton Immune Support tea. The company is therefore rolling out such products globally. It’s also aligning its innovation priorities with consumers’ emerging health-and-wellness concerns.
Similarly, packaged-food companies can encourage the habit of cooking at home. Spice manufacturer McCormick’s sales in China have sustained double-digit increases compared with 2019, even as the Chinese economy has reopened and people go back to their workplaces. The same pattern could play out in other countries. Kraft Heinz’s innovation agenda for its international markets now prioritizes products that make home cooking pleasurable, fast, and easy products such as sauces, dressings, and side dishes. These will be targeted at “light” and “medium” users of Kraft Heinz products.
iii) Sustain new habits, using contextual cues
Habits can form when a consumer begins to associate a certain behavior with a particular context; eventually, that behavior can become automatic. To help turn behaviors into habits, companies should identify the contextual cues that drive the behaviors. A contextual cue can be a particular task, time of day, or object placement. For example, more consumers are keeping hand sanitizer and disinfecting wipes near entryways for easy access and as a reminder to keep hands and surfaces clean. Product packaging and marketing that reinforces the put-it-by-the-door behavior can help consumers sustain the habit.
iv) Align messages to consumer mindsets
People across the country have felt an intensified mix of anxiety, anger, and fear because of recent events, making marketing a tricky terrain to navigate. The heightened emotions and increased polarization of the past few months could drive lasting changes in consumers’ behavior and shape their long-term preferences. Companies should therefore ensure that all their brand communications are attuned to consumer sentiment. The quality of a company’s communication
and its ability to strike the right tone will increasingly become a competitive advantage.v) Analyze consumer beliefs and behaviors at a granular level
Using qualitative methodologies, consumer beliefs, habits, occasions, and emotional-need states will continue to evolve rapidly over the next year or two as the world awaits a COVID-19 vaccine. For consumer companies to stay abreast of those changes, monitoring product sales alone won’t be sufficient. Companies must also conduct primary consumer-insights work, with a focus on identifying changed behaviors and associated changed beliefs and motivators to get a comprehensive picture of the changing consumer decision journey.
Qualitative, exploratory research will have a particular role to play as a precursor to (and, in some cases, a substitute for) quantitative research. Digital data-gathering and monitoring techniques such as mobile diaries, social-media “listening,” and artificial-intelligence-driven message boards will be vital tools to help companies understand emerging behaviors and contextual cues. When structured well, those insights generate new thinking within an organization that can be validated through larger-scale surveys and in-market testing. Companies can then refine their product offerings and marketing messages accordingly.
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Try to apply the concept to a real-world scenario Darmathan. Use your own words and opinion from the concept discussed above.
Microeconomics analyzes the behavior of individuals, companies, and households. Macroeconomics analyzes entire industries and economies, the structure, performance, behavior, and decision-making processes of an economy.
Government intervention in the market is the economic authority at the national level. It is including tax, subsidization, and price control.
For example, in Malaysia, federal budgets are presented annually by the Government of Malaysia. It is to identify proposed government revenues, spending, and forecast economic conditions and its fiscal policy for the upcoming year.
Pervious Budget 2021, the government intervention was to save lives and livelihood. At that time, the pandemic was hitting the economies badly. People lost their job, the businessman went bankrupt, and the economics has been closed.
Recently, in the Budget 2022, the Government intervention is to strengthen Malaysia’s economic resilience and rebuild market confidence. This is due to the re-open the industry after Malaysia has successfully implemented vaccination on their 80% population.
Understanding consumer behaviors shape your business strategies.
The principle to understand consumer behaviors is the key to grow the business. It is an advantage if the business can understand, influence, and persuade consumer behavior.
“Persuasion is no longer just an art; it’s an out-and-out science” – Prof. Robert Cialdini (Psychology and Marketing at Arizona State University).
Marketing can be highly effective in influencing consumer behavior when you know consumer trends.For example during the Covid-19. With the movement restriction control, the consumer could not be in the physical store. The physical store also cannot be operated as normal due to the restriction and only essential products can be sold.
So, this goes to the strategy of the business. The Covid-19 Pandemics lead to an increase in online shopping. The e-commerce site that offers goods and services has developed strategies to influence customer behavior of spending online.Nowadays, even with restrictions lifted, the trend is likely to continue. Why? Because the online site/e-commerce successfully builds trust. The trend for online shopping is not just because of the Covid-19 but indirectly matching human behavior. People tend to like something easy and convenient. Online shopping helps people to save costs for parking, to save time and it is open 24hours.
CNBC reported that during November 11, 2020 sales, Lazada had $100 million of sales in the first hour of the shopping event while the CEO of Shopee said they sold $200 million items.
In conclusion, understanding the causes of the consumer to purchase certain products and support certain brands are all back to social factors, physiological factors, and personal factors. The buying behavior affects how these three factors fall on them. The marketing strategy should continue to align with consumer-level of group, age, income, interest, geographical and location, and the current trend.
Can you identify any challenges for businesses to move into a digital platform Maizatulziah?
I believe system infrastructure is one of the challenges to moving from physical to digital platforms. Business owners have to understand the technology behind the online shop. Besides the knowledge, maintenance costs also will be another challenge. Web maintenance, database, and inventory are costly to small businesses.
When we talk about a digital platform, logistics is also important. The challenge to business owners is to have the worldwide logistics to make their product available and reach the consumer from all over the world. Luckily, some logistics companies like UPS Malaysia with ePantos South Korea do have partnership programs that allow a business owner to outsource their delivery process.
The last challenge would be the price. Based on the article, I understand that one of the customer theories is to examine prices to get goods and services up to their satisfaction which means the lowest possible price. In the digital platform, we know that consumers can compare the price in just a minute. Some business owners especially the new start-up may have difficulty giving lower prices due to their e-commerce maintenance cost and logistics cost.Cheers!
In addition to the abbove, other factors, including as out-of-date organisational structures, inefficient processes, and inflexible leadership styles, may all contribute to the failure of digital transformation initiatives.
Hi Ms Zahra, I would like to add on for Maizatulziah Modin’s points on the challenges for business to move to digital platform, create offline to online channel (O2O) 😇
Firstly, my product must be suitable to be sell online or at least advertised via online, but I believe most of the product is OK with that.
Secondly, my company team member must cope with the changes, I believe most of the traditional company fail to undergo the digital transformation, my experience on this is our corporate culture MUST be positive and healthy, those bad leaf in our organization must be remove before or during the transformation, it’s pain during this process, but rather than FAIL to transform, we need to survive from this short-term pain.
Thirdly, move business to digital platform is not the end of story, but future sustainable business model must be established and take care of future growth and maintenance, cost control.
Sharing my company case, we’re doing chess education for kids, before MCO we have over 160 branch nationwide, but when we’re facing our toughest challenges when we need to transform our physical course from offline to online. Nevertheless, through our team effort and all the “revolution” in my company, we successfully transformed, yeah!
Our future business model will be OMO model (Online Merged Offline), and I strongly believe it will be the better model compare to the past. 😇
Government can affect markets either through direct participation (as a market maker or as a buyer or supplier of goods and services), or through indirect participation in private markets (for example, through regulation, taxation, subsidy, or other influence).
Government frequently has a choice. I could say they can change anything at any time. There are pros and cons associated with all types of Government intervention. Many, if not most, intervention can have unforeseen consequences. Failure to address indirect costs and possible spillovers can result in a less effective policy and impose unnecessary economic costs.
Government intervention can also benefit regulated industry rather than the wider public, promote inefficiency because of restricted competition or underplay the role of consumers by concentrating purely on the supply-side of the market. In general, measures that directly limit competition in the market will not be the best instruments. Regulation of, for example, price, entry, and exit, or allowing anti-competitive mergers and agreements between firms, are generally rather blunt measures and can be less transparent than other measures such as setting product standards or introducing taxes or subsidies. While these may also have effects on competition, they can typically be designed in a more focused and transparent way.
Just my 2 cents view 😊
It feels so good to read the well-structured information on the effect of government intervention. Have you experienced this Bachevinder? Maybe in your own work environment or from your experience how government policies shape business ideas/strategies?
Hi Ms.
Thank you for the feedback. No, personally I did not experience this, but it can be seen clearly in Malaysia. For example, putting cigarettes behind closed covers makes it harder for people to buy. Price increases on cigarettes are highly effective in reducing demand. Higher taxes induce some smokers to quit and prevent other individuals from starting.
Well said. I hope our country does their analysis deeply so the pros are more than cons instead. Minimize the cons and really benefit consumer side.
“Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?”
Economics is the study of economy and is defined as ‘The study of the production, distribution and consumption of wealth in human society’ (The Economist), as we look into the main issue on scarcity of resources and the demand and supply of any product to the determination on price. Government intervention is defined as a ‘regulatory action taken by government that seek to change the decisions made by individuals, groups and organisations about social and economic matters.
Government intervention is any action carried out by the government that affects the market with the objective of changing the free market equilibrium / outcome.’ (Tutor2u, 2018).
As such, government intervenes on public goods (eg. roads n street lamps), common known as public goods, a basic needs in the layman terms for the society. It is by general that organisations do not provide public goods, but only private goods as they are setup with the common view in making profits. Henceforth, the supply of public goods will be omitted based on this concept and therefore government intervention takes place. In general, price will be set based on the theory of invisible hands by Adam Smith through the demand and supply curve, but, government will intervention also on basic goods (eg. necessities like rice, sugar) and will set a ceiling price on such private goods. This happens so that organisations producing and selling these products cannot exploit onto the people as these are basic needs with high demand and people are willing to pay higher in order to obtain these goods. As such, government will intervene these goods so that organisations will be unable to make extraordinary profits from such basic needs, allowing citizens to be able to benefit from the usage of these goods. I do believe that government intervention on these area are beneficial for the good of the public.
But however, in my opinion, govt intervention shouldn’t be on non-necessity private goods with the example on the recent cases of Libresse issue and Timah issue as these are private goods and they are non-necessity. Government intervention on such, in my opinion will be a waste of resources and would become non-beneficial on economical terms.
As mentioned on the definition of Economics, that is the study of economy and prices are set mainly on demand and supply, we understand that the higher the demand and the lesser the supply, shall result in a higher price set on a particular good. Henceforth, by the understanding of consumer behavior, we shall we able to know the demand of such goods and considering and determining the supply as a manufacturer or seller, we shall be able to forecast our profits and margin. Also, at the same time, as we understand that demand will affect the pricing set, we are also able to draw up our business strategies by educating and marketing the people on the knowledge of the good, and creating higher demand on the good.
– Low Wee Sern, Sheng
With reference to my statement in the last paragraph on higher demand on educating and creating greater need on the good for higher price, I would like to highlight after today’s class, that I meant it to be a shift in demand curve, shifting it upwards, and not an increase in demand along the curve.
The best part of your answer is the application to the lectures discussed in class, toast to that!
Issues on Timah or Libresse is a political response from the government. When we discuss government intervention in business strategies, we look at the policy implemented to protect business/consumer or policies to improve the market.
You can think of your own experience. Any policies that change the landscape of your company’s business?
Pandemic has disrupted nearly routine in a day-to-day life . This might be one of good example that I can give especially to study on customer behaviour. Covid-19 crisis has caused the change of consumer behavior. Based on the article which has explained that macroeconomics is concentrating on the behavior as whole and microeconomics analysing the behavior.
One of the example is, during this pandemic digital commerce is a need for consumer. They have migrate online for grocery shopping. This crisis has change the consumer behavior. And also a new virtual workforce also give a big impact since the purchasing power is lesser. During this pandemic, with government intervention they are helping seller by providing an aid for example GKP , Penjana (income support package) . This aid is actually help seller to maintain their price and also maintain their stock. On consumer side, they actually able to buy the goods at the same price. This price control will benefit both party for producer and consumer. By this price control and crisis, it will help seller to set their business strategies based on customer demand .Thank you for the response Aina
How do you think businesses should respond to change in consumer behaviour during pandemics?
Hi Ms, i’m sorry for my late response. During pandemic, business should adapt to changing of customer demands as they spend more time at home. And they reply on digital marketing (online business) . This is the successful medium for business during pandemic .
1.Government intervention wholesomely shapes most smes business strategies in my opinion,policy makers through central bank imposes many policies to assist sme whether by requiring banks’ to lower funding rates or by introducing products to cater to sme businesses. One such plan is skim cakna where the government would be playing two roles as the buyer/customer and guarantor, banks are in a way forced to participate in this scheme whereby sme can have up to 90% of funding for certain projects by selling their invoices to the bank without recourse, sme would have enough cash flow upfront to provide the required services. this allows businesses to continue to flourish especially during the pandemic where businesses struggle to stay afloat.
2.Consumer behaviour is the key to devising any market strategy. understanding what attracts consumers allows business to gauge how potential customers will react to new products or service. When businesses understand how a decision is made to buy certain product it allows them to devise strategies to draw consumers to purchase their products and services, one such example would be padini, back in the days padini catered to upper middle class consumers however, due to fierce competition especially ecommerce, they were making a loss until they came up with the strategy to target a wider range of consumers including low income base consumers especially students, young working adults who just joined the workforce with less spending power, fast fashion is not something that the upper class consumers are drawn to, they would rather put in extra bucks and get exclusive items, fast fashion such as hnm , padini are more attractive to consumers who just wants to look good by spending as little as possible, ultimately consumers are emotional beings, business should strategize to offer products and services upon understanding what drives the consumers emotions.
Summarizing the main point of the article, human behaviour collectively affects the economic pattern and government policies. In the article, it is mentioned that “the consumers want the most they can afford”, which I partially disagree. Probably I could agree to this during the pandemic period but in a normal environment or pre covid era, it could be debatable.
Most of us as the consumer has the attitude of “Purchase what we want and justify with logic” and this attitude has been the majority attitude of consumers. Another attitude is “Purchase what you need rather than what you want”. This concept is for those who have a tight budget and someone who has the ability to manage the finance well, which the tight budget consumers can lift up their status and move to the first attitude mentioned above and the person who manage the finance well will remain in that attitude, which fills the minority in the consumer group.
For example, we need transportation to work and for a safe ride, we want to buy a car. A fresh graduate who just got employed for 6 months might consider buying a proton saga which is affordable for him/his at that moment. After 4 to 5 years down the employment, him/his salary increases and now he may look to change his car. At this stage, he will be considering the car based on his “status” and his/her salary volume. Probably he/she will be looking for a car at the range of Honda City or Toyota Vios for an example. In reality, he could afford to buy a new proton saga which could give him a safe ride and will be able to give his/her some financial stability but his/her justification will be a better brand, country of origin, better breaking systems, airbags and etc, which Proton Saga also has but the brand value and his current status and affordability changes will contribute to his / her decision making. Based on this, the higher number of consumers behaviour determine the economic cycle and government policies. Just like in the scenario, government policies for vehicles will revolve under the category of middle-range cars which is for M40 category of consumers who is the larger number of consumers in Malaysia.Although the article mentioned about government initiative at the microeconomic level with consumer behaviour, the real role of the government initiative should be at the macroeconomics level. Microeconomics will have an economic cycle with scarce resources. In order to increase the economic cycle in microeconomics, macroeconomics has to play a vital role. Government should create platforms of opportunities to inject the microeconomic values. For example, bringing in foreign direct investment or empowering local companies with new technology market which creates more job opportunities, more business opportunities and bring more market values. With this new investment, many employees want to upgrade their skills and competency to meet the new technology companies’ requirements. Therefore, the training and development companies have a new area to venture which increase job opportunities with the technology company and also with the training provider. The new sectors will bring more value to our microeconomics sector. Other initiatives such as tax exemption, grants, expansion opportunities for these kinds of companies will help them grow and able to witness economic growth. Strategically, new areas or sectors which will conquer the economics for the next 30 years shall be focused on more economic stability.
In conclusion, macroeconomics and microeconomics need to complement each other to create values and cycles. The government’s roles shall be more on macroeconomics and play the role of enforcement and facilitator in microeconomics.
Hi Haree, your explanation on budget, attitude, and purchasing decision is what Economists categorize as “values”. Consume want the most they can afford refers to their purchasing power, budget, taste/preferences, income level, etc. That is what you explain.
To assist the gap difference between rich and poor, the government intervenes with policies. The question asks about how business can change their strategies based on different government policies.
Firstly, my apologies for not answering the exact question, and thank you for highlighting the shortfall, Ms. Siti.
The Covid-19 pandemic changes the consumer behaviour in purchasing and preferring online purchase. Although online purchases are already in practice before Covid-19 presence but it has become more active after Covid-19 presence. Products such as groceries items and clothes which consumers normally prefer to purchase directly from the outlets are now being purchased through online platforms. Even Work from Home has become a new norm that requires lots of software to coordinate remote working styles.Businesses should strategies themselves to Business Digitalization transformation. Most of the Malaysian companies has been using a lot of manual operation method which is their biggest challenge during the pandemic period for their respective operation. It has caused panic among these companies. Peer to Peer or Business to consumer (B2C) business shall migrate their businesses to online sales platforms where they can use the digital marketing concept to carry out their marketing strategies. Business to Business (B2B) is subjective when it comes to online sales or digitalized marketing migration because certain businesses still required face to face approach. However, the other platforms such as performance monitoring, payroll, meeting platforms, follow up and many other operation related matters can be digitalized. Generally, this reduces the cost of operation and is still able to sustain or grow the business which is essential in the current business situation.
On the other hand, the government is now giving full grants and matching grants for such business digitalization through MDEC. Under MDEC there are many programs that could help the Business Digitalization strategies, such as Global Acceleration and Innovation Network (GAIN), Digital Transformation Acceleration Program (DTAP), and many more which can help the businesses to implement their business digitalization strategies.
I hope this answers the question. Thank you, Ms. Siti.
The government policy can be affect microeconomic. The effects whenever the policy implement, it will have its effects in changing the inputs and incentives for individual economic decisions. For example, if the governement remove the import tax for electronic car and in the same time increase petrol ceiling price for RON95. People will shift from petrol car to electronic car. It’s because people can enjoy the cheaper price on electronic car and in the same time, they can spend less on higher petrol price. Sometime the government policy is intentional. For example is the government gives a subsidy to farmers so that it can let their businesses more profitable and help farm production. On the other hand, the government can impose a tax on cigarettes and alcohol to discourage the purchasing behaviour.
Businesses have to always stay close and aware the govrnment policy. As the government policy will directly or indirectly impact the operation of the businesses. For example, if the government increase the minimum wages, this will directly impact the operating expenses. If the cost cannot be transferred to the end consumers, the businesses have to absorb the cost and make less profit.
Government intervention refer to the policies that they applied and the state aid or subsidies which they provided to the organization.
For example, many countries are encouraging the automotive company to produce Electrical vehicles for environmental care. In order for this goal, the government provided subsidies such as tax reduction/exemption for the company to reduce the product pricing. Also, the government also need to come out with strategies such as complete the infrastructure such as charging point, electricity consumption rate, etc; within the nation wide so that the buyers can utilize the product without further concern.
For the consumers, their interest usually focus on cost saving and the user experiences. It need to be considered when they change from a Fueled vehicles to an electrical vehicle, which cost they can save such as fuel consumption, the maintenance fee, the cost of the product itself. Also, when come to charging the car, it need to be convenience for the owners, sushi as self-charging equipment, public charging point.
As for the companies, they have concern as well which is the cost of development for the new technology in their electrical product, and their company strategy in balancing the non-electrical vehicles and electrical vehicles.
Overall, we can see the Malaysia government has also implemented the same policies like other nations in the world. However, it is not quite successful where we still can see the lack of infrastructure built to support the consumer to purchase this kind of product. Also, even the price of the car reduces, the maintenance fee and the sub-equipment needed for the car still consider high-price compare to the transitional vehicles. And I think this is the main point the the government should focus on.Be patient, wait and see the things get rolling. Tax free on EV cars is just the starting…
Good example Pub Hon. I think the government’s main role in encouraging and adopting the use of EV is to focus on the infrastructure specifically on the charging points.
I think throughout my lifetime, I have never seen our government interventions that impacts almost every aspect of our daily lives as much as I am witnessing during this COVID-19 pandemic. From our utility bills to groceries/commodities price ceiling to mask mandate to social distancing to border restriction to EPF withdrawal; just to name a few.
And I think we all can agree on how much the above have impacting consumer behaviors. First, customers have to stay indoors which leads to two, customers have to shop online and three, with all the subsidies given, it gives each households a little extra disposable income. These 3 factors drive a lot of physical businesses to have or increase their online presence whereby internet-based businesses that already existed pre-Covid sees an increase in revenues and demands (Eg, Amazon, FoodPanda, Netflix, fintech).
Sadly, we can still see even when few physical businesses made the shift to digital platform; either late or not; still unable to survive and had to close down shop. Seeing this trend, government once again intervene with SME grants for digitalization.
So relating back all this to my business strategies; me and my family is starting a business soon where we will come to the customers’ whereabout to perform the services. This is due to the fact that customers seldom go out anymore. And yes we did try to apply for that SME Digitalization Grant – but we are not eligible since we have not yet operated for more than 6 months. What I noticed is most of government’s support towards SMEs are largely focusing on formal SMEs, not new startups. But we do realize the importance of online presence; hence we have allocated some budget to build up our online booking system; not only because of Covid has changed customer’s behaviour; but also because it is the future and very important for our business continuity.
In a nutshell, I now see how big of importance it is for government interventions either in microeconomics or macroeconomics. While government imposing restrictions to curb down Covid-19 cases, our government’s intervention on our daily lives and towards Malaysia’s SMEs are very crucial for our socio-economic growth and sustainability.
Just my 2 cents,
Ida F Shah
Agree on your opinion that the government intervention is very important at current situation. Not only in the form of subsidy, but also need to come with corresponding policies as a package for the market.
Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?
Economy can generally divided into macroeconomics and microeconomics. Macro-economic is a theory which covers behaviour of a national economy as a general and/or whole. Government intervenes by policy management for stronger national economy growth and macroeconomic stability. i. e government policies to develop the economy of the nation, the collection of taxes and government revenue helps the government to provide public services and create development to the society. For an example, in Malaysia, the government focuses on the exchange rate and product price stability, also providing market access to foreign businesses and investors.
Micro-economic is a theory which covers consumer behaviour (individual) and businesses to understand the buyers behaviour. Consumer behaviour is how people react or think before they make a decision to buy a product. Consumer behaviour changes time to time according to their need and preferences at the time of their purchase. A company in a particular region or location should understand the particular locations’ social ,psychological, economics ,personal and cultural factors in order to succeed in their business. For an example if company A starts their business in a small town where the people have the attitude to only eat local food (psychological factor) company A must come with an idea how to bring in local food or to emerge habits with new offerings which is near/close to local food for a start. It is very significant to consider the age factor , the culture and of course economic level of the majority of the particular location before starting selling a product or providing a service. If the majority has income less than RM 2,000 then there is no point in selling luxury products which may cost minimum RM 20,000. The company may emphasize positive new beliefs. For an example selling affordable new products which may give new experiences to the consumer and if they are happy , consumers will repeat the behaviour. Furthermore, during the lockdown last year consumers were frightened to go out for grocery shopping and majority expected for delivery services. Many stores offered delivery services after identifying consumers’ behaviour at the time of pandemic Every company must analyse consumers behaviours and also align with the consumers behaviour. All these factors are important to shape one’s business strategy in order to gain profit.
Government intervention is any action carried out by the government or public entity that affects the market economy with the direct objective of having an impact in the economy. Government intervention advocates defend the use of different economic policies in order to compensate the flaws of the economic system that give way to large economic imbalances.
The Chinese government has imposed various restrictions on the industry for years, and they are known as some of the harshest in the world.
The latest restrictions, announced at the end of August, limit gamers under the age of 18 to playing only between the hours of 8pm and 9pm on Fridays, Saturdays, Sundays and statutory holidays. This change was an update to a 2019 rule that limited minors to 90 hours of gameplay per day and three hours on holidays.
Due to this, Shares of Tencent and Netease lost more the $60billion of value amid growing investor fears. Tencent shares closed down 8.48% in Hong Kong, while Netease fell 11%.
As we see from above, the effect of government intervention on the regulation spectrum as it tries to control the video games industry for the younger generation as this will have a long-term benefit for the population as a whole. If children are not addicted to gaming or their mobile phone, they will be able to pursue a worthwhile goal (opportunity cost) i.e education, better mental health – as social media and gaming is a raising contributor to mental health.
Tobacco taxation has many advantages to the economy, health and nation.Tobacco taxation can reduce smoking through change in smoking behaviour. Increasing prices of cigarettes would reduce consumption of cigarettes, if cigarettes consumption is low, government expenditure for smoking related diseases will reduce, as reported Malaysia has spend RM 15 billion( 1.7% of the GDP) on tobacco related healthcare cost – if tobacco related diseases are lower government can allocate the funds for better usage ( infrastructure, subsidies and etc.)
Apart from that, due to increase in taxation (prices of cigarettes) and health related issues due to cigarettes. This has cost an opportunity for consumers to choose a healthier alternative which is vaping. The Malaysian Vape Chamber of Commerce said that Malaysian vaping industry is valued at RM 2.27 billion.
Interesting. I respect what the China government is doing in curbing online addiction amongst youngsters. Even though their share drops, those tech giants still comply. I wonder what Tencent and Netease is doing to cover their loses or do they even do anything about it? For now, with this action – it seems they put higher importance on their teenagers’ mental growth rather than their shareholders bank accounts growth.
Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?
My take from the article was this line ”
Microeconomics looks at how consumers and companies behave so that they can understand why society needs economic policies to regulate and shape their behavior.”.In reference to that, with the recent pandemic Covid-19 – everyone s life were affected in one way or another. Consumers in Malaysia were in confused state on how they will get basic needs, commute to work or even work, access for medical needs and other basic needs during the first movement control order (MCO) implementation. Hence during the MCO lockdown, the shopping behaviors of locals shifted tremendously as multiple surveys indicate people were more cautious on shopping due to the limitations. Stocking up on food and essential items more than before is a common response to the crisis. Almost half of them are stocking up for two weeks or more.
Shopper were siding on more shelf time food like canned food, rice and more on cleaning items and toiletries. Also the luxury spending on flowers and chocolates were reduced and this to me would be from the governments intervention on implementing the lockdown. Yes of course, soon after the relaxation of the movement control order, shoppers behaviors will gradually be back to the pre Covid-19 lockdown era, however this explains a simple example of how policy makers are important decision makers in managing microeconomics.–Ariva
From my opinion government intervention is where a government impose a set of rule or control. The goal is to avoid big monopoly and negative instances to anyone out of a business activity. For example, tax or duty imposed on cigarettes and alcohols could alter consumer behaviour and reduce the negative aftereffects of consumption. This also includes the ban on cigarette and alcohol product advertising which could curb down smoking and alcohol consumption habits in younger generations. Let’s discuss how tobacco industry understand consumer behaviour to shape their business. Compared to yester years cigarette consumption is less and allow new opportunities for the tobacco industry to explore. By analysing consumer behaviour tobacco industry focus on bring down the health impacts of their business by innovating their existing products with technological expertise to tag along with government regulations. Taking BAT (British American Tobacco) as example, they tend to Introduce wide range of alternative products such as Scandinavian smokeless tobacco, nicotine pouches, e-cigarettes and heated tobacco products. As customer preferences and technology evolve rapidly, consumer behaviour ensure that the business direction of and organization fit to satisfy consumer needs.
Government intervention is important because it shows that the government is caring for the citizen’s wellbeing. Government intervention on minimum wages can help the citizen to lift their family out of poverty, boosting purchasing power which in return positive effect on the country’s economy, reduce the dependency to government’s aid and protect the lowest paid employees in the country. If the government is not taking action to intervene, they might be seen as not doing anything thus impact their probability to stay in power in the next election, strike may occur and higher wage demand campaign.
As for Malaysia, our minimum wage is expected to reach RM 1200 by end of 2021 and this minimum wage is considered as very low. Now let’s talk about this a bit. When I first join a national O&G company, engineers min wage is RM 2050. At that time my ex-classmate who worked in factory and other industries min wage was around RM 1800. Now 24 years later, graduate engineers are paid as low as RM 1200 to RM 1800. Not much change in the salary adjustment I would say. However, the expenses, house rent, housing price etc they are all increase every year. I pity those junior engineers.
Government intervention also talks about controlling minimum prices and maximum prices of goods available in the market. For example, controlling the price of meat, chicken, rice etc during festive celebration. With this intervention, market will not increase the price unnecessarily.
Another example of government intervention is on the announcement by EPF in May last year that member who eligible to withdraw their money from Account 1 and invest in unit trust company will enjoy a reduction of upfront fee from 3% to 1.5%. The reduction is for a year due to market downturn at that time. With this reduction it benefitted the investor in 4 ways:
1. Upfront fee reduced means more units can be bought
2. Opportunity to invest more in an undervalued funds.
3. Able to diversify their investment to overseas market
4. Optimise return for long term investment
However, for the unit trust consultant, reduction of service charge means commission will also be reduced extensively. So how to survive this? As a unit trust consultant my strategy is to inform my investors on the news and at the same time strategize to get more clients via social media and referral program so that they could enjoy the benefits. The strategy to enrol more clients helps me to still enjoy the same commission as before but now with more clients. At the same time, I do cross selling by introducing cash investment for Private Retirement Scheme, where they can get tax relief of RM 3K a year and cash investment for their children education.
With the recent price hike happening in Malaysia, government is being pressure to do something to control the price hike such as bread, vegetables, noodles, and few others. The prices burden the people and need Government intervention. Inter-ministerial discussion need to happen and formulate a pricing index and lastly to monitor. This is to ensure the prices of necessities are affordable thru price control normally. Price control happen in 2 ways in price floors and price ceiling. With setting the price ceiling , the goods price do not hike above the ceiling price. A good example is rental control, with the price ceiling, the maximum rental price is set. This allow the house or apartments affordable for low and middle income tenants. As for price floor, it is not allowed for the goods price to be below the minimum. This is normally applied on agriculture goods such as wheat. This is because the in agriculture, there are unforeseen nature impact that can impact agriculture volume. Thus, with setting the price floor, it help boost and stabilize the farmers’ income. Both ways (price control or price ceiling) do have their own pros and cons, depending the goods type and policy define. As every or most country’s government will do this, it need to be apply wisely to suit the country’s need and make it affordable for its people. To ensure effectiveness, there must be monitoring and re-adjustment price controls if require.
Price hike will change consumer behaviour on their purchasing patterns such consumer will look for alternatives or buy in smaller quantity instead. This is as per Law of Demand stated. Thru understanding of this consumer behaviour, the company will need to adjust or create new business strategies to tackle this.
We have seen price controls on basic necessities like chicken during festive season. This surely does help to avoid price increase. This move is very helpful to consumers as we do not have to buy expensive chicken during festive season. It is a also expected behavior that there will be more demand for chicken due to festive season and thus with the price control, seller could not increase the chicken price too high.
References
Azman N.H (2021). Govt can do more to curb food prices. https://themalaysianreserve.com/2021/04/22/govt-can-do-more-to-curb-food-prices/
Malaysia is one of the countries that practice the Mixed Economic System, that is, the economic system that uses market mechanisms and justify government intervention in the economic activity. The housing market is basically subject to the market mechanism as other goods and services where price plays a major role. Generally, there are seven main forms of government intervention in the economy namely, subsidies, taxation, regulation and legislation, minimum price policies, maximum price policies, quotas, and government ownership. There are various perspectives of policy intervention in the land and property development process, especially when government controls land development.
Government intervention in the property sector implemented through basic and subsidies established by the government (Hoek-Smit, 2003) that is important in:
i. Improving public health facilities provided such as water supply, drainage, and environmental conditions are satisfactory.
ii. Improving fairness and equality and social balance. For example program for slum housing or housing programs for low-income earners.
iii. To overcome inefficient in the housing market. The existence of monopoly profits or home problems those are not qualified.
iv. Stimulate economic growth. Housing is not only creating jobs in the housing industry but also to the industries related to housing, such as industries producing building materials and housing equipment. Thus housing subsidies can stimulate the economy relative to other forms of government spending other. Most of the residential institution in the United States was established by the government during the economic downturn is intended to stimulate economic growth. (Hoek-Smit, 2003)
Basic housing Malaysia is to provide adequate housing, the ability-quality, and all the people from all walks of life, especially for low-income groups. The government has formed the basis and specific programs to achieve the basic goal of state housing. Kementerian Perumahan dan Kerajaan Tempatan who is responsible in the housing development. The government has introduced several incentives that essentially to promote home ownership and stimulate economic growth such as incentives stamp duty, feasibility in raising the repertory Housing Loan spending EPF to Purchase Home Second, Housing Allowance to lay accomplices and so on.
Government intervention in the real estate industry is also important in reducing the problem of growing speculation in addition to raising the price of real estate in the future consistent and relevant to improving the quality of housing and construction costs. Overall, buyers who want to buy homes and investors who buy for rental will not be impressed by short-term investors. Observed that the growth rate for the number of borrowers with three or more active housing loan accounts in 2013 has been reduced drastically to 4%, from 15.8% previously implemented measures to curb speculation. Borrower represents 3% of the total housing borrowers account. Property values also increased a lower rate, 8% for the first quarter of 2014 (4th quarter 2013: 9.6%). It is unlikely that real estate prices to be reduced, but it is likely to stabilize or increase at a slower rate in the future.
Government intervention in the control mechanisms with the developer. For example, the Government in Budget 2014 prohibits developers to implement projects profiled by DIBS to prevent developers incorporate interest rate guarantee loans to buyers during the construction period in house prices. The government also implemented several control mechanisms, namely through reduction Loan To Value (LTV) to 70 percent for housing loans for third-home purchases, HOC (Home Ownership Campaign) Malaysia 2020–2021, and review Real Property Gains Tax (RPGT). The implementation Guidelines for Acquisition of Properties aims to control the ownership of property by foreigners in Malaysia. It is important to stabilize real estate prices from excessive speculation and provide opportunities for local interests to purchase quality properties worth less than RM1 million per unit, mainly residential units.
Government intervention in the property sector is a very large role in influencing the impact of the budget on the property either for a long time or a short-term period. The role of government intervention are covering the entire planning, development, economic, social and political. It is thus indulged, the government has the power to oversee the market mechanism and resolve the problems of economic principles together with the private sector.
Government plays important role to make sure our country sustain in economy. Government always review the current economy situation and do annual budget for economy stability and growth. From our Malaysia’s annual budget, they will allocate money to help people. Example, BRIM is given to people to increase the buying power among people and make sure our economy is always stable. There also allocation money from Tekun or Mara, people who interested to start up business or development their bossiness, they can apply loan through Tekun or Mara. Government help to create new business opportunity and it will increase the GDP of the country. At the same time, there is also tax relief for certain amount of income like tax relief for individual and dependent relatives is RM9000. From here, the government reduce the burden of the people and encourage them to use them spend the money to buy useful things.
i believe understanding the consumer behaviors will ensure the growth of the business. These is because there are the decision makers to buy the product. Consumer behaviors changes based on marketing campaign, condition of economy, personnel preferences and influences from group. Consumer may get attractive to marketing campaign and they will buy the product if the price is reasonable. At the same time, positive review from previous users also will create the demand for the product. During bad economy, the consumer will only buy thing which is the basic need for them to live. The personnel preferences like their commitment and income also determine the decision for them to buy a product.
- This reply was modified 1 year, 11 months ago by Kubendren Kathiravaloo.
- This reply was modified 1 year, 11 months ago by
Government intervene in the market to address inequality and inefficiency. It can be through many forms; regulations and policies, taxes, subsidies, and price controls. These measures are taken to promote competition, increase economic efficiency and thus promote an equitable or fairer distribution of income throughout the nation. Also, the government imposes policies and regulations to protect people and the environment.
For example, Festive Seasons Price Control Scheme Enforcement was implemented in Malaysia since 2000 under the Price Control and Anti-Profiteering Act 2011 (formerly Price Control Act 1946). Under this scheme, the government controls the price of essential goods by implementing a price ceiling to ensure goods are sold at the price determined and are readily available for consumers to purchase, and in a way protecting consumers against profiteering.
Consumer behavior is the study of how consumers make the decision on what to buy or opt for services. This is majorly impacted by the maximization of utility, which is the satisfaction level the consumer gets when purchasing a product or service, at the most affordable rates to the consumer. Of course, you can’t satisfy everyone, hence these studies of consumer behavior can help businesses plan and strategize their business, as they encompass consumers’ emotional, mental, and behavioral responses and how these responses influence consumers to make the purchase. Businesses can study the demands of consumers in the market, and use appropriate marketing skills and strategies to present their products to be the most compelling to consumers – attractive packaging, best plans that suit everyone (targeting different demographics/audience), value-added services.
Great explanation on Price Control and Anti-Profiteering Act 2011
Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?
An example of a recent government intervention was on sales tax (SST) exemption for new vehicles. The sales tax exemption currently in place for Malaysian consumers started in June 2020, which came as part of the Penjana stimulus package to mitigate the effects of the first movement control order.
Penjana is a short-term economic recovery plan by the goverment aimed at introducing a host of stimulus measures to propel businesses and aid the economy following the Covid-19 outbreak.This SST exemption was originally scheduled to end on Dec 2020, but has now been extended to June 2022 as our economy is still reeling from the impacts of the pandemic. This stimulus offers 100% sales tax (SST) exemption on locally-assembled (CKD) vehicles and 50% sales tax reduction on fully-imported (CBU) models. The exemption has resulted in reduced prices for passenger cars. Commercial vehicles are not eligible. From here, we can see that the government is targeting the individual consumers segment.
This is a smart move by the Government, as in April 2020, car sales were down 99.7% to just 141 vehicles, compared with 49,935 cars sold in April 2019 (Source: The Edge). Given how severe these numbers are, it became part of PENJANA’s plan to boost the automotive sector. This incentive, coupled with the cheaper oil prices and lower hire purchase loan rates, may tempt new-car buyers who may be delaying their spending due to the challenging macro environment (high unemployment and lower disposable income due to pay cuts).
As for the automotive businesses, they can ride on this opportunity to increase sales within this exemption period by offering promotions and discounts as all other competitors will be actively doing so as well. I happened to go into a car showroom sometime back in 2020. The waiting list for a Proton X50 was about 6-9 months long. What they did after my 6 months of wait, they told me to purchase the most expensive specs car even though I had booked a basic one. Their reason was if I wanted the basic one, I would need to wait even longer and would have missed the exemption period given by the Government. With this strategy, many consumers would have spent higher than their initial budget. As for businesses, they had ride on the expected behaviors of consumers to capitalize on this government’s incentive. Hence, we can see from this experience that consumers will accelerate or even unnecessarily purchase a car just because of the special sales discount introduced by the government.
Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?
Macroeconomics is the study of wider view of looking at economics on larger scale such as regional, nation and government. Meanwhile microeconomics is the study of economic behavior of individual, household and companies.
Government’s intervention can be in any forms such as subsidies, taxes, property rights and government provisions (production externalities & public goods). This government intervention help to increase economic efficiency and thus promote equitable or faired distribution of income throughout the nation. Sometimes the government intervention can economical objectives such as increasing employment, promoting economic growth, raising, or reducing prices, raising wages, managing the money supply and interest rates, promoting income equality or addressing market failures. One of examples of government intervention that can be related to consumer is for property buying. The Home Ownership Campaign (HOC) reintroduced stamp duty exemptions will be granted for the residential purchase homes must not be priced more than RM 500K until 2021 to 2025 for first buyer home which announced at Budget 2021. This will great help for the consumer to buy house and reduce amount for the purchase price.
Besides that, government also provide ‘Skim Rumah Pertamaku’ for first home buyer, which the bank can give to 110% where the consumer no need to prepare down payment for the house. This makes the consumers can purchase the house they wanted which cannot be more than RM 500k.From last year 2021, found that RM 19.75 billion worth of house (30,290 units complete house) not sold yet. This is due to house price high and SPA price and down payment that consumers need to pay. Deputy housing and local government Minister Datuk Seri Ismali Abdul Muttalib said data by the National Property Information Centre (NAPIC) revealed a 2.64 per cent decrease in the number of unsold residential units in the third quarter compared with the second quarter of the year (a total 31,112 unsold completed houses worth RM20.1 billion). The slight drop in unsold housing properties, he said, was attributed to numerous promotional efforts by developers including reducing prices or offering discounts to house buyers. “This was shown by the reduction in the House Price Index in the third quarter of 2021 (preliminary) recorded at 198.6 index point compared with the third quarter of 2020 at 199.9, which is a 0.7 per cent drop. Once the government announced that SPA exemption for 2021-2025 this will reduce the payment for buyer need to pay, which enables for purchase.
Developer needs to understand the consumer behavior regarding about the pricing for the house and built according to their need so the consumer and seller can be in win-win situation.
References
Stamp duty in Malaysia just got a new exemption … (n.d.). Retrieved January 27, 2022, from https://www.propertyguru.com.my/property-guides/what-is-stamp-duty-exemption-malaysia-11987
APA ITU Skim Rumah pertamaku/my first home scheme … (n.d.). Retrieved January 27, 2022, from https://www.propertyguru.com.my/property-guides/apa-itu-skim-rumah-pertamaku-my-first-home-scheme-14982
Q1 Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?
Since the beginning of Covid-19 pandemic until today, governments in most countries imposed rules to wear face mask in the public. Specifically, there was a time in Malaysia that offenders were slapped with a RM10,000 fine for breaching in Prevention and Control of Infectious Diseases Act by not wearing mask at the public area.
Face masks are becoming necessity, where all consumers must have and wear it whenever going out for any purpose. Compared to the early phase of the pandemic, the cost per piece of face mask was too expensive due to the limited availability in the market as well as supply constraint from raw materials, manufacturing and distributions due to port closure and congestion.
From the business perspective, there is an opportunity as everyone is ‘forced’ to buy face masks but at the same time need to consider to contribute back to the community as everyone suffers with many reasons due to the pandemic. Thus, there are a lot of initiatives and actions taken by business from identifying opportunity of cost-effective in manufacturing the face masks, develop alternative value chain such as domestic supply to overcome the shortage in the market while controlling the supply and demand etc.
Government also intervene by setting a price ceiling for standard shape and size of face masks. For business that have already work on cost-effective solutions, they may enjoy profit while offering competitive price in the market.
Other than cost-effective and sustainable of supply, some companies have taken opportunity by becoming more creative with fashionable face masks which is not within the scope of price control by the government and sell it at premium price. Nowadays, there are a lot of shapes, colors, reusable and washable, and some printing business also take opportunity by offering logo printing service on the washable face masks for corporates, employees, gifts etc. With this options, face masks are not just necessity, sometimes it becomes needs.
Agree that face masks becomes needs and not just necessity. Interesting write up.
Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?
Government Intervention
In my opinion, the reasons for government intervention include the likelihood of severe inequality and poverty in a free market. This is not due to a meritocracy, but rather to unjust advantages of circumstances such as inheritance, wealth, greater education, and so on. Governments may step in to offer a basic safety net, such as unemployment benefits or a minimum income for the ill and handicapped. This enhances net economic wellbeing and allows people to escape the harshest forms of poverty. This government involvement may also help to avert societal unrest caused by severe inequality.
In a free market, I think that public goods are less likely to be given since there is no financial incentive for businesses to produce commodities which people may enjoy completely unrestricted. Governments may provide national defense and law and order services, and these services may be funded by public taxation. Environmental protection is indeed a public good, and there are an increasing number of locations where a government is necessary to address issues such as forest fires, sea level rise, and water shortages. Furthermore, in a free market, merit items are underused because buyers undervalue the personal benefits and/or ignore the exterior benefits. As a consequence, education and healthcare get inadequate funding. Government action to provide free education might considerably make life better for educated people. There are a number of positive externalities for the community as a whole. A well-educated populace may boost both labor productivity and economic growth.
Government intervention is also due to the consumption of deplorable commodities such as drugs, alcohol, cigarettes, and so on which may result in both personal and substantial societal consequences, such as crime. If the government discovers harmful commodities, it may gradually modify consumer behavior via methods such as increasing taxes, advertising campaigns, and behavioral economics, such as making cigarettes harder to acquire by packaging them in ugly packaging. Long-term government campaign such as “Kami Benci Dadah”, “Jauhi Dadah”, “Tak Nak Merokok: Setiap Sedutan Membawa Padah” dan “Tak Nak! Arak Pembunuh Ummah, Perosak Bangsa” in Malaysia have been successful in lowering drugs, cigarettes, and alcohol rates, which has contributed to increased life expectancy.
The environment is an issue that requires major government engagement. The free market overlooks the environmental consequences of industry. It also disregards long-term implications. Market factors, for example, may contribute to fossil fuel combustion, which causes rising environmental concerns throughout the globe, problems that will worsen in the future. Given the possible costs to future generations, government intervention is required to change behavior toward renewable energy, which does not generate these environmental costs. Furthermore, there are numerous challenges in the environment where private ownership does not apply. If pollution worsens air quality, it impacts everyone on earth, yet market systems do not offer a way to address the problem. We may sue if someone pollutes our backyard. However, a question that arises here is who steps in if the air quality deteriorates.
Firms may obtain monopolistic power in a free market, allowing them to charge high prices to customers and use that monopoly power to pay lower salaries to employees. This leads to increased inequality and a loss of deadweight welfare. The involvement of the government in prohibiting mergers and monopolies may result in increased economic well-being.
Consumer behaviors shape business strategies
Consumer behaviors can shape business strategies by knowing how customers think, feel, and decide. This may help businesses find the best method to market their products. Customers’ future behavior may be predicted, which is useful for the marketing of present products and services. As a result, innovative companies are able to identify fresh opportunities ahead of their competition.
Demographic data may help marketers learn more about client behavior. Predicting behavior may be made easier with the knowledge of factors such as a person’s age, income, and education. A typical billboard advertising campaign isn’t a good strategy for reaching millennials because they are more likely to respond to word-of-mouth recommendations, according to research.
In order to better understand the needs of their customers, marketers use a variety of methods, including surveys and interviews, to learn more about their habits, where they shop, how they get their information, and so on. Consumer behavior research requires an understanding of what questions to ask and how to ask them.
Having a better understanding of consumers may help marketers interact with and influence them. Human connections may be the difference between a successful campaign and one that is a complete waste of money in today’s competitive global market. While the world has shrunk in many ways, consumer behavior has only gotten more complicated.
Gregory Mankiw in his Principles of Economics outlines Ten Principles of Economics that Governments can sometimes improve outcomes. In nature, People are always strive to get maximum with minimum spending, it not only happen to individual but our company decision as well.
Malaysia had the 3rd highest vehicle ownership in the world after the USA and Luxembourg. On average, about 25% Malaysians owned a vehicle. I think one of the main reason might caused by our country bad public transport system.
Since 1980s, our government start intervene automotive sector after the launch of the country’s National Car Project by the former Prime Minister, Tun Dr. Mahathir bin Mohammad, hence Proton established. 😇
Malaysia protects Proton by implement high import tariffs on imported cars. Thus, our National cars become cheaper compare to imported car. So most of Malaysian will tend to buy National car. For example, my company staff incentive and year end prize, Proton and Perodua will always be our first choice as the prize to our employees. 😇
Reference:
Proton: Its Rise, Fall, and Future Prospects, 2013, https://www.researchgate.net/publication/263907043_Proton_Its_Rise_Fall_and_Future_Prospects
Modern Industrial Policy: Lessons from Malaysia’s Auto Industry, https://carnegieendowment.org/2012/03/22/modern-industrial-policy-lessons-from-malaysia-s-auto-industry-pub-47625
Q1:
The reason for governments intervention is necessary in markets is mainly to address inefficiency. In inefficient markets where resources are not perfectly allocated, whereas some may have too much of resources while others do not have enough, government plays role to control these inequities through regulation, taxation, and subsidies. Taken some government interventions as examples, greater equality could be promoted in terms of income and wealth redistribution through taxation, market failure due to externalities could be overcome or reduced by providing subsidies and even major global health crisis affecting economy like Covid-19 pandemic could have immediate resolution through government’s disaster relief programs. Thus, the importance of government is non-arguable and is unavoidable. In my opinion however, as far as it helps to overcome inefficiency in market, there should be limitations to government interventions as too much in opposite will tend to cause an inefficient allocation of resources. There is risk of wrong decisions made by government due to influenced by political pressures which can lead to cases of biased economic monopoly. In addition to that, some government regulations and restrictions may also take away individuals’ freedom to make decision on how to spend, which somehow against the theory where the market is the most efficient determinant of deciding on how and when to produce.In relation to the consumers or markets behavior, to effectively sell a product or service, it is important for organizations to understand how consumers behave with regard to their purchases or buying decisions. The understanding of consumers behavior should involve examining types of product that certain types of consumers buy and when and how consumers decide among product options. In order to shape the effective business strategies, organizations must first gather data and analyze the consumers behavior in market, taking consideration the externalities like government interventions and macroeconomics factors existed. Only when business understand the consumers behavior, the management will be able to plan their production, marketing as well as product development. The analysis on consumers behavior should not been done only once at the starting point of the business but must be continuous from time to time taking available business internal data on sales volume or returns as part of analysis.
Government intervention could help strategize the business plans if they prioritize the goods or services based on situation or demands for consumers. As technology and business evolve, so do consumers’ habits and priorities. It is easier to know how to influence consumer behavior when knowing the consumer trends.
For example, government have encourage people to opt with the technology by providing the tax relief on purchases on the mobile, tablet and laptop devices. As business owner, they need to supply the goods not only in store but also by online to par with the current pandemic era.
- This reply was modified 2 years, 1 month ago by
Microeconomics studies individuals and business decisions, while macroeconomics analyzes the decisions made by countries and governments.
In my opinion government intervention plays an important role in shaping consumer’s business strategies.
In the articles it has mentioned that People struggle to get as much as possible while spending as little as possible. The economist Thomas Sowell has said there is never enough of anything to fully satisfy all those who want it. This clearly shows that consumer always attempt to get the best for what they are “paying” for.
Online shopping becomes famous in past years and it becomes as “essential shopping platform” for most of us during the pandemic. Since Malaysian government policy allow the consumers to purchase goods from various countries, it allows the consumer to get the BEST within their budget and its moving towards board less market. Some policy by government also let the producer to reach the consumer or end user directly without middle person. Current technology era supports this direction very well and help to boost countries economy.
For example, we can import / buy anything from China from Toaboa with cheaper price. Some business owners tied an agreement with our local online shopping platforms like Shoppe and Lazada to sell their products. With this its allow a win- win situation for both consumers and sellers at an agreed price. This also help the consumer to do comparison and market survey before purposing anything and sometimes we receive products from China faster than local products. All these are not possible without government intervention.
Good Yamini!
Business deals with online platforms are one of the business strategies to attract more consumers.Thank you Ms Zahara
True, China has all the resources. and at times they may make their own raw resources. the only disadvantage is waiting time
Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?
Governments have the capacity to make broad changes to monetary and fiscal policy, including raising or lowering interest rates, which has a huge impact on business.
They can boost the currency, which temporarily lifts corporate profits and share prices, but ultimately lowers values and spikes interest rates.Governments can intervene when companies or entire segments of the economy are failing, or threatening to undermine the whole economic system, by providing bailouts.
Governments can create subsidies, taxing the public and giving the money to an industry, or tariffs, adding taxes to foreign products to lift prices and make domestic products more appealing.
Subsidies and Tariffs
Subsidies and tariffs are essentially the same things from the perspective of the taxpayer. In the case of a subsidy, the government taxes the general public and gives the money to a chosen industry to make it more profitable. In the case of a tariff, the government applies taxes to foreign products to make them more expensive, allowing the domestic suppliers to charge more for their products. Both of these actions have a direct impact on the market.Government support of an industry is a powerful incentive for banks and other financial institutions to give those industries favorable terms. This preferential treatment from the government and financing means more capital and resources will be spent in that industry, even if the only comparative advantage it has is government support. This resource drain affects other, more globally competitive industries that now have to work harder to gain access to capital. This effect can be more pronounced when the government acts as the main client for certain industries, leading to well-known examples of over-charging contractors and chronically delayed projects.
Regulations and Corporate Tax:
The business world rarely complains about bailouts to certain industries, perhaps because of the knowledge that their industry may one day need help as well. But Wall Street does object when it comes to regulations and taxes. That’s because while subsidies and tariffs can give an industry a comparative advantage, regulations and taxes can negatively impact profits.High taxes on corporate profits have a different effect in that they may discourage companies from coming into the country.
Just as states with low taxes can lure away companies from their neighbors, countries that tax less will tend to attract any mobile corporations. Worse yet, the companies that can’t move end up paying the higher tax and are at a competitive disadvantage in business as well as for attracting investor capital.
Governments play a substantial role in the financial world. Regulations, subsidies, and taxes can have an immediate, and long-lasting impact on companies and whole industries. For this reason, Fisher, Price, and some other famous investors considered legislative risk as a notable factor when evaluating stocks. A great investment can turn out to be not that great if it’s at risk of seeing its competitive advantage and profits dwindle as a result of certain government actions.
To understand the challenges of Industrial Revolution 4.0 (IR 4.0), let us take a step back to understand the origins of the Industrial Revolution. The Industrial Revolution mainly involved the manufacturing / production sector. It began in 1784 with the 1st IR which saw the mechanization of the sector to use steam powered machineries. The second 2nd IR saw the electrification of the assembly line. The 3rd IR saw the emerging of automation such as robots in the manufacturing sector. Currently we are in the 4th Industrial Revolution which sees the digitization of not only the manufacturing sector but the entire economy.
Digitization or often referred to digital transformation involves the usage of technologies in every aspect of the business. These technologies offer us opportunities to improve efficiency, effectiveness, quality and reduce errors. Technologies supporting the IR 4.0 include cloud technology, Internet of Things (IoT), blockchain and cybersecurity. These technologies come together to provide an end-to-end optimization of the entire chain of activities in our economy.
While many have the impression that the adoption of technology is crucial in successfully embracing the IR 4.0, many failed to understand that the large part of the digital transformation is changing the way we work or our work culture. Digital transformation also involves the adoption of the new ways of working as well. The culture of working the Agile way is essential for us to remain nimble and fast to adapt to the ever-changing requirements in our ecosystem. As the saying goes, the only constant in life is change, we now live in a world that is changing rapidly. We need to think and work in an Agile manner for us to cater to the ever-changing requirement. Working in an Agile manner also includes a continual feedback mechanism into our work to ensure that we are checking on the requirements as we progress along.
With the IR 4.0 we are experiencing now, there has never been a point inf our lives where technology has become so ubiquitous and affordable to the masses. The mindset that technologies will drive the adoption and sales of our products and services is no longer relevant. Due to the available of these technologies what really matters is the customer experiences / user experience when customer use our products and services. We need to focus on how the customer feels when they use our products and services. That has become fundamental in differentiating from the competition. Equipping with skills such as Design Thinking will have to analyze customer experience issues and really focus on where it matters.
In embracing the IR 4.0 economy with need to equip ourselves with not only the latest technologies such as cloud, IoT and blockchain but also the ways of working and thinking that will propel us to be successful in the digital transformation of our economy.
Hi Leonard,
Do you think Industry 4.0 can help organizations to improve the costs of production? The organization that can invest and adapt to change will benefit from the competitive advantage. For example, using AI and BIG data to manage the inventory allows the supply chain planner to plan the demand and supply more efficiently. Thus, reduce the cost and maximizing the profit.
The challenge is whether the end to end processes have been fully upgraded to the latest technology so that each value chain can fully utilize the technology. Otherwise, we may see slack or inefficient outcomes.
I think to move to industry 4.0, planning and training are very important. Upskill the current employees to the next level and introduce the new tools and systems to learn. Furthermore, moving and implementing the industry 4.0 by stages so that everyone in the organization can adapt to change. However, the Covid-19, supply chain disruption, and labour issues have accelerated industry 4.0.
TOH
- This reply was modified 2 years ago by Lik Wai Toh.
Yes a big push for organizations to adopt IR 4.0 would be the cost savings that they can enjoy from the utilization of technology and from digital transformation.
- This reply was modified 2 years ago by
IoT and Blockchain technology definitely became the “next big thing” in the world market, while we can see it is still requirement more improvement in our market to achieve the transformation in our country.
True, agree with you. Many sectors have started small-scale IoT efforts.
IR 4.0 or Industry 4.0 aims to boost productivity and scalability of traditional industrial and manufacturing process by combining IoT to create interconnected systems that analyze, communicate and use relevant information to drive actions intelligently [1]. Everyone or every business reacts to change differently, but either way, if you do not embrace the upcoming change; sooner or later your business might be obsolete.
But I have to say with the limited readings that I’ve done – I am impressed by how prepared and eager Malaysia government is towards Industry 4.0. If you open MITI website [2], you’ll see the ministry has launched Industry4WRD: National Policy on October 2018. And going through the info-graphics, you will see how comprehensive the program is. This program will help eligible organizations with readiness assessment, guidance, financial aids and implementations. If I own a business, I would definitely take advantage of this government program to ensure that my business is Industry 4.0 ready and most importantly, by being in this program I will get the best advice and help with some of the challenges that comes with it. Some of those challenges are [1]:
- Lack of confidence to implement a modern digitization plan
- Lack of in-house talent and skillset to take Industry 4.0 deployment and development initiatives
- Limited knowledge on the latest technologies
- Unclear on data security and legal issues
- IT-related vulnerabilities
Of course organization will face more challenges then what’s listed above but I am sure Industry4WRD program will inform you on the challenges and prepare you for it. For employees in these organizations – be ready. A lot of standard works will be automated which will replace the need for human workers. It is the organization’s responsibility to take proactive actions in assessing each workers’ skillset and see whether or not it is align with Industry 4.0. If it is not, upskill trainings need to be made available to every employees. But to employees, I’d say this – do not resist; the change is inevitable, just like any organization that refuse to change and became obsolete; we can be obsolete too. So employees have to embrace the change and participate. If all levels in an organization focused towards Industry 4.0, in every organizations in Malaysia; and we attack this new wave fast and head strong; just imagine where we’d be in 10 years from now. Malaysia could be the Industry 4.0 role model for all developing countries. How cool is that?
Just my humble opinion,
Ida F Shah
Reference:
Technology is transforming society. Not only do we use technology more and more in our daily life. Our workplaces are likewise evolving digitally, with more and more tasks being automated. This change is known as the fourth Industrial Revolution or Industry 4.0. Production can be efficient according to customer needs with the collection and analysis of real time data and Artificial Intelligence. With increased automation, our time will be freed up for concentrating on more complex tasks. We will need a workforce who are capable of building, programming and developing these technologies. But also making sure we are applying them to our lives in an ethical way.
There are coarse skills that we, human, can offer that technology cannot replace. Human touch is important to ensuring effective communication, problem solving and supporting change management in this digital environment. There will also be a greater need for joint working across disciplines, creating new innovations. The future job market will be looking for graduates with open mind to explore the unknown future possibilities. We will all need to develop our skills in order to embrace, adapt, to this very changing environment.
Talking about effective communication skills, these will be slowly automated like what seen autobots seen in helpdesk feature, or in facebook messenger. We, human will need to learn from these instead of improve our communication skills indirectly.
Yes our youngster need to be equipped with almost everything. Thus, you can see they need to learn all different kinds of technologies and skills , for them to have some taste of the working world. For example, my kids joined a program called AI. It is a platform where companies will provide learning skills to children thru small project. I recall one of the project, which is to make ice cream, packaging and sell them. In return, the company will provide you certificate and provide modal to setup your company if you are the winner.
- This reply was modified 1 year, 11 months ago by Yee Mei, Rachel Chan.
Good sharing, I didn’t know that there are such programs.
The AI is smart enough to learn from the algorithms, but we humans should not limit our potential, and we should always try to improve ourselves. 🙂
- This reply was modified 1 year, 11 months ago by
Industrial Revolution 4.0 (IR 4.0) is a big shift on how industrial operates itself. With the advancement of Internet, networking, digitization of data storage and processing, it has become easier for a large amount of data to be stored without the need of physical storage by individual/organization, where a third party storage service provider, either public or private provide this storage services for these data.
As the data itself is an important source of information, which can be reused back to organization’s process in order to improve its performance and output. As this process can be programmed to run automatically, this whole process has become self-taught, or in more popular terms, artificially intelligence.
Automation not only focus on car manufacturing plants running with TIG welding robots dancing in tandem while assembling cars up parts by parts themselves, it is also occurs in cleric jobs and on the pc jobs.
Such examples are a ticket being created automatically when we sent an email to internet service provider (ISP), asking about service outage in our residential area. As the ticket being processed, there’s automatic email sent to us mentioning that our email was well received, and in their queue for support.
On ISP side, as the ticket generated, the senders information, home address, contact number etc. are automatically updated in the ticketing system, for faster assistance by service agents.Service agents themselves may not have full knowledge of the whole network design/requirement/knowledge, only provide support and assistance by a set of information that can be found in their knowledge bank, and their roles does not require in depth skill on network.
This jobs, what we can see becoming more and more currently, from customer support for banks, telcos, credit cards, satellite tv providers, all are using the same format, a Generalist.
There may come a time where the generalists role will become redundant and ended, as earlier mentioned artificial intelligence has coupe up with human’s progress, where it can perform what current Service Agents are capable off. You can see this happening right in front of your eyes from the chat support in some of the brands websites (albeit in its early stages).
With IR 4.0 accelerating business and economy, although the monetary benefit will come to the businesses, the actual job available for workers will shrink, which means that not only the cake become smaller, only a few will be able to enjoy it.
Supporting Link : The Rise of the Machines – Why Automation is Different this Time
The current industrial revolution 4.0 in Malaysia’s context, refers to the current trends of process automation and data exchange using advanced manufacturing technologies, changing from mass-scale production to use of robotics (smart technologies throughout the production lines and supply chains) for enhance efficiency. Which also mean work and processes would already be automated and replaced by machines, and the need for human labor would gradually decrease.
Moreover, compared to other developed countries, we are experiencing shortage of skills, knowledge, and talent, in the effort of adapting to the new wave. If the workers’ skills are not being upgraded, they will face serious unemployment issue in the near future. The group of workers with the highest risk of being replaced are those unskilled worker doing high volume routine jobs like data management, storage, sales transaction, etc., that could be easily automated. On the other hand, highly-skilled positions are less threatened by automation, such as tasks that cannot be transformed into coding and algorithms, and tasks that requires critical thinking and social intelligence. E.g. Musicians, doctors, etc. The gap between high and low skilled workers are gradually widen due to lack of proper training and education to upgrade skills. Those without the relevant skills moving forward will be left behind with low salary jobs or even unemployment, whereas the highly skilled ones will be highly advantaged in the labor market, some even with extra bonuses such as language allowance or skill allowance. These would eventually bring the people into deeper issues of income inequality and even poverty.
Another visible challenge that is interdependent to the above would be the lack of awareness and proper understanding of how important getting on the train of 4IR is, therefore the effort and chances of exploring the opportunities related to the transformation is reduced. Without the investments and stakeholders bringing in “smart” technologies and job opportunities, it is difficult for Malaysia to advance along with the new wave.
To prepare ourselves in adapting to the new wave, the government needs to first raise awareness to the local businesses, and at the same time work on relevant investments into the country, to help with job creation. Then, both government and organizations need to invest in education and training for the people, giving knowledge and exposure towards new technologies and digitization, through job-related re-skilling and up-skilling programs. The idea of future jobs and education needs to be spread nationwide, so that people can work on adapting.
One example I’ve come by in my company is, now we are collaborating with CyberSecurity Malaysia, to hire resources (mainly fresh graduates) that took cybersecurity courses sponsored by the government into the job opportunities we have. So here we have both training program, job opportunities, and eventually up-skilling training. Soon enough the batch of resources would grow to be the competitive bunch in the labor market.
Good insight there Jessy. As we venture into IR 4.0, demand for cybersecurity related jobs will increase too. This is an ideal time for universities to grab opportunity by offering relevant cybersecurity courses to meet the job market demand.
A fourth industrial revolution is now underway. Across many industries, the Fourth Industrial Revolution is bringing technologies that blur the borders between the physical, digital, and biological worlds. Artificial intelligence (AI), nanotechnology, quantum computing, synthetic biology, and robotics will all vastly outperform any digital advances made in the previous 60 years, allowing humans to experience worlds previously unimaginable. Such significant facts will disrupt and modify every industry’s business strategy.
There are four important effect areas to consider:1. Technological: For most global industries will require companies to have a solid understanding of the way these technologies impact their industries and how they can ensure organizational agility to adapt to these changes. Increased global competitiveness will accelerate cost pressure.
2. Economic: There are four factors of production that fuel economic growth: land, labor, capital, and enterprise. Today, the world is attaining only 52% of its entrepreneurial capacity, and this number is declining year over year. Large, established enterprises have a significant advantage in the future of work than smaller companies due to their ability to adapt to technological changes. However, this is not a recipe for long-term, sustainable economic success. The world must focus on supporting independent entrepreneurs, as small and midsize businesses are the fuel of most economies of the world today.
3. Social: Technology has enabled people to work anytime, anywhere.
4. Education and training: Part-and-parcel with economic development is one’s ability to access training for employment. Naturally, tectonic shifts are happening in the education space. Students are less interested in stale curriculums and keener to take shorter, skills-based training that is more relevant to today’s workplace. Employers are focusing on the skills required to achieve their business objectives and remain competitive and agile, which requires them to ensure their employees the necessary training to fill these skills gaps. Workers, naturally, need to acquire skills “on demand” to adapt to their changing roles and responsibilities.
Despite the issues we face, we have a once-in-a-lifetime opportunity to use an abundance attitude to solve them. The Fourth Industrial Revolution will allow us to learn and teach new talents, develop new occupations that require unique skill combinations that don’t exist today, discover talent we didn’t know about, and grow our businesses and produce a new generation of highly skilled workers in a wider range of fields.
Let us approach this next transition with an abundance mindset, so that we can create a successful future of work for all.Source : How The Fourth Industrial Revolution Is Impacting The Future of Work (forbes.com)
Industry 4.0 solutions will have a substantial influence on all aspects of organisation. It’s more than simply an IT overhaul, businesses must get leadership buy-in and participation.
Agree with Yaamini, IR 4.0 has impact on Technological, Economic, Social and Education. I believe the revolution will bring more good impact to human being and society, and we need to adapt to the changes.😇
The Industrial Revolution 4.0 is a technological transformation which may bring changes to our lifestyle and industrial development. It consists of Industrial internet , big Data analytics, advanced robotics, artificial intelligence and/or machine learning, cloud computing and addictive manufacturing and many others. The changes may lead to high productivity and quality products, better working environment and easy access to consumers. However, there are challenges that we may have to face such as inequality and it may give impact on workforce. There will be a technical gap in skills .Only those companies/businesses/ workers that can adopt with the new technologies will survive. Those without proper technical knowledge on the fast developing technology will be left behind. The major transformation will be very difficult for people from rural and those from agricultural background to adapt to the fast phase developing industry. Most of industries will face the negative impact particularly in manufacturing sectors, those low income labors will be replaced with machineries. Next will be data security. There are sensitivity issues on the security of data as digitalized industry requires companies to share their privacy and management data to a third –party which may lead to fraud cases as well. Learning and educating ourselves with the latest technology and digitalized industrial skills will be helpful to adapt to the changes.
Ref: https://iap.unido.org/articles/what-fourth-industrial-revolution
Technology has been related to labour for a way long and it has been continuously evolving from industrial revolution 1.0 till the current industrial revolution 4.0 (IR 4.0). All the technology development are introduced to enhance labour productivity, which results in economic growth and new job creation at the macro level. This revolution did not only create new job opportunities but also destroyed other job sectors.
IR 4.0 effects can be witnessed with the businesses, manufacturing and other industries are going through digital transformation. For example, the internet of things (IoT) is making most of the devices connected with the internet, where many manually monitored, worked and other processes are being done automatically with just data input and can be carried out any part of the world with the help of big data analytics and cloud storage capability. These kinds of technologies help businesses to for more predictive approaches with data, help them to make decision-making processes, new business models etc. In the manufacturing sector, these kinds of technologies will transform them into smart manufacturing where they are able to reduce wastage, manage the risk better, organize supply chain, inventory and many more. All said scope of work requires many works force to carry out the work traditionally but with the help of technologies, the number of workforces can be reduced, yet the work can be done much faster with fewer errors or risks.
All these technological changes do not only help but also brings challenges. Challenges in government policy, generation behaviour etc will face challenges but the bigger impact is the supply and demand of skilled workers to handle the technology.
We have to break this into a few sections of labours such as hard labours/ground labours, technical, middle management, top management / white collars.
Hard labours/ground labours are not yet to be impacted into IR4.0. In fact, it may reduce the effort and increase productivity at the ground level. The real challenge starts above this level/section. The IR 4.0 requires certain skills on top of your professional skills. The demand for these IR 4.0 compatible skills is highly demanding currently but there is a lack of supply in such labour. Therefore, the gap is still huge to fill.
Like I said above, IR 4.0 shall create new job scope, industries etc and shall destroy certain job scope, industries etc.
In order to overcome this gap and revive the destroyed or destructing industries or job scopes by giving proper training for these labours to fill the gap on the supply-demand. Training and development are crucial in overcoming the challenges. The continuous development program is also crucial for labours to update themselves to be competitive in the labour market.
Having skill, competent and contently labour, not only will help the particular industry but also help the economy of the country. Evolving ourselves in every revolution is a must to stay relevant.
References
Kergroach, S. (2017). Industry 4.0: New Challenges and Opportunities for the Labour Market. Foresight and STI Governance, 11(4), 6–8. https://doi.org/10.17323/2500-2597.2017.4.6.8
Szabó-Szentgróti, G., Végvári, B., & Varga, J. (2021). Impact of Industry 4.0 and Digitization on Labor Market for 2030-Verification of Keynes’ Prediction. Sustainability, 13(14), 7703. https://doi.org/10.3390/su13147703
Yes, there are efforts to replace hard labor with this kind of technology but the efficiency of the end product is still being questioned and not being endorsed by any relevant authorities. However, I have to agree with you that this will take over some part of hard labor works but will take slightly longer time than other industries.
Noted and thanks a lot for the insight Hareeraja. Gained new knowledge from your sharing.
Industry 4.0 is here, and it’s already influencing how we live and work in the future. Although the industry is always changing, our technology and attitudes are continually evolving. Manufacturing, smart factories, and smarter work are all part of Industry 4.0. We must adopt these technologies within our organizations, whether on a small or large scale, to get to a smarter, more digital sector.
I believe the challenge may differ among countries. As for the first-world countries, they might have fewer challenges than a third-world or developing country like Malaysia. So yes, we do have a challenge especially to our very own SME (small and medium enterprise).
Some challenges are the lack of skills among labor, knowledge barrier on the technology/system in the local industry. No budget or funds are also a challenge for a business owner to move forward especially the SME. Knowledge to go into automation and beyond require high cost for the training, upskill, and implementation of the new technology.
To overcome the challenge, we have seen that the government addresses these issues by providing incentives and funding, as well as coaching, mentoring, and support services to the SME.
I agree that challenge may differ among countries. A few developing nations are showing stronger capabilities to use, adopt and adapt frontier technologies than their per capita GDPs would suggest. Frontier technologies are those that take advantage of digitalization and connectivity. They include artificial intelligence (AI), the internet of things, big data, blockchain, 5G, 3D printing, robotics, drones, gene editing, nanotechnology and solar photovoltaic.
Industry 4.0 refers to a new phase in the Industrial Revolution that focuses heavily on interconnectivity, automation, machine learning, and real-time data. Industry 4.0, also sometimes referred to as IIoT or smart manufacturing, marries physical production and operations with smart digital technology, machine learning, and big data to create a more holistic and better connected ecosystem for companies that focus on manufacturing and supply chain management. While every company and organization operating today is different, they all face a common challenge—the need for connectedness and access to real-time insights across processes, partners, products, and people.
The farming industry is a good example of how Industry 4.0 can be beneficial. According to the UN Food and Agriculture Organization, the world would need to produce 70% more food in 2050. Shrinking agricultural lands and depletion of finite natural resource has got the farming industry evolving.
As a result of the declining agricultural workforce, adoption of internet connectivity solutions in farming practices has been triggered, to reduce the need for manual labour.
Internet of things solutions are focused on helping farmers close the supply demand gap, by ensuring high yields, profitability, and protection of the environment. The approach of using IoT technology to ensure optimum application of resources to achieve high crop yields and reduce operational costs is called precision agriculture. IoT in agriculture technologies comprise specialized equipment, wireless connectivity, software and IT services.
As a result of the modernization of the farming industry. New generation of workers will needed and old farmers will require training.Hoping that one day, soon, the technology used in agriculture and farming industry would be able to stabilize the supply of the goods so that price hike due to scarcity will not affect our every lives so much~
As we discuss the labor market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
There were three industrial revolutions before this to begin with, all of them had challenges and with time lapsing among them – that determines the strength and foundation of a country s policy and vision/objective. However the first three revolution compared to the current one probably developed in linear pace compared to the current Fourth revolution will evolve in exponentially.
There are many challenges predicted by economists that will be faced by us, taking one as example will be the disruption in labor markers – with the introduction of automation there will a gap between capital gain and returns to labor, with that said history suggests that the outcome will be more likely a combination between labor and machine in order to ensure optimization of production. We are certain in future everyone has to be basic qualified to under the technology to be expose to the current working scenario.
Malaysian government after sharing the National IR4.0 policy ,cited some potential risks and challenges involving in getting the people up-to-date with the current revolution, however government are putting in many changes in order to optimize the usages of evolution.
Taking the transportation and logistics sector, which were equipped with workforce with 4IR skill sets, enhanced the digitalized logistics systems by adopting 4IR technologies. Other efforts by them were to amplify mobility through development and adoption of centralized and open transport-related database, including traffic management.
All of these were displayed in our courier s efficient in tracking and getting parcels and etc. delivered within given time frame even in Covid-19 pandemic era. In other word, we should get ourselves updated with the current change by attending trainings and ensuring we are upskilled.
Reference
https://www.epu.gov.my/sites/default/files/2021-07/National-4IR-Policy.pdf–Ariva
IR 4.0 is an extension of the 3rd revolution which used electronics and information technology to automate production. This 4th revolution is no longer can be seen as a prolonged 3rd revolution but it is a new wave that is known as a digital revolution, it is a fusion of technologies and it is moving at pace unlike any other revolution which is not on a linear pace but rather exponentially and it has disrupted every industry globally thus bringing about unprecedented change to how production, management and governance work. The opportunity for thousands to connect globally and to have access to processing power, storage capacity, and access to knowledge, are unlimited and nd these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence and robotics. With such advancement there are bound to be some challenges, one such challenge is the shift in the labour market, where talent will be highly sought, hence the job market will be segregated to low skill / low pay and high skill / high pay which could displace the middle class laborer and they will also face a stagnated income, in addition business would need to cope with the technological advancement by investing more in the same, even if business capacity is small to medium, consumers would expect the same technological advancement as provided by larger businesses. Thus, we should be prepared to face these challenges by upskilling ourselves to cater to the new advancement, being complacent is no longer an option. Companies would need to include technological advancement costs as one of the major cost in their business plan to be able to compete with the big players in their respective industries.
Just like previous industry revolutions, industry revolution 4.0 will free up our time, energy and effort and allow us to accomplish things that are more important and crucial.
New technology makes it easier for organization to automate routine tasks such as monitoring factories/machines’ performance, clerical filing processing, customer service etc. This translates into increased productivity, prevent downtime, equipment effectiveness optimization and maintenance. By embracing digital technology, organization will be able to lower their operating costs, improve product quality, become more innovative and gain competitive advantage.
Impact of Industry Revolution 4.0 on workforce.
Emerging technologies such as the Big Data and Analytics, Internet of Things (IoT), Automation and Robotics, have been incorporated into company’s daily operations, from product manufacturing to serving clients.
According to a recent study by McKinsey Global Institute, AI and automation will affect around one-fifth of the global workforce, with the greatest influence in industrialized countries such as the United Kingdom, Germany, and the United States. By 2022, 50% employers expect automation to reduce their full-time workforce, and by 2030, robots will have replaced 800 million humans around the world. (Change Recruitment, n.d.)
How should we prepare ourselves to be adaptable to the new wave?
As what founder and executive chairman of the World Economic Forum Schwab said, “In the new world, it is not the big fish which eats the small fish, it’s the fast fish which eats the slow fish” (2020).
People tend to resist changes but often change brings in new opportunities, enable us to learn new thing, new skills, to optimize existing process and to revamp how we work.
New technologies will make old job obsolete, so people must equip themselves with the skills needed to grab the opportunity that the technology offers. Technology advancement will and already creating more or new jobs like social media marketers, application developers, cybersecurity analysts, and data scientists. For instance, when everything is connected to everything else, serious privacy and security issue going to arise. Organizations will be facing more cyber security attacks or data sabotage and there will be surge for cyber security related jobs to protect, audit and safeguard organization’s data.
Moreover, Covid-19 pandemic accelerated digital transformation and technology to fulfill the employees’ needs. For example in Malaysia, 69% of survey respondent prefer to work from home. There is an obvious interest on employee’s expectation to adopt hybrid working environment or remote work options. As a result, it is vital for leaders to begin rethinking the future of work, which will emphasize necessity for new work policies, digital investments, and modified office designs to support hybrid work arrangements and increased productivity. (Aman, 2021)
However, there are jobs that are less likely to be impacted by IR 4.0 which requires cognitive and social skills. Roles that require complex reasoning, manipulation, artistic talents and sports skills such as teacher, healthcare worker, singers, football players etc. can be rest assured they will not be impacted in near future.
References:
Aman, A. S. (2021, August 16). Most Malaysians prefer WFH, highest among regional countries: Randstad survey. NST Online. https://www.nst.com.my/business/2021/08/718281/most-malaysians-prefer-wfh-highest-among-regional-countries-randstad-survey
Change Recruitment. (n.d.). How Will the Fourth Industrial Revolution Impact the Future of Work? https://www.changerecruitmentgroup.com/knowledge-centre/how-will-the-fourth-industrial-revolution-impact-the-future-of-work
Schwab, K. (2020, February 5). Are you ready for the technological revolution? World Economic Forum. https://www.weforum.org/agenda/2015/02/are-you-ready-for-the-technological-revolution/
- This reply was modified 2 years ago by Pavala Malar Nadan A/L Mariappan ..
- This reply was modified 2 years ago by
In my opinion, industrial revolution 4.0 is more talking about digitalisation that continuation of industrial revolution 3.0 and this bring a huge improvement to manufacturing industries that once industrial struggle to satisfy the growing consumer demand.With the improved technology and right skills, the industries now capable to meet and even exceed consumer exceptions with advanced automation in implemented in factories.
I believe one of the biggest challenge with this revolution will be the shortage of skills that can adopt this technology like AI, IoT, robotics, cybersecurity, and many others[1]. On other hand, there will be some reduction in labour force due to this smart automation in factory[2].
Employees should keep constantly up-skill their knowledge that align with technology growth. This can helps them to sustain in this digital revolution world.
As you mentioned the shortage of people with these skills, it is time for you to upskills yourself in these technologies and not this MBA course. 🙂
You will have more chance for higher wages in your future.
True, workforce demands are always changing. Businesses can only effectively integrate new technologies and sustain operations with the correct people.
Yes. We have to keep upskills ourselves based on the demand in the market to stay in competitive edge.
Industrial revolution 4.0 is all about enabling the digitalization market. Both Digital technology and big data are very important for the transformation. Back to our labor market in Malaysia, it seem that we are still lacking of the necessary skillset and knowledge to adapt the changes. Government required to move their direction by implementing new policies such as business innovation programs, providing infrastructures with new technology. However, due to the pandemic, the economic market has been impacted which may caused the delay for the transformation.
Good point on Big Data. Over the years organizations have collected vast amounts of data. Big Data will enable organizations to unlock the value from all the collected data to find patterns and trends that can be used to continually improve the organization. Take for example a simple retail store, over a period of 1 year, the cash register machine would have collected a large of volume of data on every transaction taking place in the store. Now apart for accounting purposes, this data when processed with the right tools and methods, can yield patterns in the terms of popular products, product complements, etc. This can help the store to organize targeted promotions and to stock-up on popular items.
- This reply was modified 2 years ago by Leonard Robinson Chin.
Big Data is insane.. well…. in a positive way 🙂
- This reply was modified 2 years ago by
Industry 4.0 refers to the fourth industrial revolution, although it is concerned with areas that are not usually classified as industry applications in their own right, such as smart cities.
The concept of IR 4.0 is to digitize industrial processes to accomplish an adaptive yet extensive production and service network. Like manufacturing industry, construction industry performance can be enhanced through IR 4.0. The implementation of IR 4.0 renders an area where every mechanized automation will be interconnected through technological advancements to operate and share information without the need of humans which will improve the efficiency. The industry develops a concept called smart factory, where cloud computing and cognitive computing stores data and make decisions. The IoT however, comes functional with cyber-physical systems, allows humans to monitor the processes in real time without physical presence and proven the capabilities of vision of IR 4.0 manifest.
Chalenges:
Political- Companies within the construction support industry are mostly made up of SMEs, which restricts their ability to invest in technologies which provides with unclear benefits. The construction companies would have to rely on governing bodies and authorities to provide support towards these implementations through funding programs and also collaborative partnership.
Economical- The implementation of innovative technology is costly. Further worsened by the uncertainty of a return of investment. Other hidden costs such as training and equipment maintenance would also add up to the list making it harder to implement.
Social- The adoption would have a widespread effect throughout the construction processes involving multiple parties.
Technological- Standards and processes would have to be redefined and enhanced to suit the construction environment. Equipment utilized elsewhere would have to be robust and the need for enhanced skills to operate these innovative technologies would increase the challenges in implementing it to normal daily practices.
Environmental- Changes within organizational processes (horizontal, vertical and end-to-end) would somehow distort common execution processes. Common practices would now require to be redesigned to successfully adapt to the new changes and enhance growth.
Legal- Unclear separation of responsibilities withheld by each stakeholders and legal concerns through shortcomings adds up to the complexity.
Security- Information and data exchange would be prone to threats and placed under risky situations raising multiple IT security concerns relating to data privacy and data protection
How to prepare:
Understand SDGs- No Poverty, Zero Hunger, Good Health and Well-being, Quality Education, Gender Equality, Clean Water and Sanitation, Affordable and Clean Energy, Decent Work and Economic Growth, industry, Innovation and Infrastructure, Reducing Inequality, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life Below Water, Life On Land, Peace, Justice, and Strong Institutions, Partnerships for the Goals.
Understand global warming- understand how your organisation contributes to global warming and how your organisation can limit its negative footprint. It’s no surprise that global warming features strongly in the SDGs.
Understand tech-A variety of short digital technology courses on cybersecurity, machine learning, artificial intelligence, data science, and coding are available online. Start with an introductory course and work your way up from there.
Understand gender issues- have to be sensitive to gender issues in the workplace, and particularly the challenges faced by women. We’d be hard-pressed to find an organisation that has no women in it. Women face harassment in the workplace, often do not receive the same remuneration as men doing similar work, are not proportionately represented in senior management and often don’t get the learning and work opportunities that are granted to men.
Understand stakeholder engagement- Stakeholder engagement helps organisations to proactively consider the needs and desires of anyone who has a stake in the organisation, which can foster connections, trust, confidence, and buy-in for your organisation’s key initiatives. A stakeholder is any person or organisation who is affected by or who can affect the operations of an organisation.
Clarify your values and your purpose-A sense of purpose drives you toward a satisfying future. A sense of purpose can motivate you and change the way you act, feel and think. It helps you to set priorities, to go after the things that matter. And it has to make sense for you and where you are in your life.
Assess your management style- Prof. MS Rao, a leadership expert, has created the concept of Soft Leadership for these times. Soft leaders adopt tools such as influence, persuasion, negotiation, motivation, recognition, appreciation, and collaboration for the collective good. This style calls upon leaders to make a difference in the lives of others. And this is very much in keeping with the worldview of 5IR. Soft leadership is not self-centred but is centred on others. Soft leadership emphasises a concern for people, i.e., on employees who are the precious human resources. Hence, soft leadership gives a soft touch to people who in turn give a real touch to customers through dedication and discipline.
Hi Darma,
Good sharing. Can you further elaborate what is the relationship between gender issue and IR 4.0 in preparation towards IR 4.0 in Malaysia.
As we are aware IR 4.0 describes the exponential changes to the way we live, work, and relate to one another due to the adoption of cyber-physical systems and most works will be done by robots. The Fourth Industrial Revolution (IR 4.0) almost never fails to incite contrasting predictions about the future as robots look poised to replace workers on the factory floor.
- This reply was modified 1 year, 12 months ago by Bachevinder Singh A/L Param Singh @ Bob.
What I feel is companies are losing outstanding women in their thirties since this is the time of their lives when many have children and must make the difficult option of “kids vs career.” in my opinion, the Fourth Industrial Revolution could work in favour of these women in the short term.
Hi Pavithra don’t you think that now currently IR 4.0 many organizations has implementing Work From Home concept. So by implementing this, I don’t think gender issue will impact in the preparation of IR 4.0.
yes, true, definitely will be a great revolution 🙂
- This reply was modified 1 year, 12 months ago by
IR 4.0 from my quick reading is about digital transformation and has 9 pillars -the internet of things (IoT), augmented reality, simulation, additive manufacturing, system integration, cloud computing, autonomous systems, cybersecurity, and big data analytics.
I believe big manufacturing companies will benefit most in this IR4.0 because with digital transformation, people communicate more, everything must be connected, fast and automated, thus requirement on networking, connectivity, smart devices, electric cars , robotic system etc will be high.
With this transformation also, I trust a lot of changes will be apparent and become normal in future such as education system; no longer in school and execution of office task at home especially now with Covid-19 pandemic, all these activities have been done for almost 2 years at home. Healthcare will be interesting as well; we might be seeing development of healthcare technology and numerous findings that might improve our health. Perhaps cancer can be cured without going through number of painful chemo. Green technology is another initiative that I am interested to see especially on the electric cars where we do not have to depend on petrol and road safety can be improved as well.
However, with technology, sophisticated crimes could bloom too. Cyber security attacks, computer viruses and personal data breach might also become rampant and on a bigger scale. To combat all these, we need to prepare and develop our own skill or talent. We need to train more people on IT- programmers, digital forensic, analyst etc.
Based on IR4 and its 9 pillars, in my opinion, job demand will be more on IT related skills, technologist to operate the robotics/ machines, doctors, pharmacists, sales engineers, designers and educators like teachers and lecturers.
My take on IR 4.0 is, now is the time to buy more stocks on technology, electric cars, semiconductors, social media like FB, software giants’ companies and healthcare.
The Fourth Industrial Revolution (IR 4.0) describes the exponential changes to the way we live, work, and relate to one another due to the adoption of cyber-physical systems, the Internet of Things, and the Internet of Systems. As we implement smart technologies in our factories and workplaces, connected machines will interact, visualize the entire production chain, and make decisions autonomously. This revolution is expected to impact all disciplines, industries, and economies. While in some ways it’s an extension of the computerization of the 3rd Industrial Revolution (Digital Revolution), due to the velocity, scope and systems impact of the changes of the fourth revolution, it is being considered a distinct era. The Fourth Industrial Revolution is disrupting almost every industry in every country and creating massive change in a non-linear way at unprecedented speed especially during this COVID-19 pandemic. IR 4.0 is a call for a dynamic transformation of how all aspects of business and production are done. A new wave of global technology will change global production. Internationalization, in all aspects of business and industry, will be the norm.
The challenges that the world facing currently are lacks a consistent, positive, and common narrative that outlines the opportunities and challenges of the fourth industrial revolution, a narrative that is essential if we are to empower a diverse set of individuals and communities and avoid a popular backlash against the fundamental changes underway.
Industry 4.0 will require the world to produce a new kind of worker—a knowledge worker who can adopt to changes. Tomorrow’s industry leaders and managers must possess new skill sets to adapt, to manage, and to take advantage of Industry 4.0. They must be critical thinkers, problem solvers, innovators, communicators, and provide value driven leadership. They must be able to see beyond the technology at play to the implications for society for the use of that technology. These traits define the knowledge worker. They must know the technology but be able to meet and solve all aspects of the challenges engendered by this technology.
Reference:
Gray, A. (2016). The 10 skills you need to thrive in the Fourth Industrial Revolution. Retrieved from https://www.weforum.org/agenda/2016/01/the-10-skills-you-need-to-thrive-in-the-fourth-industrial-revolution/
Industrial revolution 4.0 will surely have impact on labor market. We do not have to import many foreign workers to fill in the labor gaps like what we are seeing in Malaysia. Some jobs disappear such as cashiers, waiter, travel agents and many more. While some jobs are going off but there are new jobs created as well. These new jobs such as data scientist, big data experts and technical employees require more high skilled to adapt to the technologies and tools, called data literacy skills. More and more companies need to move or adapt into current industrial revolution 4.0 because thru optimize all aspects of manufacturing processes and supply chain, they can offer wide range of opportunities for a more human life and from economic point of view, digitalization will become an element of competition by reducing marginal costs.
Challenges to move to Industrial revolution 4.0 is the knowledge and skill require. Education system need to adapt to the changes to train our young generations with the necessary skills such as ICT, coding, Stem, Artificial intelligence courses. Not only on young generation, companies also need to venture into related technologies, tools and the training improvement program for its staff. Thus, company need to develop and implement digital transformation strategy in order to stay ahead and maintain its competitiveness in the market.
The extend of unemployment is determined by the digitalization strategy of each country and the speed of its introduction, also the readiness of its education system in a country to retrain vulnerable groups in the labor market.
References
Robinson, D (2018). How businesses can prepare for the Fourth Industrial Revolution. https://www.ns-businesshub.com/science/how-businesses-can-prepare-for-the-fourth-industrial-revolution/
Szabo-Szentgroti, G & Vegvari, B & Varga, Jozsef (2021). Impact of Industry 4.0 and Digitization on Labor Market for 2030-Verification of Keynes’ Prediction. https://www.mdpi.com/2071-1050/13/14/7703/pdf
IR4.0 is still only a buzzword for a lot of people in Malaysia. To some people it is even a completely new term and for some, it is heard somewhere. As a result, a very little amount of people really knows about the industrial revolution 4.0. This case is even seen for the employers, industrial managements and also for the investors. IR4.0 is a completely new term for the normal people. The marketing around IR4.0, or the discussion sessions regarding IR4.0 is very limited. As a result, people do not get the chance to know fully about it. General people need to know about IR 4.0 because they are the ones who are going to be benefited by the implementation of this. Investors are crucial in this case as they are the people who are closely related to the implementation process of IR 4.0.
One of the main theme of IR4.0 is that there is going to be a huge usage of new technologies. This obviously would need hefty amount of investments. However, investments into new sectors contain risk of loss. Therefore, investors would not be so willing to come forward. An example can be given from an article of digitalnewasia.com. Industry 4.0 consultant and training provider Knowledge.com Corporation Sdn Bhd chief executive officer S T Rubaneswaran points out that local small-and-medium enterprises (SMEs) are far from ready to adopt Industry 4.0.
New technologies, mainly digitalization, information technology, and communication technology are changing how corporations produce and deliver customer service. The development of human capital has generated, in this way, an innovative solution. Nowadays, human capital is not only creative but also is a super human capital. At the heart of the 4.0 revolution is the information and communications technology, which, together with artificial intelligence, profoundly influences the economic-social environment, the life of each individual and the relationships established on a global scale.
In the next decades, certain professions will be gradually taken over by industrial robots, so that a large part of the jobs will be affected. Thus, traditional roles in production, agriculture, utilities will disappear but new jobs in health, education, and service delivery will emerge. However, these new jobs will require employees to acquire new skills, especially digital ones. Nowadays, the employees who are most afraid of job automation are those whose formal education is precarious. Continuous retraining of employees is the most commonly used method to reduce skill differences. Companies need to get involved and support education. Governments must support continuing education programs. Industry 4.0 needs Education 4.0.
To meet the needs of the economy in the future, Education 4.0 must be viewed from a four-dimensional perspective: vocational education, entrepreneurial education, financial education, and digital education.
The deployment of cyber-physical systems such as the Internet of Things and the Internet of Systems is part of Industry 4.0. There are 4 four distinct technological advancements which are High-speed mobile Internet, AI and automation, big data analytics, and cloud technology are . AI and automation are predicted to have the greatest influence on employment figures in the global workforce of these four technologies.
In sectors such as AI, IoT, robots, cybersecurity, and many others, there is a shortage of the requisite skills, abilities, and expertise to implement Industry 4.0. This are the challenges that need to faced in industry revolution 4.0. So to adapt to this in future, we should be prepared in few aspect such as invest in education and training , choose the right digital tools , join digital revolution. If we didn’t adapt to this new changes, we are not updated.
Industrial revolution 4.0 is a more advanced technology where the technology helps to create better living, reduce our workload, increase productivity, improve efficiency and quality.
I believe that we are moving towards industry revolution 4.0 because there are many changes happens for the pass 10 years. Firstly, the number of people using online banking, online shopping, digital marketing, social engineering has increased. In addition to that, cybersecurity’s job is in demand to make sure online platform is always secured. Secondly, the evolution of the mobile phone, mobile application and mobile internet. Example, online banking can be done using mobile phone, we able to search any information via mobile phone, telegram or what up can be used to communicate any one in the world. Lastly, online platform is used for learning, to do business, online meeting and work from home. In fact, the industry has started to implement the cloud technology which give capability that data can be access anywhere from the earth with internet connect. The fast internet connectivity and investment of 4G technology has give impact to internet users to access it without interruption.
The challenge to move forward to industry revolution 4.0 is lack of knowledge, lack of finance support, social problems and reduce revenue of traditionally business. Firstly, we need to have knowledge workers in the field of cybersecurity, cloud technology, big data, advanced robotic, machine learning, artificial intelligent and others. The generation X and Y is new to these technology and they have to keep learn and adapt fast to learn these latest technology. Secondly, finance is another major factor because the company need to study the return on investment and the benefits that they will gain when implement new technology. If the current technology is sufficient to produced expected revenue and meet the target, they will not apply the new technology. At the initial stage, implementation of new technology need time to reach maturity level. The business owners will not take risk to implement new technology to avoid any interruption of current business. Moving to 4.0 industry revolution may creates social problem like cyber crime, children will be addicted to internet, people will less active in physical sports, spreading of fake news and other negative impact from the internet and technology. Finally, the growth of revolution 4.0 will impact the traditional business owners like newspaper seller, grab drivers, physical shops owners and others. The number of people walkin to buys thing in physical shop will reduce because they will more prefer to buy thing online. When people starts to work from home, it will effect the income of the grab drivers. Since people can read newspaper online, the newspaper seller’s will get less sales than before. Physical education center will reduce because student will prefer to learn online than attend physical classes.
Based on Cybersecurity Malaysia, Malaysia need 25.000 cybersecurity knowledge workers. It create awareness that they are new job opportunity in the areas like cybersecurity, cloud technology, big data, advanced robotic, machine learning, artificial intelligent and other jobs related to Industry revolution 4.0. The student can learn and study in these related field to get the job in the future. People should attend training and do self study to improve their skills. The parents also should guide the children to use the technology in correct way and make sure children did not influences by bad things in the internet. There are many children education Centre that teach robotic skills, coding skills and others. If the children interested, they may sent the children to these class because it will give exposure for them and they will have strong basic knowledge. The business owners should change the way they do business and they have to move to online business to survive and sustain their revenue. The people who has impacted in their wages due to Industry Revolution 4.0 like newspapers seller and grab drivers, they have to find another alternative work to sustain their wages.
As we discuss the labor market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
IR 4.0 will bring transformations and disruptions and may already be occurring within labor markets across the world. New technology makes it easier for businesses to automate routine tasks. This could change the balance between jobs done by humans and those done by machines and Artificial Intelligence.
Advancement in technology has caused some roles to disappear while also creating new, previously unheard of job titles such as Data Scientist. It is also expected that automation will decrease staff being employed and replaced by robots or smart devices with algorithms. These robotic technologies will offer a substitute of labor. The initial investment may be higher however with economies of scale and repetition, they are expected to provide efficiency and cost savings compared to employing human labor.
Some industries are more likely to be automated than others as robots will not be able to be trained on all tasks. In some countries, we are seeing these automation happening already in manufacturing and agriculture. For example in Malaysia, Hartalega which is one of the world’s largest glove makers have been expediting automation and digitization, reducing the reliance of foreign workers. This has resulted in speed, accuracy and cost effectiveness for them to compete with the more aggressive expansion of China’s glove manufacturing companies.
IR 4.0 comes with its own challenges too. Firstly, some employees may not be up to speed with the latest technology being deployed in the company. Next would be the issue of cybersecurity due to the various physical and digital interconnected systems that comes with the risk of an expanded cyber-attack. Businesses are also highly dependent on the government’s implementation of technology and telecommunication advancement. For example in Malaysia, the government has some initiatives underway for 5G, among others.
As employees, we would have some worries on our job security due to these changes, especially on lower skills roles. As a preparation we can start to up-skill ourselves or even move to a different profession which has a higher demand in IR 4.0. We can also look for opportunities in skills where robots are lacking, such as those requiring social and cognitive ability. Examples of these are such as nurses and teachers.
As we discuss the labor market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
Industrial revolution 4.0 will allow the organization that can invest and adapt to change to benefit from the competitive advantage. For example, using AI and BIG data to manage the inventory allows the supply chain planner to plan the demand and supply more efficiently. Thus, reducing the cost and maximizing the profit.
The challenge is whether the end to end processes have been fully upgraded to the latest technology so that each value chain can fully utilize the technology. Otherwise, we may see slack or inefficient outcomes.
I think to move to industry 4.0, planning and training are very important. Upskill the current employees to the next level and introduce the new tools and systems to learn. Furthermore, moving and implementing the industry 4.0 by stages so that everyone in the organization can adapt to change. However, the Covid-19, supply chain disruption, and labour issues have accelerated industry 4.0.
As we discuss the labor market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
Technological advancement changes our life. Basically, simplify our day-to-day routine including work method. The range or level of advancement of technology in any field can’t be forecasted. This is something that evolves as time goes by. The right mindset one should blend is to adapt with the integration and the changes time to time as technology advances. Industrial revolution 4.0 conceptualizes fast change to innovation because of expanding interconnectivity and computerized automation. A piece of this period of modern change in labour market segment is the joining of advances in technology such as robotics, internet of things and artificial intelligence in in the physical day to day environment. The challenges relating to this industrial revolution 4.0 is absence of abilities to lead a complex industry technological design. Lack abilities to manage or lead is frequently referred to as the greatest hindrance to advanced changes in digitalization especially in training and re-skilling staff. Adding to that, concerns with respect to digital data protection involving corporate information and operation. Online framework possibly give space to security breach and information spills. Not bound only for the cyber-attacks other serious concerns includes wrong network setup, failed commands, including software and hardware faults that might impact the business production. A decent security approach involves coordinated effort and comprehension. While it ought to be a concern, it shouldn’t prevent one’s innovation objectives. Combining industrial and IT professionals in innovation objectives ideally reduces the vulnerabilities concerning security as it opens broad discussion over IT infrastructure threats along with process gaps and operational hiccups. One of the challenges is the absence of understanding and clear idea regarding which procedures to seek after. With technological advancements, new plans of action are arising expecting organizations to re-evaluate the way they carry on with business as normal. Without a proper understanding on the business procedures, it very well may be hard to direct an organization with a proper goal or vision. Building training modules that will help staffs to enhance their knowledge and skills works well to counter this challenge. Ideal way to deal with this is by creating a platform that helps and trigger a chance of learning among current resources that encompass new technical methodologies with hands-on trainings to test them in the organization’s operation and manufacturing area. One should be well prepared for the new wave by assessing present abilities. Recognize the area’s most needing improvement and computerized upgrade to ensure competitive advantage capacities are retained. From critical thinking to handle streamlining the new wave spans the digital and the physical capabilities while drastically adjusting our relationship to both. Industrial revolution 4.0 will reach at its full utilization not under the direction of the present minds which work on the previous thoughts, however it depends on the upcoming or future pioneers who will track down clever ways of incorporating, enhance, and redefine all parts of life in the technologically connected and actual universes.
Industrial revolution 4.0 revolves around digital transformations. Not only that we use these technologies increasingly, but we also rely on them in our daily lives. More workplaces are now integrating technology and evolving digitally, with businesses allowing their employees to work remotely and more processes being automated and customized to suit the consumers’ needs.
One of the challenges that we might face with IR4 is a gap in technical skills. In terms of the labor market, there might be more jobs and tasks being replaced by machines via automation and technology integration. On the other hand, with the automation in place, this might also create more efficient jobs as the workers can concentrate more on the complex stuff and issues, rather than spending time on the routine, manual work. Apart from that, as much as technology advances, there are limitations to it and requires highly skilled personnel to manipulate it to come up with the desired outcomes.
To prepare ourselves to be adaptable to the new wave, we should not limit ourselves to only what we already know. We must always be aware and creative, think outside the box, and upskill ourselves for us to always stay relevant.
1.As we discuss the labour market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
The Fourth Industrial Revolution represents a fundamental change in the way we live, work and relate to one another. It is a new chapter in human development, enabled by extraordinary technology advances commensurate with those of the first, second and third industrial revolutions. These advances are merging the physical, digital and biological worlds in ways that create both huge promise and potential peril. The speed, breadth and depth of this revolution is forcing us to rethink how countries develop, how organizations create value and even what it means to be human. The Fourth Industrial Revolution is about more than just technology-driven change; it is an opportunity to help everyone, including leaders, policymakers and people from all income groups and nations, to harness converging technologies in order to create an inclusive, human-centered future. The real opportunity is to look beyond technology and find ways to give the greatest number of people the ability to positively impact their families, organizations and communities.
When it was first described by Klaus Schwab, the founder and executive chairman of the World Economic Forum, the fourth industrial revolution was differentiated from its competitors not only by the technologies that define it, but its velocity, scope, and systems impact:
a) Velocity: Humanity is discovering new technologies and enhancing old ones at a rate never before seen in history. Technology is now advancing exponentially, rather than at a linear rate.
b) Scope: Digital transformation is disrupting nearly every industry across the global economy.
c)Systems Impact: A bigger, broader, deeper disruptive force requires swift and substantial modifications to personal and professional environments. Businesses need to understand and contextualize the role digital transformation has to play in their continued existence and growth, and identify and implement the tools they need to make those changes happen, whether in production, management, internal process controls, or all three.
Beyond these characteristics, navigating the fourth industrial revolution is also challenging for businesses for three other reasons:
a)The Future is Now. Part of the overall thrust of digital transformation is a forward-looking, strategic mindset that seeks to establish practices that don’t just create savings or attract new customers today, but optimize internal systems and leverage data management to anticipate and compete in the market of tomorrow. Integration blurs the lines between home and office, work and play, and so these solutions must also seek to improve all areas of life, not just the bottom line.
b)Work is an Action, not a Location. In a world plagued by natural disasters and political conflict and dramatically altered by the COVID-19 pandemic, brick-and-mortar may go the way of horse-and-buggy. The sprightly, resilient business leaders of tomorrow are already integrating digital tools that make it possible to connect and collaborate without regard for location, devices, or even time zones. Achieving healthy work-life balance, leveraging mobile accessibility, and enjoying full integration of software systems, Internet-connected devices, and multiple data streams to create a cohesive whole ripe for mining strategic insights and process improvements are no longer optional, but expected in the new normal.
c)Youth in Bloom. Shockingly fast. Techno-fluent from birth. Focused on systemic integration, social responsibility, and issues that affect their lives, rather than just their livelihoods. The fourth industrial revolution will reach its full flower not under the guidance of today’s management using yesterday’s ideas, but tomorrow’s leaders finding novel ways to integrate, optimize, and refine all aspects of life in the digital and physical worlds to which they hold dual citizenship. It’s up to today’s business leaders to set the stage for this flowering by investing in the resources, training, and education required to empower those who will follow, as well as the technologies they can use to create even greater advancements in productivity, innovation, and profitability.
We may prepare ourselves for current industrial revolution 4.0 by many ways
a) Develop and Implement a Digital Transformation Strategy
Fail to plan, and you’re planning to fail. Evaluate your current capabilities. Identify the areas most in need of improvement and digital enhancement to protect your competitive capabilities. Answer important questions like “What skill sets will our staff need to develop as we modify our workflows with tools like automation, artificial intelligence, and analytics?” and “What changes will have to be made in order to attract and retain team members who are digital natives?”Develop a digital transformation strategy and then invest in the tools and training you need to ensure your organization can make it reality.
b) Invest in Education and Training
Your existing team members need training to take advantage of new technologies. They might also need time and significant educational investments to help them make the cultural leap as well as the operational one. But digital learning tools can also become part of your workflows, from employee onboarding through advanced training. Understanding the what, why, and how of digital technologies helps your employees use them more effectively, use their skills and knowledge in novel ways, and keep them engaged as you continue to refine your business process management through automation, strategic planning, etc.
c) Choose the Right Digital Tools
Consider, for example, your procurement department. Choosing a cloud-based, data-centralized solution like PLANERGY adds a number of Industry 4.0 tools to your kit and makes it easy to establish a foundation for digital transformation through:
Optimized automation of repetitive, high-volume tasks like invoice processing, lowering cycle times and capturing more discounts. Human resources dedicated to strategic tasks like relationship building and innovation rather than data entry, chasing exceptions, or placating perturbed vendors. A centralized data management environment where all transaction data is captured and stored for easy access, review and analysis. Mobile-friendly, platform-agnostic access for all stakeholders, making it easier to connect and collaborate across not just offices but continents and time zones. Elimination of human error and inefficiency, along with productivity and profitability killers like approval bottlenecks, maverick spend, and inaccurate financial reporting. Full integration with your existing software environment.
Advanced analytics for immediate and measurable improvements in supplier management, financial planning, strategic decision making, and employee morale. Value creation through reputational enhancements and socially responsible initiatives (e.g., going paperless not only creates savings and reduces your company’s environmental footprint, but improves public perception). Modularity and staged implementation that can be used to address immediate business needs and then expanded to the rest of the organization as budget, resources, and training permit. A more flexible work environment that allows for better work-life balance through remote access and meaningful work.Reference
Q2 As we discuss the labor market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
Automation and computer is IR 3.0 while the key enabler for IR 4.0 is cyber physical systems, IoT and networks. With the high performance of cyber system and networks that increase capacity of storage with high internet speed, it can support big data, cloud system, cybersecurity, AI and many more including the IoT.
Many of us without realizing, are using apps from smartphone for various purpose such as map assistance, wearing wearable health monitors such as smartwatch, smart home security system and many more. We started to rely on IR 4.0 either in the daily life activities or at work, either as users or developers.
From the perspective of business, there are several external and internal factors. External factors include the facilities that is yet to be developed, for example is factory that located in the rural area. The stability of network may not allow the factory to get a benefit from connecting to cloud and need to use the internal server with limitations.
Internal factors include the availability of employees that capable of operating the IoT devices. Existing employees have high tendency of continuing to operate as current practice and difficult to change the behaviour, and this is one of the reason for leaders to be trained with Change Management. Especially for new technology of IR 4.0 where most of existing employees may not been exposed during their studies, this will be the biggest challenge for ensuring it is fully utilized after the installation of facilities and related devices and systems.
Employees need to be educated, for example is companies arrange courses for employees to immediately use the skills in the operation. Additionally, company may encourage employees to seek additional new skills and consider it as a part of career development plan. As employee, adding more relevant skills are a part of survival where those without any knowledge at least to operate certain apps and devices may not be considered.
Industry 4.0 is a new sphere of industry that has emerged as a result of the introduction and widespread use of new technologies—digital technologies and Internet technologies—that allow for the development of fully automated production processes in which only physical objects interact without the involvement of humans. Industry 4.0 is a term that refers to the fourth industrial revolution. Industry 4.0 generates both classic industrial items and innovative industrial products that are not already available and may not be produced in other domains of the real-world economy.
Throughout the process of Industry 4.0’s creation and growth, the economy as a whole is impacted, including the social sphere, which is characterized by significant changes in the way humans are adapted to the new economic circumstances. As a result, the entrepreneur uses Industry 4.0 to improve company operations, the employee (an industrial expert) learns new skills essential for Industry 4.0 or seeks for work in another field, and the consumer gains familiarity with new industrial goods.
Even while Industry 4.0 is only present in a few industrialized nations and makes up a tiny portion of their actual sector, it is possible that the growth of Industry 4.0 may eventually lead to the modernisation of other areas of industry (Zambon et al., 2019). So, the current technological mode may be changed through the use of Industry 4.0 as a domain of industrial activity.
As a result, its sectoral affiliation is determined by its organizational structure, not by the items it produces. Industry 4.0’s new industrial model allows for the manufacture of any industrial product because of its universality. A new industrial revolution is now possible, and as a consequence, Industry 4.0 will be established as the new global industrial benchmark and standard by which the actual sector of the global economy’s whole economic system develops.
As a summary, Industry 4.0 can be evaluated via a few approaches:
– Socio-oriented approach where modern civilization is influenced by the development of Industry 4.0 in both good and bad ways.
– Competence-based approach where a fresh set of skills from a contemporary industrial expert is required for the advancement of Industry 4.0.
– Production approach where in the fourth industrial revolution (Industrie 4.0), modernisation of industry is characterized by large-scale automatization of manufacturing processes (Popkova, et al., 2019).
– Behavioristic approach where transition to object-object interaction is envisaged as a result of the development of Industry 4.0, i.e., the elimination of the human subject (human being) from the system of interactions between inanimate objects (technical devices).
Below are some of ways companies can embrace the Industrial Revolution 4.0:
– Setting up new goals. The mere acquisition of new technology will have no beneficial impact on the company’s operations. It is necessary to use it purposefully, which involves employing it to accomplish a desired objective but also considering all of its ramifications, which vary from process alterations to changes in organizational culture, before proceeding.
– Utilize the current data to improve performance. One of the most promising aspects of Industry 4.0 is the ability to make data-driven choices. The majority of businesses already have a large amount of data; they simply don’t know how to use it to get valuable insights from it. Artificial intelligence/machine learning can assist in structuring data so that it can be used as a strategic asset for the company, allowing them to increase efficiency, products, and processes while lowering costs.
– Adapting the existing equipment. An older piece of equipment may be made compatible with an Industry 4.0 environment by simply enabling it. Manufacturers who use smart sensors, for example, do not have to replace their existing equipment in order to improve processes; instead, they can outfit their existing equipment with affordable aftermarket smart sensors, which allow them to reap the benefits of Industry 4.0 technology without having to purchase entirely new systems.
– Educate the employees instead of eliminating them. As with equipment, it makes more sense to adapt current human resources rather than schedule individuals for termination if one wants to fully embrace Industry 4.0. New technologies are not on the verge of replacing employees; rather, they have the potential to alter the character of the work environment altogether. Only 5% of jobs have activities that are completely automatable with today’s technology, however % of all occupations contain tasks that are at least 30% automatable (Chandrashekhar, 2019).
– Cybersecurity has to be taken seriously. Inevitably, as manufacturers integrate more technology into their operations, and as those systems become more interconnected, the dangers associated with cybersecurity will rise. As a result, each Industry 4.0 initiative must be accompanied with a strategic approach to cybersecurity.
References :
Chandrashekhar, S. (2019). 5 Ways to Embrace Industry 4.0 | Industry Today. Industry Today. Retrieved 19 January 2022, from https://industrytoday.com/5-ways-to-embrace-industry-4-0/.
Popkova, E. G., Ragulina, Y. V., & Bogoviz, A. V. (Eds.). (2019). Industry 4.0: Industrial revolution of the 21st century (p. 253). Springer.https://static.s123-cdn-static-c.com/uploads/1259807/normal_5e88204229a10.pdf
Zambon, I., Cecchini, M., Egidi, G., Grazia Saporito, M., & Colantoni, A. (2019). Revolution 4.0: Industry vs. Agriculture in a Future Development for SMEs. Revolution 4.0. Retrieved 19 January 2022, from https://www.scribd.com/document/403182467/Revolution-4-0
As we discuss the labor market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
In my opinion, the current industrial revolution 4.0 is the drive to increase productivity and reduce costs in manufacturing environments has led to an exponential increase in the adoption of automation on plant floors. This integration of computation, networking and physical processes is what has characterized the 4th industrial revolution of today, known as Industry 4.0 or the Industrial Internet of Things (IIoT). Although this trend provides clear business advantages, it has also led to manufacturing networks which are more interconnected, complex and heterogeneous. As a result, today’s manufacturing networks are operating with an increased risk of cyber incidents. Cyber incidents are not limited to cyberattacks. A cyberattack on a manufacturing facility would be damaging, but it’s not the most prominent threat to a network’s operational continuity. In fact, small to major network or process disruptions due to misconfigurations, erroneous commands, software errors or device failures, can occur almost daily. Fortunately, there are steps you can take to prevent these cyber incidents from impacting production.
Here are three common challenges faced by manufacturers today and how you can address them to build a more cyber resilient network:
1. Identifying and Correcting Misconfigurations: Network misconfigurations include unstable or broken links, commands that don’t reach the destination, a network service or IP misconfiguration, “noisy” devices causing traffic floods and devices not configured correctly by the vendor or system integrator. These misconfigurations happen frequently and can have a moderate impact on your bottom line, as the network will not always operate reliably or correctly. To maintain operational continuity, you need to have visibility of all assets and communications within your network and leverage this visibility to identify any existing misconfigurations.
2. Preventing Operational Disruptions: Operational disruptions can be caused by anything from a malfunctioning device to process instability and anomalies. These glitches happen very frequently and can have a serious impact on your organization’s bottom line. The first step to prevent disruptions is to assess the current operational state of your network and take the appropriate steps to fix any existing anomalies. The next step is to implement continuous monitoring of your network to catch the early indicators of threats to operational continuity.
3. Securing the Network Against Cyber Threats: Although rare, a cyberattack could be devastating to your organization’s reputation and bottom line. Whether it’s ransomware or a targeted, zero-day attack, these incidents can be detected and prevented with the right plan in place. First, your organization must have an up-to-date inventory of its digital assets to develop an understanding of its network to pinpoint any existing vulnerabilities within it. Second, you need to have authentication processes in place to guard your digital and physical assets. Third, your organization needs to have the ability to detect anomalous activity. The most effective way to achieve this is to deploy a continuous monitoring solution. Finally, your organization should have a contingency plan in place to quickly respond and recover from a potential cyberattack. The NIST Cybersecurity Framework is an excellent guideline to use when strengthening your cybersecurity practices.
Despite the security challenges presented by the evolution of Industry 4.0 / IIoT, organization can remain resilient and profitable by gaining proper visibility into its network and processes to detect and prevent both cyber incidents and attacks.
Q2: As we discuss the labor market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
Let us go through Industrial Revolution since 1.0 😇
IR 1.0: used water + steam power to mechanize production.
IR 2.0: used electric power to create mass production.
R 3.0: used electronics and Information Technology to automate production.
IR 4.0: based on IR 3.0, Digital Revolution involved fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.
In IR 4.0, majority peoples connected by mobile devices, with unlimited processing power + storage & access to knowledge. In addition, the impact increased with emerging technology breakthroughs in fields such as AI, robotics, IoT, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.
In the future, technological innovation will also affect labor market, corporate more focus in efficiency and productivity. Transportation and communication costs will drop, at the same time logistics and global supply chains will become more effective, and the cost of trade will diminish, the business environment will changed.
In fact, according to the economists Erik Brynjolfsson and Andrew McAfee, IR 4.0 will cause greater inequality, hence disrupt labor markets. As automation substitutes for labor across the entire economy, the net displacement of workers by machines might exacerbate the gap between returns to capital and returns to labor. 😇
M-shaped society is approaching (Kenichi Ohmae) , one of the scenario is that a job market increasingly segregated into “low-skill/low-pay” and “high-skill/high-pay” segments, which in turn will lead to an increase in social tensions.
In addition to being a key economic concern, inequality represents the greatest societal concern associated with the IR 4.0. The largest beneficiaries of innovation tend to be the providers of intellectual and physical capital—the innovators, shareholders, and investors—which explains the rising gap in wealth between those dependent on capital versus labor. For a majority of the population in high-income countries, the demand for highly skilled workers has increased while the demand for workers with less education and lower skills has decreased. The result is a job market with a strong demand at the high and low ends, but a hollowing out of the middle.
This helps explain why so many workers are worrying that their incomes and their children will continue to stagnate. It also helps explain why middle classes around the world are increasingly experiencing a pervasive sense of dissatisfaction and unfairness. A winner-takes-all economy that offers only limited access to the middle class is a recipe for democratic malaise and dereliction.
Reference:
Kenichi Ohmae (2010), https://en.wikipedia.org/wiki/M-shaped_society
Q2: In my perspective, the Industrial Revolution 4.0 signifies a fundamental change in the way people live, work, and interact to one another. It is a form of new development, specifically in terms of digital revolution, which is enabled by advanced technology advances expansion over the first, second and third industrial revolutions. These developments merge the physical, digital, and biological worlds in ways that create huge potentials and opportunities, with equally huge risks entails. The speed of the fourth revolution requires people to think how countries and organizations can develop and create value by utilizing the means. Having the potential to raise global income levels and improve the quality of life for populations around the world, consumers who afford and able to access the digital world have been able to gain the most under the industrial revolution 4.0 as the technology has made possible for new range of products and services that increase the efficiency and desire of personal lives.
However, in another aspect, the revolution could yield greater inequality, particularly in its potential to disrupt labor markets especially for those who have limited access, resources, and skills for the digital and technological requirement. Plus, as digital automation substitutes labor across the economy, the displacement of human workers by machines might increase the demand on returns to capital and returns to labor which will result to less dependability on human capital. On the other hand, it is also possible that the displacement of workers by technology will, in aggregate, result in a net increase in safe and rewarding jobs. Thus, while this might be an opportunity to a new form of labor market, this might harm the other form of traditional labor market.
In my opinion, the real opportunity for the upcoming new wave is to look beyond technology and find ways to give the greatest number of people the ability to positively impact their families, organizations, and communities. Hence, it is important for everyone in traditional or new advanced market or industries to equipped themselves with resources, ability, and skills of the technological and digital advancement.
The industrial revolution 4.0 can be described as the advent of “cyber-physical systems” involving entirely new capabilities for people and machines. Due to the pandemic era, the employers wanting the employees to work remotely or flexibility. this will benefit the employee by not having to commute to the workplace, thus they’ll have more free time. A better work-life balance and greater flexibility would lead to employee satisfaction and commitment. However, some industries are more likely to be automated, such as the manufacturing and agriculture. So in future, we will see a reduction of staff as many positions are already phased out due to increased of automation.
In addition, this revolution will also create new markets and growth opportunities. To adapt in the current technology, the new business usually, setup their store by online marketing. However, With new technologies available, existing services or goods could eventually be phased out. Thus, the company need to adapt with any technological revolution, new services, products, and software will be needed to support the transformation of organizations. So, this will create entirely new product, new jobs vacancy, and more.
As we discuss the labor market, what do you think about the current industrial revolution 4.0? What are the challenges and how we should prepare ourselves to be adaptable to the new wave?
As reviewed and understanding the current position globally all of us stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. The more the scope, and complexity, the transformation will be unlike anything humankind has experienced before. Hence it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society.Industrial revolution 4.0 technology helps to manage and optimize all aspects of manufacturing processes and supply chain etc. It gives access to the real-time data and insights you need to make smarter, faster decisions about your business, which can ultimately boost the efficiency and profitability of your entire operation.
Digitalization will drive quantum leaps in performance and are ready to invest in digitalization.
Customers will drive change to value chains, production, and services. Building smart factories will require significant changes.Growth Mindset:
A growth mindset stems from knowing that rather than being born with innate qualities, limitations and talents, we can also acquire knowledge and master new skills with hard work, assistance and good strategies. People with a growth mindset thrive on challenges and persist in the face of adversity. Where other people see obstacles, those with a growth mindset see opportunities. People with a growth mindset celebrate their failures as openings for growth, making it easier and more desirable to try new tasks.The Ability to Upskill:
Another thing adaptable people do is develop new skills. In this digital revolution, upskilling—the process of learning new, more relevant skills necessary today and in the future—has become a popular term. Digitization and the introduction of new 4IR technologies will require a new set of skills. These include both technical skills, such as information technology and computer science, and interpersonal skills, such as empathy, communication and conflict resolution.
Technology as a support, not as an enemy:
As new technologies and processes emerge, lifelong learners dive in and seek to understand and adopt. They are also constantly curious about their surroundings and they tend to thrive in changing environments. It is important to remember that we, humans, control the machines, and not the other way around. Indeed, these machines need people responsible for their design, manufacture, production, maintenance… we should not be afraid of the future or the changes this technological revolution keeps bringing to us to the cutting edge to improving our knowledge and skills adaptable to all the situations “Adapting to constant change means survival & sustenance of mankind”…
Agreed. Its required constant changes to survive
True, Workers must be taught to use new technology, e.g. digital learning tools may be used for anything from onboarding to advanced training.
At times of recession and economic downturn, the sales revenue and profit of an organization will decline, causing companies to strategize for crisis management which usually includes cost reduction and optimization. With that, the first thing that might happen would be freeze is hiring. Even when attritions happen, managers might decide not to backfill the position, causing the departments to be understaffed. When departments are understaffed, it might cause a decrease in productivity and performance level of the employees, resulting in lack of motivation and morale. To a certain extent, the organization might even decide on drastic measures to restructure the organization and carry out workforce reduction activities, which becomes one of the biggest challenges managers would experience at times of crisis.
To manage such situations caused by recession or economic downturn, the management first need to assess and understand the true impact of the downturn on the business. Because before you start planning, you need to know where you’re at in terms of your business health. This can be done also by identifying any unprofitable products or services, and even your customers, because in times of recession, available capital and consumer spending can both decline. With that, when initiatives for cost reduction is being taken due to financial challenges faced by the organization, employees get laid-off, where it further lower the employees’ morale and productivity. Managers have to find the balance between giving adequate support to the employees while continue to push on performance and work on the change management. Although layoffs are unfortunately the last resort taken by the management to ease the financial struggle, managers need to make sure that communications are being done effectively and get the employee assistance program out to the employees to help them manage their struggle.
Finally, while working on crisis and performance management, and making sure to provide adequate support the employees at these time, for long-term’s sake, it is important to pay attention to new opportunities and plan ahead.
When the economy is in a crisis, a company’s revenue and profit suffer, forcing it to use crisis management strategies including cutting costs and improving efficiency. It may be necessary to stop hiring as a first step. Even when a post is vacated, managers may choose not to replace it, resulting in understaffing in their departments. Departments that are understaffed may see a drop in production and performance, which may lead to low morale and a lack of drive among their workers. In times of crisis, the business may even take severe steps to reorganize the organization and conduct out workforce reduction activities, which is one of the most difficult issues for managers.
Management must first investigate and appreciate the true nature of the impact of the downturn on the company to effectively deal with problems caused by recession or economic downturn. Simply said, understanding the present state of your company’s health is essential for any serious planning. Additionally, you may identify any unproductive goods or services, as well as your customers since available capital as well as consumer spending might both be lowered during a recession. This results in cost-cutting measures being taken and employees being laid off when the firm is experiencing financial problems, further depressing morale, and productivity. Maintaining control over change while still providing enough assistance for employees is a tricky balance that managers must achieve. Management must ensure that all workers are informed and aware of the company’s employee assistance programme, which may be able to aid them in coping with their financial issues when they have no choice but to lay off employees.
To the long-term, it is necessary to keep an eye out for fresh chances and prepare ahead when dealing with crisis management and performance management.Totally agree with you Jessy. Although I did see some of my friends being faced lay off but I think it is not a good solution to overcome a crisis. It really impact us as an employee who has been laid off especially in term of the financial and morale, and how they will survive after the lay off. Although MSS/VSS scheme is being offered but the money being received sometimes only can managed up for few months and it is not a proper solution I think.
High 5!!
Hi Jessy. Nice points.
Instead of layoff, my suggestions is maybe the organizations can first practice cost reduction for example switch off the lights during lunch hours which can save electricity. Cost-consciousness should be spread across the company, and employees should be encouraged to participate and be rewarded for their efforts. Making expenses variable rather than fixed in order to reduce the company’s exposure to a downturn is a long-term strategy for cost-cutting measures.
For me, MSS/VSS is not a proper way for we as employee as it is just a short term benefit for us as we have have many more commitments and on the other hand will make us demotivated. Although layoff is the last choice, but maybe organization should re-consider before laying off their employee. For me, reduce employee salary by 10% will be a good last choice instead of lay off.
In terms of layoffs believe sometimes that is an option that has to be taken. As normally organization would look at their profit forecast and earnings for upcoming financial years and probably see a savings in reducing their workforce. Especially for listed companies they need to keep the shareholders happy by ensuring profits. Market sentiment always reacts positively when a company starts to trim its workforce.
- This reply was modified 1 year, 10 months ago by Leonard Robinson Chin.
- This reply was modified 1 year, 10 months ago by
Good sharing
During a recession, the rate of unemployment usually rises rapidly and remains high. Since corporations confront rising expenses and stagnant or declining income, they begin laying people off as a cost-cutting measure to save money. As the recession deepens, the number of jobless employees across a wide range of sectors rises at the same time, and the average duration of unemployment for workers rises as well.
During a recession, there are two or more consecutive quarters of negative economic growth, as measured by GDP or other indices of macroeconomic performance, including unemployment. The official dates of recessions include unemployment as part of the definition of what defines a recession, therefore the link between recession and unemployment is a question of semantics. Job opportunities are rare during a recession since many firms are laying off workers at the same time.A major tragedy of economic downturns is that the adjustment of labor markets is sometimes impeded by government actions, which may deepen and extend unemployment. Such policy responses to recessions are essential and vital to debate even if this is not cyclical unemployment in the strictest sense. This may occur in a variety of ways, but fiscal and monetary policies that interfere with industrial structure adjustment are the most crucial. Government intervention with labor market incentives is also a factor. Government policies to safeguard banks and large corporations may actually damage the economy rather than help it.
A crisis, especially one as unexpected and devastating as the COVID-19 global pandemic, can shake an organisation to its core. However, every crisis presents an opportunity to shape what your organisation will become — and how it will be perceived as it emerges from such a trying time. An effective crisis management plan can assist an organisation in anticipating potentially serious issues before they become a major issue.
In Malaysia, for example, many people are currently in the grip of a crisis. The recent floods that have devastated many parts of the country are extremely severe and will result in dramatic changes. People’s lives will be impacted and altered in a variety of ways.
Given the severity of most crises, whether personal, at work, or in our country, how we manage ourselves and, by extension, the crisis becomes critical. Many businesses are unprepared for a crisis. Indeed, some argue that our response to the current disaster in the country demonstrates that the authorities were woefully unprepared. And the repercussions of these floods will be felt for a long time by all of us, as well as Malaysia’s already battered economy.
In the current flooding disaster, for example, not everyone rose to the occasion and provided the necessary leadership.
Some people simply became overwhelmed and were overcome by inertia. Others acted irrationally because they had not been trained to deal with a crisis. And there were those who overreacted, exacerbating the situation.
How you behave in a crisis will shape your company and your career. Always begin by assessing the situation. And this evaluation works in tandem with your ability to detect and forecast problems. Remember to give yourself plenty of time to assess the situation. You may have a reasonable amount of time to assess the situation at times. On other occasions, acting quickly will be required. Most importantly, avoid overreacting or freezing. Do whatever it takes to calm down, then determine the facts and separate the emotional dramas that frequently accompany a crisis, seek objective and expert advice, and see the crisis for what it is.
The next step is to get involved. Involve everyone. Bring everyone on board. A company-wide crisis will necessitate all hands on deck. There will be people you implicitly trust, as well as significant people with knowledge and expertise in specific areas. The key is to make decision-making more effective. And you’ll get everyone’s support because they’ll feel like they’re a part of the process.
The next step is to get involved. Involve everyone. Bring everyone on board. A company-wide crisis will necessitate all hands on deck. There will be people you implicitly trust, as well as significant people with knowledge and expertise in specific areas. The key is to make decision-making more effective. And you’ll get everyone’s support because they’ll feel like they’re a part of the process.Following that, you must develop a strategy. A multi-pronged strategy is required. What should be done immediately following the crisis? What steps must be taken to prevent the crisis from spreading? What kind of damage mitigation will be prudent for the company? Before you act, you should run through the best-case and worst-case scenarios in your strategy. This level of planning allows for confident and accurate responses.
Take action now. Actions must always be proactive and hands-on. Your actions will be in line with what needs to be accomplished if you have a proper strategy in place that is based on clear assessment and engagement. Remind yourself that even in a crisis, you are in the results business, which means that everything you do must be purpose-driven and must ultimately result in the desired outcome.
The worst nightmare for your people during a crisis, catastrophe, or disaster is when you fail to communicate. Your communication must be clear, concise, honest, and transparent. The fact of the matter is that perception is everything.
Respect and consideration should be shown to your team, stakeholders, and customers. Get everyone involved, and you’ll notice that when everyone is on board, the results are better.
Finally, keep in mind that emotions will run high during a crisis. Improve your emotional quotient by managing yourself, your empathy, and understanding that everything you say and do has a social impact. Your company, like our country, is made up of people with feelings. A crisis molds you into the person you are. The way you manage it; the way you steer through it; the way you provide leadership, motivation, and hope; and the way you hold the hands of those around you all reveal who you are and what you are made of.Great info and well written on how an organisation can deal with a crisis
Leaders are confronted with difficulties that are unfamiliar and poorly understood in unpredictable crises. Therefore, leaders are unable to gather information or make judgments promptly to respond effectively. During a crisis, the team carries out responses outside of normal operations, as well as adjustments to routine business activities. The challenge is all about decision making, where the leaders need to define the priorities, make smart moves, decide and implement to respond to the incident.
Whatever the cause of the crisis, the implications for the company might be disastrous and risk its future. To avoid a situation like this and effectively manage any form of crisis, the leader must move immediately and take appropriate actions to bring the company out of the mess. First, understand the true impact of the downturn on the business. Determine how different sectors of the customer base will react in a downturn, as well as their level of loyalty to the product and service. Also, to determine the strength of the competitors. Second, determine which items and consumers are not lucrative. A detailed analysis is required to determine product, customer, and segment profitability, ensuring that all direct and indirect expenses are taken into account. Corrective action for non-performing products or consumers might involve price increases, cost reductions, and changes to terms of trade once this is completed. The third point is to cut costs. During a downturn, cost containment and reduction must be a top priority for management, which should begin with a clean slate. Moving from the existing cost base to a lower-cost model is a long-term cost reduction strategy. This will necessitate a comprehensive reconsideration of the company model in all of its elements.
Some of the important managerial challenges at times of crisis are as below:
1. Employee lay-offs and benefit reductions. Employee morale deteriorate.
One of the major challenges is to reduce cost by laying off staff. Fewer workers will be required to complete more tasks. Employee’s morale may deteriorate due to work overload, work becomes more difficult, compensation increases are halted, and the threat of additional layoffs continues.2. Cuts to quality of goods and services. Customer dissatisfaction and inconvenience.
In an effort to reduce cost, the organization may compromise the quality of its products or services, and hence their desirability.
For instance, airlines companies may add extra seats per plane, cramming the already crowded passenger even more. Airlines routes to the higher cost or marginally profitable destination would be cancelled and will leads to customer dissatisfaction and inconvenience.3. Less advertising and marketing. Consumer spending will fall.
As organizations tend to spend less on advertising and marketing in all mediums such as printed, TV or online to save cost, consumers confidence weakens and their spending will fall.Some of the recommendation we can adhere to manage crises efficiently at times of recession / economic downturn are as follows:
1. Understand the true impact of the recession / economic downturn on business.
We must determine how different sectors of client base will react during a downturn, their price sensitivity, and their loyalty to product or service. We should also evaluate the strength of competition. Will the slowdown be viewed as a danger or an opportunity by them? Then we must adapt approach to the new circumstances and determine whether the new strategy has any repercussions in other areas, such as supply chain, production capacity, or financing requirements.2. Identify profitable products and customers. When resources are scarce, understanding the profitability of particular consumers and products is vital. We should devote time and resources to staying close to profitable products and clients once we identified them. We must comprehend how the downturn affects consumers and persuade them of the benefits of our product or service. If we fail to do this, we are at risk of losing consumers to our competitors.
3. Cost reduction.
During recession / economic downturn, cost control and reduction must be a top priority for management. We need to ensure to move from existing cost base to a reduced cost model. This will involves a comprehensive reappraisal of the company model in all of its elements, as well as long-term managerial commitment. The quickest way to achieve this is by segregating between essential and desirable expenditure.References:
The Investopedia Team. (2020, September 9). The Impact of Recessions on Businesses. Investopedia. https://www.investopedia.com/articles/economics/08/recession-affecting-business.asp
Wahyudi, J., & Satar, R. (n.d.). Managing effectively in a downturn, turning challenges into opportunities. PricewaterhouseCoopers Indonesia. https://www.pwc.com/id/en/publications/assets/managing_in_a_downturn.pdf
Laying off staff helps the company to save money on payroll and benefits.
However, it would be a reason for burning out for those who stay. More workload and contributed to long working hours.Indeed Maizatul. Decision makers and managers role is very challenging to strike a balance between minimizing spending, saving cost while keeping employee motivated to perform task to achieve organization’s goals especially during recession / economic downturn.
Q3: The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
There were multiple challenges faced by organizations during this pandemic era, many had tp wind down business, some had to restructure and some had progress beyond expectation due to the nature of the business. During the time of crisis, there will be many challenges, as from my point of view, some business would not be able to run anymore due to the fact this kind of business requires people to be there physically. My experience as I am with an IT industry, we couldn’t speak to clients physically to bring in new ventures and we had to find a way to deliver all of this virtually. Some of the works which takes weeks to complete, were actually completed faster due to the engaging method in this pandemic era. Besides this, we did go through some impacts in which we had to restructure of organization in order to reduce redundant roles and ensure cost reduction is in place.
As for my opinion, the important crisis management inputs that are needed are as below:Decide with speed over precision.
Due to the circumstances of government announcing lockdowns which defers with different countries and with the safety of the organization in mind, best leaders should be able to process information quickly, analysis should be done in thorough manner to identify a scalable framework for rapid decision-making. Priorities should be defined correctly, i.e. employee safety & welfare, financial liquidity, customer care, and operational continuity should be in important list. Not all the priorities can be taken into consideration, a leader should be smart in making trade-offs by analyzing the impact of the decision, correct platform like ‘war room’ should be establish to ease up the decision making process.
Adapt boldly.
Leader should be not afraid to admit he/she doesn’t know any information especially in this time of crisis management, they should seek expertise from the available sources. A leader should also, prioritize on new initiatives, expenses as they might jeopardize the current situation. Technology can bring the parties together; think internal wikis that capture issues, solutions, innovations, and best practices. Effective leaders extend their antennae across all the ecosystems in which they operate.
Reliably deliver.
Even though many challenges and variables are beyond their control, the best leaders assume personal responsibility in a crisis. They develop a culture of responsibility by aligning team focus, establishing new metrics to assess performance, and establishing a culture of accountability.
Leaders should be considering the welfare and health of the fellow employees, as how their physical and mental condition are in chasing in delivering the required priorities. Leader should be able to touch base with the employees least monthly or probably frequently if required.Engage for impact.
No job is more vital than taking care of your employees during a crisis. Effective leaders are aware of their team’s conditions and diversions, but they find methods to engage and encourage them by presenting vital new goals and information in a clear and thorough manner. This aspect is particularly important since, while the COVID-19 epidemic is primarily a health issue, it has also triggered a financial crisis. In this time of continual and intense change, your leaders must constantly reiterate new priorities to maintain continued alignment.agree that leaders should make decisions fast and boldly instead of making the people wait..
What are the most important managerial challenges at times of crisis?
When in time of crisis such as Covid-19, leaders or managers had encountered tremendous managerial pressure to manage the company.
1. Decision-making – Decide with speed. This is because of the Covid-19, company had to adapt to the SOP restriction by the government. Ensure SOP follow strictly as there will penalties imposed. Other than that, different countries have different SOPs and some countries may encounter lock down, thus if the company is doing export goods, they need to keep abreast of the news and follow the rules. Leaders need to make rapidly process available information, quickly determine what matters most, and make decisions with conviction.
2. Adapt – During crisis, they need to review and put hold on large initiatives and expenses and prioritize. These enable business continuity for longer period with the uncertain future. The leaders need to adjust quickly and make new plans
3. Reliably deliver – in crisis, leaders need to keep team focus, establish new metrics to monitor performance and create a culture of accountability. Suggest to stay alert and aligned on a daily dashboard of priorities. Set KPIs and other metrics to measure performance.
4. Engage for impact – during crisis, the team members are affected as well. Important to care for them by understanding their circumstances and distractions, find ways to engage and motivate, clear communication, health care also important check. This is also to reduce any employee resign which can cause understaff and impacting performance or productivity during Covid 19.How do we manage crises efficiently at times of recession / economic downturn?
1. Access your business’s health
During crisis, the profit keep going down. In order to keep to company from bankrupt, it is important to check the business health in term of financial view, workforce view, environment factors and others.2. Implement change
Thru no 1 assessment, you identified the troubled areas and it is time to make the require changes such as restructure organization staff, evaluate products and services for the market demands , readjust benchmarks and project growth targets.3. Maximise your talent
During crisis, hiring is mostly freeze. Thus, resign or previous not backill position will face stress. They will need to maximise and identify undiscovered leaders to step up.4. Meet the needs of your employees
Recession is hard on everyone. And yet company need employees to be more efficient and productive. Thus, it is important to understand employee need thru listening.
5. Recession proof your business.
To improve and maintain the company existence during recession,. Need to think long-term, conduct regular checkups, this is to prepare ahead before crisisReferences
Chaffold, J(n.d.). Managing a business in a recession: 5 strategies. https://www.insperity.com/blog/managing-a-business-in-a-recession/
Nichols, C, Hayden S C, Trendler,C (202). 4 Behaviors That Help Leaders Manage a Crisis. https://hbr.org/2020/04/4-behaviors-that-help-leaders-manage-a-crisisThis is very clear and easy to understand. Thank you.
Many countries have been affected by global economic and financial crisis and caused rising inflation and unemployment rates. For an example, Covid-19 pandemic caused economic downturn due to prolonged lockdown. Generally, crisis is an unexpected situation that cannot be predicted in advance and it affects politics, society and the economy. The most important managerial challenges are cancelling bonuses, pay reductions, increasing employee stress and in some cases hiring will be halted. These issues cause slow performance as well. In order to manage the crises efficiently at times of recession/economic downturn, manager or management must take good decision while still under stress, to mitigate the loss or problem that the company or business facing. The decision is to choose the right strategy and to implement it. A SWOT analysis will guide to identify areas that need to be improved in order to respond to an economic downturn. It also gives the ability to identify new opportunities the economic downturn may present. Besides that, financial analysis of the business including profit, loss and cash flow will be helpful for planning or to set strategies to overcome the economic downturn. Next step will be risk management. It helps to monitor the business’s performance and to identify the issues that affecting. After identifying the risks, they should be analyzed, evaluated and treated to minimize the impact. It is important to develop and review the risk management plan. Furthermore, during the economic downturn, it is best to manage the finance by monitoring accounts and cash flow. Besides that, managing the staffs are also important during economic crisis by giving proper training for staff and also to let go some of the staff if need to, in order to save money. Networking plays important role during recession as it helps to understand how other businesses are coping and also to get to know new clients and sometimes to even to seek assistance.
In my opinion, in times of crisis, the most critical managerial challenges are to have a CEO that has a clear and compelling vision to face the problem, bring out the company from the crisis and survive the crisis with successful results. This CEO must understand the company’s situation (i.e. company economic conditions, business decline due to recession, etc) and be bold enough to make the decisions that aligns with his vision. To achieve this, the CEO requires a strong management team and organisation; thus a restructuring or reorganisation of the current structure if necessary is unavoidable. Workforce reductions, restructuring of business portfolio, including eliminating underperforming units/departments and assets, using workforce talents, and exploring or venturing into other profitable businesses are activities that the CEO and the executive teams need to study to survive the crisis. Quick, smooth and immediate implementation of these crisis response strategies and actions will transform the company from surviving mode to a successful market leader.
Other than that, leaders must find the right balance between rigorous cost-cutting and creating an entrepreneurial context that allows sustainable growth. A crisis is also when managers can demonstrate that they are competent and skilful. One of the opportunities is venturing into other businesses that may have less impact on an economic crisis, such as healthcare, education, consumer staples etc. One of the examples is Grab, where they explore the food delivery business as an addition to their transportation business, thus creating an opportunity for them to survive the COVID-19 pandemic fiasco. Grab proactive leadership saw the surge in demand for food deliveries and immediately filled the need. With their marketing, easy to use apps, workforce, promo, discounts offer, and loyal customers, they managed to dominate the food delivery business in Malaysia.
On the other hand, government intervention helps promote economic growth to tackle business closures, poverty, and unemployment, especially for small and medium enterprises (SMEs) during the financial crisis. In Malaysia, the examples of government intervention are providing grants to SMEs, special relief facility, employer COVID-19 assistance programmes, wage subsidy programmes, reducing the interest rate from 3.75% to 3.5% and providing the amount of RM500 million under the micro-credit scheme which makes the total fund for the scheme RM700 million with the 2% interest and without collateral to promote the development of entrepreneurship, managing unemployment and inflation rate in the country. All the government intervention policies will definitely increase government debt. However, good cash flows to individuals and SMEs help grow GDP because the economic activity will increase.
I agree with your point that the CEO of the company should play a vital role in ensuring their success through crisis.
When the economy is in a crisis, a company’s revenue and profit suffer, forcing it to use crisis management strategies including cutting costs and improving efficiency. It may be necessary to stop hiring as a first step. Even when a post is vacated, managers may choose not to replace it, resulting in understaffing in their departments. Departments that are understaffed may see a drop in production and performance, which may lead to low morale and a lack of drive among their workers. In times of crisis, the business may even take severe steps to reorganize the organization and conduct out workforce reduction activities, which is one of the most difficult issues for managers.
Management must first investigate and appreciate the true nature of the impact of the downturn on the company to effectively deal with problems caused by recession or economic downturn. Simply said, understanding the present state of your company’s health is essential for any serious planning. Additionally, you may identify any unproductive goods or services, as well as your customers since available capital as well as consumer spending might both be lowered during a recession. This results in cost-cutting measures being taken and employees being laid off when the firm is experiencing financial problems, further depressing morale, and productivity. Maintaining control over change while still providing enough assistance for employees is a tricky balance that managers must achieve. Management must ensure that all workers are informed and aware of the company’s employee assistance programme, which may be able to aid them in coping with their financial issues when they have no choice but to lay off employees. To the long-term, it is necessary to keep an eye out for fresh chances and prepare ahead when dealing with crisis management and performance management.
Hi Everyone,
Can Ignore this as wrongly copy and paste here.
What are the most important managerial challenges at times of crisis?
In a crisis, numerous difficulties present themselves, all important, all urgent. A natural response may be to “batten down the hatches” and focus solely on today’s problems. Prudent management is of course necessary, but it is important also to recognize the opportunities presented to challenge old ways of doing things, to take advantage of weaker competitors, to plan for the changed marketplace that will emerge. Effective management will help ensure your business is best placed to come through the bad times re-energized and fit for the future. Thriving in a downturn requires greater diligence and skill than during more favorable economic times. However, the rewards can be greater as businesses that adapt quickly with the right strategies can not only grow, but position themselves strongly for the inevitable upturn that will emerge. Addressing the points above will help ensure your business is best placed to come through the bad times re-energized and fit for the future.
How do we manage crises efficiently at times of recession / economic downturn
1) Identify unprofitable products and customers
When resources are limited it is critically important to be aware of the profitability of individual customers and products. Profitable customers and products need and deserve investment – not least because they will be at risk of loss to competitors – whilst unprofitable customers and products require detailed analysis to determine whether or not the position can be rectified. Once you have identified your profitable products and customers you should invest the time and resources to stay close to them. You need to understand how they are impacted by the downturn and convince them of the benefits of your product or service.
2) Careful tax planning
It is important not to lose sight of the importance of careful tax planning while dealing with the new management challenges presented by the downturn. While still ensuring that your organization remains fully tax compliant, it should be possible to improve your cash flow position by reducing or deferring tax payments to the Tax Office. Opportunities here would include making maximum use of losses in calculating Preliminary Tax Payments and ensuring that all available deductions are being claimed. At a more strategic level, falling asset values can also be taken advantage of for crystallizing losses and tax effective succession planning. From a human resource perspective tax efficient remuneration strategies is more important than ever; likewise, the tax implications of any workforce reduction which proves necessary – for both the business and the individuals concerned – should be closely examined.
3) Cost reduction
A key action at this stage is to increase cost consciousness throughout the business, get people involved and reward measurable contributions. In the longer term, cost reduction will involve driving down the business break-even point to as low a level as possible – making costs variable rather than fixed in order to minimize vulnerability to a downturn. This will involve examining just about everything – the market the business should be targeting, the product or service offering, the opportunities for outsourcing or sub-contracting manufacture, the desirability of centralizing or outsourcing support functions, reworking the management information system, redesigning remuneration policies. This kind of change cannot be achieved in weeks or months, but the threats presented by the downturn will persuade all stakeholders of the need for regular reinvention.
Agreed on your points of view where the effective management can help the business to retain on the market and overcome the crisis through the bad times re-energized and fit for the future.
Thank You Pub Hon.
COVID-19 pandemic really opens our eyes every aspect in our life. The impacts are on the macroeconomics like unemployment and inflation are showing the big impact during this crisis. The high employment rates shows that how well our economy is operating. So, it means with the high rate of unemployment means our economy is not doing good. With the high rate of unemployment, it shows the negative trend in labour demand. For example, during COVID19 pandemic, some sector like airlines, travelling is the biggest sector get impacted on this.
Secondly, when we look at the inflation the higher production costs owing to supply chain interruptions and physical and cross-border labour supply constraints might contribute to cost-push inflationary pressures. It is possible that the initial pandemic lockdown has changed the level of market power enterprises may apply, eventually impacting equilibrium inflation. Inflation causes consumers willing to pay more for the product. Based on BNM, the headline inflation increase in Q1 2021 is due to the base impact of fuel costs and the delay in the tiered electricity tariff refund.
During crisis, manager must play a big role on handling the management. Our people are the great asset to the company. So, manage should priorities and care about employee in term of safety and care, customer care and financial liquidity. Manager also need to keep an eye on a daily priority dashboard. And they also need to keep the engagement with the team while reach them out and give open space to the team members to share their states of mind along while working from home.
YES. agree with Nur Aina that during the crisis, talent is the most important resources to guarantee our company survival. Good manager will increase the potential profit for company, while those bad leaf in the organization should eliminate.😇
The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
Effective managers – whether or not they have past recession experience – must analyze the downturn’s repercussions and what they mean for their business and its survival. Then they should answer the critical questions – what should we do differently, and what should we do better?
The key to survival is often to get the small things right rather than radically altering every area of the operation. Numerous practical measures can mitigate the downturn’s impact and position the business to thrive when economic conditions improve.Understand your customers: During an economic crisis, the customers often get hit due to poor cash flow. Thus, the management should need to understand how the customers behave. Whether or not we need to extend the payment term for the customers to avoid bad debts. Moreover, management needs to understand the customers whether or not they will downgrade to the entry-level model, purchase the same product less frequently, or seek an alternative product or service. When resources are scarce, it is crucial to consider the profitability of specific consumers and products.
Effective working capital management: When ‘cash is king,’ everyone in the business should be focused on reducing working capital investment. Also, cash collection should be managed proactively. Inventory balances should be kept at the minimum level to ensure that agreed-upon customer service criteria are met.
Cost reduction: During a downturn, management must prioritize expense control and cost reduction, and management should begin with a clean slate. Sustainable cost reduction entails transitioning from your current cost base to a lower-cost model.
- This reply was modified 1 year, 10 months ago by Lik Wai Toh.
Some of key notes, good ones. I think managers need to note these points as well, not only CEO. When crisis come, very easy on panic mode.
what should we do differently, and what should we do better?
Understand your customers
transitioning from your current cost base to a lower-cost model.
- This reply was modified 1 year, 10 months ago by
The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
Using the pandemic as an example of a recent crisis, it had significantly impacted the economic and labour market. We have seen disruptions to production, logistics, and supply chains across the world. Businesses are also facing challenges such declining revenue, insolvencies and job losses. One of the main issues during the pandemic was the lock down and border closures which had caused employees of businesses unable to carry out their usual job and these companies were not able to hire workers as well due to mobility. Because of many uncertainties, management were not able to make investment decision as well, as they are unable to foresee how long the pandemic will last for.
During the pandemic, labour supply declines due to quarantine measures and a slowdown in economic activity. Employment impacts will then cause income losses for workers. The loss of labour income will translate into lower consumption of goods and services, which in turn impacted the continuity of businesses and the economy.
To manage such crisis, firstly would be health protection at the workplace and across communities. This includes provision of protective equipment to employees and also the option of remote working. Secondly, large-scale and coordinated policy efforts should be taken to provide employment and income support to stimulate the economy and labour demand. This includes:
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- Fiscal policies such unemployment benefit and tax relief for low income earners
- Accommodative monetary policy such as interest rate reductions
- Lending and financial support for specific sectors such as SMEs
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*Revised response
The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
Using the pandemic as an example of a recent crisis, it had significantly impacted the economic and labour market. We have seen disruptions to production, logistics, and supply chains across the world. Businesses are also facing challenges such declining revenue, insolvencies and job losses. One of the main issues during the pandemic was the lock down and border closures which had caused employees of businesses unable to carry out their usual job and these companies were not able to hire workers as well due to mobility. Because of many uncertainties, management were not able to make investment decision as well, as they are unable to foresee how long the pandemic will last for.
During the pandemic, labour supply declines due to quarantine measures and a slowdown in economic activity. Employment impacts will then cause income losses for workers. The loss of labour income will translate into lower consumption of goods and services, which in turn impacted the continuity of businesses and the economy.
To manage such crisis, businesses can build their business continuity plan to sustain ongoing operations at a lower capacity, and facilitate recovery once the crisis is over.
- Health protection at the workplace and across communities. This includes provision of protective equipment to employees and also the option of remote working.
- Clear communication plan on the company’s strategy and policies
- Update customers on any changes in the business and also obtain feedback if they are facing any issues such as delayed payments
- Reaching out to suppliers to check on any supplies delays due to production or logistic so you can meet your customers’ expectations
- Evaluate capacity and resources to plan labor demand and supply that aligns to production
- Make plans for post-pandemic such as purchase of materials and the recalling of additional employees back to workplace
Totally agreed Stef. Communication is on key point in surviving the crisis.
As unemployment rates increase, inflation decreases; as unemployment rates decrease, inflation increases.
Governments can use wage and price controls to fight inflation, but that can cause recession and job losses. Governments can also employ a contractionary monetary policy to fight inflation by reducing the money supply within an economy via decreased bond prices and increased interest rates.
One of the biggest challenges to the economy when a recession or economic downturn happens is the reduction of spending power of the consumer. Some consumer may have lost their jobs resulting in a reduction in their income. Consumers who are still working would of course be more cautious with their sending the increase their savings in anticipation that they might be next on the chopping chop. This kind of sentiments amongst consumer will definitely effect the economy as a whole. As consumers are at the receiving end of most products and services, when they stop spending, it will have a domino effect on the economy.
So during this times of recession we often see steps or actions being taken to promote consumers to spend or to increase their disposable income so that they continue to spent. Lets took at the recent pandemic we had and its effect in Malaysia and the steps the Malaysian government did to promote spending. One such action was to provide option for citizens to lower their mostly EPF contributions from 11% to 9% thus increasing their monthly disposable income so that consumers have more RM to spend at the end of the month.
Another action taken by the government is to waive the Sales & Service Tax (SST) for private vehicles which saw the prices of cars reduced by a couple of percent thus promoting people to purchase new vehicles. Many of my friends took this opportunity to change their vehicles as well during this SST waiver period. For the tourism services sector, the government provided RM1000 income tax deduction for local domestic holidays which include hotels and local tourist attractions promoting people to go for holidays and spend.
Many people are under the impression that during the recession is good to keep as much money as possible. Of course this is good for your own personal well-being but if we look at a bigger picture if every single Malaysian does that and spend very little and save their money only, we will see a huge collapse of many sectors of our economy and it might not recover back. As when the spending stops, it will create a domino effect that will impact the entire supply chain.
The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis?How do we manage crises efficiently at times of recession / economic downturn?
As a result of crisis, numerous organizations are in a battle for their business survival. Crisis exposes an organization to uncertainty and substantial consequences. Fast business change, varying economic settings, problems between or with employees, unforeseen social health and technological deviations and political consequences is considered the root volatility in business ecosphere. This uncertainty seems to be out of control which eventually results in economic crisis. As profit decreases, organization will usually stop hiring entirely. To make costs savings, organization also bound to not invest in new equipment and stop any new product or services rollout. These cost saving initiatives may backfire the organization in economical standpoint due to uncertainty of the market share. The business may reduce workers, additional work to be done by smaller workforce. This affects morale and motivation of the workforce. Downturns are inevitable, nevertheless if one plot a counter idea in advance, their business can endure and cultivate better outcome during crisis. As basic for any organization they should frequently evaluate the healthiness of their business whereas accommodate properties such as product and services required as essential during the moment of crisis. Data statistics is the finest technique to encounter these challenges. The situation brings to a point where data is crucial to apprehend what the system of measurement concludes pertaining to daily operations. Once one recognizes problematic portion of a business, they should render changes that will drive business beyond in every economic condition. Not every single setback could be deciphered at once. Giving precedence to concerns with the maximum damage towards client satisfaction, organization culture and result. As soon as the recession sets a crush on staff’s morale and number, organization should focus on by what means they can make the most out of the head count they now have in place. This comprise of giving reassurance and comforts towards current workforce and recognizing new leads in the company which could motivate their peers. A decent manager pay attention to their staff’s needs which in return the manager is given a well-ordered effort from his/her staff. If one become accustomed to these approaches, their business will stay well organized in the direction of surviving any economic condition.The most important managerial challenges at times of crisis are reevaluation of their company/business health, decision making, and adaptability. This is important as managers and leaders need to know where they stand, in terms of finances and resources to be able to make decisions for the company’s best interests, including measures like workforce reduction (WFR), furloughs, and salary adjustments. Also, the management should always be adaptable with the current situations and be able to enforce policies and motivate their employees during difficult times.
To manage crises efficiently at times of recession/economic downturn, management might need to reassess their workforce and processes. One of the ways to manage the crisis is to introduce work from home (WFH). This can promote health and safety for the employees and also reduce cost of maintaining the office premises. However, the management also needs to look into the technology literacy of their employees and encourage online training to create awareness and upskill. WFR, mutual and voluntary separation are also some of the options to save cost. but, the management needs to ensure that they have a workforce that can deliver what they are supposed to. In other words, maintaining and retaining appropriate talents.
Good point there, Hamizah. By allowing working flexibility such as working from home or hybrid working, organizations could save fortune in facility maintenance and also at the same time fostering employees’ job satisfaction which leads to higher productivity.
A good example Mizah on the work from home part. Working from home can be positive for both employers and employees. Increased productivity, improved work-life balance, and reduced costs are just some of the ways remote work flexibility can be mutually beneficial. While remote employers may reimburse employees for their at-home work setup, there are significantly fewer costs associated with starting a remote company. With a non-remote company, employers need to pay for building rent, utilities, office supplies, office maintenance and cleaning, pantry snacks and coffee supplies. This can lead to a lot of savings for companies.
The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
One of the crisis which gave big impact on our country is covid-19. Due to covid-19, cause a lot of downfall in out country which gave a big impact on our economic downturn and made people lost jobs and bankruptcy of a lot of companies. Due to pandemic it made people to struggles a lot and some people lost their life too. There were many managerial challenges faced during crisis. This is the crisis that managerial faced:
1. Optimism Bias
– Since the managers and their organization never seen this crisis before, the past experience which they gone through would not be enough to face this. The common problem would be the managers will be optimism bias, both collectively and individually. The managers will be reluctant to bring forward the date of an expected crisis rebound or minimize duration of expected business closure. They wont believe how bad the situation will turn out during crisis period, while the organization ends up planning for a much milder scenario than transpires.2. Informational instability
– During covid-19 the information was unstable. Epidemical date were shifting rapidly: infection and mortality rate, length of infectious period and the extent of immunity duration after infection. The speed of information affected a lot during this pandemic. The business strategy mostly will be based on assumptions about the course of the events happened. Most likely planned scenario is unachievable in today crisis. For example, rate of transmission covid-19(Ro) will impact the disease, even slightly change of numbers can dramatically increase the expected infection and mortality rates and change government measures and consumers behavior.3. Wrong answer
– Instability of information, leaders must be aware that possibility of the information they thought was clear and certain might turn out to be wrong. Managers cannot make own assumptions as facts, since new information can make their judgement become invalid. Managers need to regularly need to revise and revisit their understanding and assumptions, which is a part of organization continuous learning. Leader’s need to override the initial wrong answers quickly to overcome the crisis to look for new opportunities.4. Paralysis by Analysis
– Instable and ever-changing date can make leaders to delay decisions as they search for more suitable options. They never might be find it due to extent of crisis. Delayed decision making is not suitable in a crisis such as covid-19. Without any decision made it will cause consequences int the end. Leaders must act on what they know, and adapt to crisis situation once new information become available.5. Organizational Exhaustion
– In extreme uncertainty, the organization might not come back for business for long time, sometimes years. This will expose to risk of exhaustion to managers and their team and never-ending changes. A crisis may galvanize a company’s senior managers and employees in its initial phase. But once that adrenaline fades, continuing uncertainty becomes enervating. At worst it can take a toll on managers’ mental and physical health, causing major harm to organizational effectiveness, from a decline in responsiveness to a deterioration in the overall quality of work.To overcome the crisis management, the organization need to respond to extreme uncertainty, managers need to estimate the magnitude and expected duration of the crisis. The organization need to activate crisis mode and the leaders need to switch to an operating model to make the organization sustainable but reactive to continuing uncertainty over months or even years.
Activating Crisis mode
Earlier the manager determine the crisis, the faster and effectively organization can respond to overcome. Effective response enabled by several fundamental elements.1. Early warning system
– Managers/leaders need to develop an understanding of the kinds of events that trigger a crisis. This will establish appreciate monitoring and early warning systems. For example this can be linked to intergovernmental oceanographic commission’s early warning system, which rapidly relay data of approaching tsunamis to potentially affected communities.
2. Integrated nerve center
– Managers must have an organization structure which a common understanding of the crisis can be developed quickly and important decision can be taken with authority. Such a structure must be part of organization’s ready-made crisis-management plan, but leaders must prepared for the possibility that preconceived structures may not suitable in existential crisis. The leaders must create new operating model if the situation requires one. The organization need intrgrated nerve center to oversee holistic crisis response so the leadership must identify an inner core: a small group of managers who can make judgement and internal credibility to lead the organization. Once identified, these leaders need to make prompt decision-making authority throughout the crisis, including the top-level support needed to make big decisions.3. Transparent Operating Principles
– Managers need to take high level approach to guide them throughout crisis. This approach should be set as operating principles made available throughout the organization. This principle will guide into decision making throughout the crisis and provide standards against which management actions can be measured. One example of such transparency can be seen in Airbnb’s response to the consequences of the pandemic for the company—a massive drop in revenue and significant layoffs. CEO Brian Chesky wrote an honest letter to the staff explaining in detail the measures being taken to ensure the company’s survival and the ways in which the travel business was being reshaped in the crisis.Reference
Finn, P., Mysore, M., & Usher, O. (2020, November 16). When nothing is normal: Managing in extreme uncertainty. McKinsey & Company. Retrieved January 27, 2022, from https://www.mckinsey.com/business-functions/risk-and-resilience/our-insights/when-nothing-is-normal-managing-in-extreme-uncertainty
During times of crisis, such as the COVID-19 pandemic, significant managerial challenges have emerged, including hiring freezes and layoffs, salary freezes, canceled bonuses, pay reductions, changes in the way work is done (for example, working from home), and increased worker stress and burnout, among other things.
The less vulnerable a company is to dangers or unanticipated occurrences, the stronger it is. Financial management isn’t the only way to improve the company. To maintain and expand the consumer base, keep employee morale high, and enhance the company processes are all included in this guide. Seeking opportunities to network and form partnerships can help the company reduce its risk exposure.Consider the following ideas to help companies during an economic slowdown.
1. For customer service, it’s all about meeting the client’s expectations and exceeding them. If you give good service, customers are more inclined to stick with your company. So you’ll be able to maintain and grow your current clientele more easily. Adapting your company to new markets, goods, and services may be part of this. Maintaining client satisfaction during an economic recession may include maintaining customer reward or loyalty programmes, adjusting the items or services you provide, and diversifying your firm to minimize the impact of a big customer’s departure. The need for delivering excellent post-sale customer service becomes even more apparent when the economy is in a slump.
2. Taking a fresh look at your marketing tactics might help you generate new ideas for growing your business and make better use of your advertising budget. Your competitive advantage should be the focus of your marketing efforts. It is important that your unique selling proposition (USP) helps you stand out from the competition. Along with this, you must devise methods for gauging the success of your marketing campaigns. The cost of promoting your company may be prohibitive, which is why it’s critical to take advantage of the many low-cost options accessible to you, such as social media and word-of-mouth marketing.
3. Check to see whether your HR strategy is up-to-date. To appropriately price your items or services, you should use your plan to describe your workforce expenses. Motivate and energize your employees by letting them know what’s going on at work. Let them help you make decisions and come up with solutions. Changes in the workforce may be necessary during an economic slump. Reduce the number of hours worked if you can (e.g. you could ask some of your full-time staff to work a 4-day week, or use job-sharing arrangements). If you have to let some employees go in order to save money, make sure you are aware of your legal responsibilities in the termination process. Your staff might also be trained for additional jobs. You may perform a staff skills evaluation in order to determine what training your employees may require.
4. During a downturn in the economy, it might be helpful to learn from the experiences of other firms. Your firm may also reap the benefits of a wide range of new customers, suppliers, and business partners. You may want to build partnerships with other firms, such as by giving complementary services or discounts.
5. You may be able to react to changing market circumstances and remain ahead of your competition by developing creative methods. As part of this process, you should examine whether or not employing technology can boost productivity, cut expenses, and make your firm more competitive, for example, by establishing a customer management system or doing business on the Internet.
6. For assistance in weathering a financial crisis, engage a financial advisor or other business experts like accountants and consultants.
What are the most important managerial challenges at times of crisis?
During crisis of economy, the management will do cut the cost operation by reducing headcount, no increment, high work load, no hiring and very high KPI to meet.
As a results, the challenges that management will face as below:
1) Reduce in work quality because the staff have take extra responsibility to meet the organization goal. They may less focus due to need to work extra hours to meet the KPI and it also effect their motivation because they need to work without any salary increment.
2)Absenteeism and unexpected leave among the staff will happens because they will take rest and run away from their responsibility.
3) They may have conflict with the management when they has been told to take extra responsibility and learn new staff which is not their job scope.
4) The staff also will undergo heath problem like stress because of their high work load and pressure from the management.
How do we manage crises efficiently at times of recession / economic downturn?
Firstly, we need to understand the situation of bad economy and plan our expenses based on our basic need. We should save our money to prepare for the worst scenario. Example, cook at home will be cheaper than buy food at outside for family.
Secondly, we should respect the management decision during the recession time. We should able to understand that their decision is to make the company sustain in business. So, we should avoid any conflict with the management and try to communicate with them humble to make them understand our point.
Thirdly, plan the work strategically to avoid any error. The staff can discuss with their superior to come out with the framework to handle high work load without any stress and pressure.
Finally, manage our health is very important. There is no point for we work hard but end up with health problem. We have to take rest in between the high work load to avoid any major health problem. It is advise to meet the counselor to get advise on how to manage the stress in work. All the people should maintain their healthy live style to create better community.
Q3 What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
Many industries were impacted during the recent crisis of Covid-19 pandemic. For example, in Tourism Industry, ARBA Travel & Tours Sdn Bhd have made it to the Forbes 30 Under 30 (Asia) 2018 list in category of retail and e-commerce. Compared to other travel and tours companies, ARBA focus on digitalization by developing their own apps that linked to WhatsApp to incorporate the Malaysian customer’s behaviour of highly engage with WhatsApp.
Due to the closure of international borders as well as restriction movement orders domestically, like other company, ARBA faced a huge lost for business as well as commitment to refund all the booking to the customers. The same young leaders, with highly talented team members have transformed their business with their core, which is the retail / e-commerce apps that linked to the WhatsApp.
During this period, many retailers are struggling to run a small business online and unstructured via WhatsApp and mostly spamming to as many groups as possible. The small or individual retailers may not be able to compete with giants in the established platform like Shopee or Lazada to convert the visitors into customers. ARBA use the similar concept with several enhancements like catalog functions that fit many types of businesses, easy selection, additional sales analysis and many more and established as Yezza. Recently, Yezza has been backed by “Y Combinator” that is housing many successful startup such as Airbnb, dropbox, coinbase and many more. Most importantly, Yezza is a team of 100% Malaysia local Young Entrepreneurs.
Based on the above success story, in my observation there are several important managerial challenges which to analyse, for example with SWOT analysis and identify the opportunities based on the core strength in terms of possessed skills among the existing employees, unique knowledge and technology etc.
For leaders, it is important to quickly identify the change in customer’s behaviour and decide the short, medium and long term strategy. Once it is decided, all mid-level managers need to quickly plan for operational at optimal and efficient while at the same time all levels of managers and leaders need to give more attention of the employees needs in term of emo-tional, shelters and career supports.
If a country’s GDP growth records negative two consecutive quarters and witnessing labor laid off, then we are in a recession. If economic activities significantly decline in a country, it will directly impact the companies revenue and profit which will result in loss of jobs and reduction in consumer spending.
The tightening of financial conditions is one of the first effects of recessions on companies. Interest rates may first rise, then decrease as the monetary floodgates open, but lending standards in the market tend to tighten throughout the recession, and lenders are more discriminating of the risks they are ready to take on at any interest rate. Even major corporations may have difficulties repaying their debt, which they rely on to keep their operations running. A recession affects a company’s accounts receivable, and liquidity concerns affect consumers and businesses all the way down the supply chain. Customers that owe money to the company may pay more slowly, later, or not at all. The afflicted company may therefore be forced to pay its own payments slower, later, or in smaller increments than their initial credit agreement stipulated due to diminished revenues. Making late or delinquent payments lowers the value of a company’s debt, bonds, and capacity to raise capital. The company’s capacity to service its debt (pay interest on money borrowed) may also be harmed, leading to bond and other debt defaults and further damage to the company’s credit rating.
Obviously, when a company declined in revenue and profit, the shares of stock of the company decline but the most significant effect of reduction in customer spending shall be jobs being laid off. The businesses will have to reduce their workforce to overcome the revenue losses but need to maintain productivity. Therefore, all the work which was done previously by 2 or 3 workforces shall be forced to be carried out by 1 worker. Employee productivity may increase, but morale may deteriorate when hours are stretched, work becomes more difficult, compensations halted, and the threat of additional layoffs continues.
There will be impacts such as manufacturers compromising in the quality of the products to remain the same selling price in the market but trying to reduce the cost by using lower quality raw materials, smaller companies will have smaller reserves which may have larger cash flow issues and companies will cut more costs which reduce the access of consumers.
Managing a recession crisis is one of the toughest tasks of every company and many companies would not survive and force to close down but many companies have survived and some even gain from the recession. Companies shall initiate to manage their workforce first. Every recession does not last long. Therefore, having mutual understanding between workforce and company will be the key to survival. Workforce and company shall work on a win-win basis for salary reduction and benefit reduction temporarily. This will allow the workforce to retain their job and companies able to reduce their operation cost. If manufacturers, it will be good if they can close down underperforming brands or plant to reduce unnecessary operation and overhead cost. Settling these two issues, next the company shall work on the restructuring of their company debts. If it fails, then companies maybe be declared bankrupt and may go out of business which is not healthy for the country’s economy. Therefore, the government shall intervene and shall assist the companies in restricting the debts. Another good option shall be merger and acquisition. Not all companies will be in trouble during a recession. Some larger companies or some new companies will definitely emerge at the top and benefit from the recession. Larger companies can purchase smaller companies and leverage their expertise and benefits. This also may be able to successfully manage the recession crisis.
I do not disagree, government shall intervene during tough time to get the economy going, workforce and company shall work on win-win basis, however, there would always two sides of consequences. Not everyone would be on the winning side. Some companies would force to go out of business or takeover by larger companies, some employees have to accept the faith that their employment services are no longer needed due to downsizing or foreclosure.
The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
First we must consider the effects of the downturn and what
it means for their business and its survival. Then they should address the key
questions – what do we need to do differently, what do we need to do better?
Often, the secret of survival will be getting the simple things right rather than
embarking on wholesale radical change in every aspect of the operation. Many
practical steps can be taken to minimise the effect of the downturn and position the business to emerge strongly when economic conditions improve.1. Understand the true impact of the downturn on your
business. When assessing how the downturn will impact your business you should pose
these questions to yourself and your colleagues:a. How will our customers behave – will they trade down to the cheapest
model in the range, purchase the same product less often, or seek a
substitute product or service?b. How will our competitors react – will they work with customers to reengineer their products, seek to maintain volumes by cutting prices, or
seek alliances to reduce market competition?c. What do we need to do well to minimize the impact of the downturn
on us – play to the strength of our existing customer base rather than
seek to expand, focus on those customers most likely to thrive in difficult
times, suspend product development in favour of supporting existing
brands, revisit our pricing policies?You need to assess how different segments of your customer base will behave
in the downturn, how price sensitive they are and how loyal they are to your
product or service. You should also assess how strong your competitors are. Will they see the slowdown as a threat or an opportunity?
You then need to adapt your strategy to the changed conditions and assess whether the new strategy has implications in other areas such as, for example, supply chain,
production capacity or financing requirements.
Given the volatility which exists in current markets it makes
sense to subject your assessment of the impact of the
downturn on your business to stress testing and scenario
planning. Only when you have considered the potential
range of future outcomes can you determine the optimum
course of action to take. When conditions are difficult,
the most successful businesses are the ones that react
quickest – those that take the tough decisions early and
lead rather than follow. Once you have defined your new
strategy, share it with management and drive it. Make your
key people accountable for targets which are consistent
with your revised strategy.We could and we should manage crisis positively and effectively. Take the challenge as opportunity. There is a saying “In every crisis, there is an opportunity”. In a downturn, numerous difficulties present themselves – all important, all
urgent. A natural response may be to “batten down the hatches” and focus
solely on today’s problems. Prudent management is of course necessary, but
it is important also to recognise the opportunities presented – to challenge old
ways of doing things, to take advantage of weaker competitors, to plan for the
changed marketplace that will emerge. Effective management will help ensure
your business is best placed to come through the bad times re-energised and
fit for the future.
Thriving in a downturn requires greater diligence and skill than during more
favourable economic times. However, the rewards can be greater as businesses
that adapt quickly with the right strategies can not only grow, but position
themselves strongly for the inevitable upturn that will emerge.The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
YES, agree that Unemployment, Inflation, and growth often end in conflicting policy approaches and government intervention. During recession (economic downturn), consumer spending power decrease and they might lost their jobs, hence Unemployment increase; During boom (economic upturn), prices of the goods and services increase, thus, inflation increase. The Phillips curve relates the rate of inflation with the rate of unemployment. The Phillips curve argues that unemployment and inflation are inversely related: as levels of unemployment decrease, inflation increases. 😇
The most important managerial challenges at times of crisis, is to recognizing that a company faces a crisis is the first thing management must do. It is a crucial step, especially during the onset of crises that do not arrive suddenly but grow out of familiar circumstances that mask their nature. Top management need to strategize their plan during the recession, which department need to cut cost, where the resources should deploy, the company direction, etc. All of these decision is to ensure company survive, and this is the most important matter for company to overcome this challenges during recession.
When assessing how the downturn will impact my business I must evaluate myself on these questions:
• How will our customers behave – will they withdraw from the course or choose the cheapest course, OR turn to my competitors who offer cheaper price.
• How will our competitors react – will they cutting prices, or seek alliances with me to reduce market competition?
• What do we need to do well to minimise the impact of the downturn on us – run again our company SWOT analysis, evaluate our strength, weakness, opportunities and threat. should implement our aggresive plan or conservative plan, re-evaluate our pricing policies? 😇
When the economy is in a state of recession, unemployment and inflation will be prevalent. The government must ensure that the recession is resolved and that the economy continues to expand. The most significant managerial issues during times of crisis are the management of economic growth in conjunction with inflation control in the economy, as well as the control of the economy itself.
Most important managerial challenges at times of crisis are to manage the economic growth together with the inflation control in the economy with the control of the economy. crises are well managed during times of recession / economic downturn in two ways:
– Through the government’s strategy of increasing expenditure on economy welfare through infrastructure construction or people welfare
– Through tax cuts. By cutting the cash reserve ratio, making loans more affordable, and purchasing bonds in the open market, the Federal Reserve increases the money supply and liquidity in the market, insuring rapid growth.
During times of crisis especially the one like covid 19 poses extraordinary challenges to management, such unprecedented events cause many unexpected challenges including decision-making by the management. Management needs to digest available information quickly to make informed decisions on the spot and update their decisions as new information becomes available. Moreover, making good decisions is hard as it requires sacrifices for the common good, and finally, implementing the decisions made is not easy as it requires persistence in the face of strong counterproductive social pressures. As the country faced lockdown, it was inevitable for nonessential businesses to fail and close down which led to a rise in unemployment, government decision to impose lockdown and closed borders effectively putting all import and export business on hold led to an economic downturn however this decision has to be made for the greater good. The most important way to manage a crisis is to communicate, businesses should not keep in the dark and let them go at the very last minute, businesses should let the employees know the status of the company and how the economic downturn has affected them. This would allow employees to have ample time to perhaps look for other opportunities instead of being stranded last minute. Before anything else, leaders should always be ready to face a crisis, leadership training in crises should not be foreign to them, they should take a refresher yearly basis, in addition, businesses should always invest in business continuity management plans, this can be of help to the leaders and business to react and manage the situation positively as they are prepared to a certain extent.
Q3: Most of the times during economic downturn or recession, a lot of businesses and organizations failed to maintain their sustainability to survive through the crisis. At times of crisis, the most important managerial challenges that businesses and organizations should seriously considered are the effects of the downturn and what it means for their business’ survival. Management should be able to address the key questions on what they need to do differently or better to minimize the effect of the downturn and survive the crisis. Beyond the survival factors, it is also a challenge for the management to identify strategies to position the business during crisis which later helps business to emerge even stronger when economic conditions improve.
In order to do manage the crisis effectively, management
should first understand the actual and possible impact of the economic downturn
on their business by assessing consumers behavior and competitors’ reaction during
the crisis. Through this assessment and analysis, business should be able to
identify and eliminate unprofitable products or investments to help them to
minimize the downturn effect to business’ sales and returns. Another important aspect
which is the prime focus for most businesses during crisis management is cost
reduction. As far as cost reduction does indeed provide the fastest and most
impactful strategy for quick survival, it is necessary for business to implement
sustainable cost reduction model which does not negatively affect business’
operations and assets. To do so, effective working capital management is the
main key which managements need to discover through proper economic crisis
analysis and reappraisals of business planning and strategies.During the times of crisis the leaders should adopt by get ahead of changing circumstances. After they seek input and information from diverse sources, they would come out the method or strategize to apply. In addition, the leader also need to take care of the team as they could be stress in the changing environment. So the leader should play their role by try to understand their team’s circumstances and distractions, but also find ways to engage and motivate the team.
In a recession, available capital can be both decline, which can cause a business to feel a pinch in their budgets. This means some difficult decisions may have to be made regarding product pricing, marketing initiatives, hiring, benefits and even new launches.
So, it is vital to understand about business day-to-day operations. The leader need to do the business assessment and strategize the best way to meet these challenges head on. Then, need to be restructure back the organizational chart, reevaluate the current product and services and readjusting the current benchmark and target. So, by prioritizes the issues can tackle the customer satisfaction. Lastly, the business also need to build a lean, effective team. By listening to the employees’ needs, and they will give discretionary effort for the business.
Malaysia is one of the countries that practice the Mixed Economic System, that is, the economic system that uses market mechanisms and justify government intervention in the economic activity. The housing market is basically subject to the market mechanism as other goods and services where price plays a major role. Generally, there are seven main forms of government intervention in the economy namely, subsidies, taxation, regulation and legislation, minimum price policies, maximum price policies, quotas, and government ownership. There are various perspectives of policy intervention in the land and property development process, especially when government controls land development.
Government intervention in the property sector implemented through basic and subsidies established by the government (Hoek-Smit, 2003) that is important in:
i. Improving public health facilities provided such as water supply, drainage, and environmental conditions are satisfactory.
ii. Improving fairness and equality and social balance. For example program for slum housing or housing programs for low-income earners.
iii. To overcome inefficient in the housing market. The existence of monopoly profits or home problems those are not qualified.
iv. Stimulate economic growth. Housing is not only creating jobs in the housing industry but also to the industries related to housing, such as industries producing building materials and housing equipment. Thus housing subsidies can stimulate the economy relative to other forms of government spending other. Most of the residential institution in the United States was established by the government during the economic downturn is intended to stimulate economic growth. (Hoek-Smit, 2003)
Basic housing Malaysia is to provide adequate housing, the ability-quality, and all the people from all walks of life, especially for low-income groups. The government has formed the basis and specific programs to achieve the basic goal of state housing. Kementerian Perumahan dan Kerajaan Tempatan who is responsible in the housing development. The government has introduced several incentives that essentially to promote home ownership and stimulate economic growth such as incentives stamp duty, feasibility in raising the repertory Housing Loan spending EPF to Purchase Home Second, Housing Allowance to lay accomplices and so on.
Government intervention in the real estate industry is also important in reducing the problem of growing speculation in addition to raising the price of real estate in the future consistent and relevant to improving the quality of housing and construction costs. Overall, buyers who want to buy homes and investors who buy for rental will not be impressed by short-term investors. Observed that the growth rate for the number of borrowers with three or more active housing loan accounts in 2013 has been reduced drastically to 4%, from 15.8% previously implemented measures to curb speculation. Borrower represents 3% of the total housing borrowers account. Property values also increased a lower rate, 8% for the first quarter of 2014 (4th quarter 2013: 9.6%). It is unlikely that real estate prices to be reduced, but it is likely to stabilize or increase at a slower rate in the future.
Government intervention in the control mechanisms with the developer. For example, the Government in Budget 2014 prohibits developers to implement projects profiled by DIBS to prevent developers incorporate interest rate guarantee loans to buyers during the construction period in house prices. The government also implemented several control mechanisms, namely through reduction Loan To Value (LTV) to 70 percent for housing loans for third-home purchases, HOC (Home Ownership Campaign) Malaysia 2020–2021, and review Real Property Gains Tax (RPGT). The implementation Guidelines for Acquisition of Properties aims to control the ownership of property by foreigners in Malaysia. It is important to stabilize real estate prices from excessive speculation and provide opportunities for local interests to purchase quality properties worth less than RM1 million per unit, mainly residential units.
Government intervention in the property sector is a very large role in influencing the impact of the budget on the property either for a long time or a short-term period. The role of government intervention are covering the entire planning, development, economic, social and political. It is thus indulged, the government has the power to oversee the market mechanism and resolve the problems of economic principles together with the private sector.
- This reply was modified 1 year, 11 months ago by Karen Xaviour.
This was my respond for forum 1 and not for this question.
Noted Karen 👌
- This reply was modified 1 year, 11 months ago by
As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment. Are macroeconomic variables a good indicator of business performance?
Economists determine an economy’s overall success by examining how it achieved such high output and consumption growth rates. Three macroeconomic factors are particularly relevant for this assessment: gross domestic product (GDP), unemployment rate, and inflation rate.
GDP is a unit of economic production used to quantify a country’s economic activity. Countries with larger GDPs generate more goods and services and often have a higher standard of living. As a result, many individuals and political leaders view GDP growth as a critical indicator of national success, frequently using “economic growth” and “GDP growth interchangeably. Thus, many businesses will increase their CAPEX spending based on the GDP growth. They believe they can increase the capacity and get the maximum return.
The unemployment rate is expressed as a percentage of the labour force. It is a lagging indicator, which typically increases or decreases in response to changing economic conditions rather than forecasting them. For example, when the economy is terrible, and jobs are scarce, one might anticipate increasing unemployment. Conversely, when the economy is developing at a healthy rate and jobs are available, one might expect that unemployment will reduce. Nevertheless, the organization’s HR department will monitor the unemployment rate closely. It is because the unemployment rate will impact the country’s overall workforce and affect the company’s talent retention strategy.
Inflation is the rate at which a currency’s value declines, increasing the overall prices for goods and services. The Consumer Price Index (CPI) and the Wholesale Price Index are the two most often used inflation indices (WPI). The inflation rate is essential for a business because it will affect the raw material price and eventually impact the margin or the goods or services. Due to the pandemic, the world is now in the cost-push inflation. Therefore, the central banks worldwide are monitoring closely, and they may implement monetary policy to ease high inflation in their countries.
Overall, each macroeconomic variable is an essential indicator for businesses because management will adjust the business strategy based on the study of macroeconomic variables.
Hi Lik Wai. Yes agree with you as this three factors actually really plays an important role in business decision making environment as it really interrelated. Over time, the growth in GDP causes inflation. Inflation, if left unchecked, runs the risk of morphing into hyperinflation.
For example, in a world where inflation is increasing, people will spend more money because they know that it will be less valuable in the future. This causes further increases in GDP in the short term, bringing about further price increases. Also, the effects of inflation are not linear. In other words, 10% inflation is much more than twice as harmful as 5% inflation.
Agreed with Bob, the high inflation will cause a lot economic & social issue in consequence, so government play an important role on this. 😇
As we discuss macroeconomic issues and identify problems related to the
economic meltdown, what is your view on the impact of macroeconomic
variables on the business decision-making environment. Are macroeconomic
variables a good indicator of business performance?Tracking of macroeconomic variables is an important element in business decisions as overall economic activity, economic policies (industrial policy, trade
policy, monetary policy, fiscal policy), inflation affects the business. Business depends on economic growth, any changes in overall economic environment affects the business. When the economy’s growth is slowing, demand will be reduced and the business will have to make the necessary adjustments to its production and operations. As for Inflation, we have Demand-Pull Inflation and Cost-Push Inflation. This is what we are seeing now as economy reopens and recover. The demand for goods has now increased, and if it outweigh supply, price will go up. Due to Covid, the cost of doing business increases due to reasons such as tight supply of workers and insufficient shipping containers. These scenarios will need constant business attention to continuously monitor the latest situation and act accordingly such as raising the selling price to accommodate for their increased cost of goods and overhead costs. When inflation is high, which in turn generates higher interest rate, businesses will need to reconsider their borrowings structure and overall financial planning.Macroeconomic variables such as unemployment rate and corporation tax rate are beyond the control of an organization. History has shown strong correlations between economic growth (GDP) and corporate profit growth. However, determining
whether a specific company may grow its earnings based on one indicator
of GDP is nearly impossible (https://www.investopedia.com/terms/e/economic_indicator.asp).One of the top leading indicators used is the stock market’s performance due to the reason that stock prices factor in forward-looking performance. Hence, the stock market can provide some indication of the economy’s direction, but only if earnings estimates are accurate. There is a risk in using this indicator as financial estimates may not materialize, which will then cause the stock price to decline.
Businesses may rely on leading macroeconomic indicators as one of their decision tool in predicting business cycles and to analyze whether expansions or
contractions needs to be planned in the near future. Purchasing Manager’s Index (PMI) is one of the most followed economic indicators because of its strong correlation with GDP. The information collected can be used to forecast the overall business
confidence and helps determine if it shows an
expansionary or contractionary outlook.If the economy is not doing well (eg, recession), GDP decreases or unemployment rate increases. In turn, businesses will foresee less optimistic performance outlook. When unemployment rate increases, businesses will also expect lower demand of their goods, which will negatively impact their performance.
Hence, businesses may utilize macroeconomics data as a tool in their forecast but it will not be a direct indicator of their performance. In summary, not all macroeconomics variables are indicators of business performance. The level and degree of correlation may vary and it is also dependent on other factors as well, such as size of companies, industries, type of goods and such.
YES I agreed with Stephanie, although macroeconomic variables are good indicator of business performance, but not all macroeconomics data apply to business operation. Besides, the impact of the correlation may different depend on the industry and company fundamental. 😇
First, it is affecting the economic growth rate. Businesses must adjust their sales rates in response to changes in the economy. To stay up with demand as the economy improves, business owners need to expand production rates. As a result, it contributes more to the overall pace of economic growth. Second, the interest rate has an impact on corporate success as well. Interest rate changes have a significant impact on firms that take out loans. Small company loans are used by a substantial percentage of today’s small enterprises to expand their operations. If interest rates climb, business owners will have to pay more. Third, unemployment. Consumers who have been laid off and are having difficulty obtaining new jobs do not have the financial power to purchase goods. While unemployment may be beneficial to business hiring costs, it may harm the company’s overall top-line earnings. Unemployment rates affect firms on a variety of macroeconomic levels. As a result, the business owner is selling fewer products and earning lower earnings.
Yes, macroeconomic variables affect business success and are a good indicator.
1. Consumer confidence is a metric that gauges how optimistic consumers are about the state of the economy. Consumers with high confidence are more inclined to spend money than those with low confidence. As a result, businesses are more likely to succeed.
2. Inflation usually happens when the quantity of money exceeds the supply of goods and services. The cost of raw materials, production, and utilities will all rise as a result. Goods prices must rise in order to keep the business afloat.
3. Economic growth is most likely the most crucial factor influencing corporate success. The business owner must meet the expectations of a powerful economic climate. The quantity of money invested in long-term improvement channels, as well as the finances of people living in the society at large in a given country, is determined by the country’s economic growth.
Yes agree here. Inflation can be very detrimental. Giving examples of country like Venezuela and Zimbabwe where their local currency has very little. Life of consumers there is very hard. I believe this situation is called hyperinflation.
Thanks for mentioning the example. A very good sample for reading to understand hyperinflation.
Dear Leonard,
There are three types of inflations. I believe Venezuela and Zimbabwe are more towards demand-pull inflation caused hyperinflation.
Good note on hyperinflation
Macroeconomics is the branch of economics that studies the economy as a whole. It is important for us to consider this during the decision making process. We should also consider the concerns such as national output, unemployment, and inflation.
Examples of macroeconomic factors include economic outputs, unemployment rates, and inflation. These indicators of economic performance are closely monitored by governments, businesses and consumers alike.
I think these factors definitely will impact the decisions that are being made by businesses. Take for example when unemployment rates are high, this will results in consumers having less spending powers and won’t be able to afford luxuries in life but seek out for more economical products and services to stretch their money. Businesses can use this indicators to make decisions on what products and services to provide during this period of time. Such as provide more lower cost options for the consumers. For example a restaurant might have special set meals or family set meals that can cater for a more economical savvy consumer group. It is better to have sales rather than zero sales. And if they keep on producing the same products and services in the luxury segment they might end up not having any business.
Overall this market variable indicate the overall health of the economy and thus can be used a gauge on how well businesses are performing. A business that is performing well will be able to keep jobs and to expand and create more job opportunities thus lowering the unemployment rate.
It is always the case that when there is an economy downturn, business will lack in performance and unemployment rate will increase. Since the businesses are able to use these macroeconomic variables to predict business performance, I’m sure it will be very helpful for the businesses to be more prepared in surfing through the waves of the economy downturn so that they do not result in having to layoff employees in such unprecedented times.
Agreed, most of the businesses that did not survive were most probably unable to gauge the impact and respond accordingly.
Macroeconomic covers the scope of the whole economy environment, impacting the growth of national income, the employment rates, private and government spending, and inflation. Therefore, tracking and understanding the movement of these macroeconomic variables is a crucial element in business decision-making environment as it helps the CEOs and managers to run the business. Economic activity, inflation effects, and economic policies such as trade policy or industrial policy is important in process of building up a company’s business policy and business strategy development.
The first group of inter-related macroeconomic variables that impacts business decision-making is the economic growth rate, national income, and the GDP. This is because the standard of living and income distribution of the nation’s citizen and the financial impact of investment and trade within a nation is one of the main factor to affect business. When the economic growth is at a downtrend, the economic environment becomes unfavorable to the businesses as the aggregate demand (AD) is reduced. The business decision-making also gets impacted by the inflation rate because when the price of goods rise, the purchase ability decreases, causing businesses to charge higher in selling their goods.
Another macroeconomic variable impacting the business decision-making is employment rate. When a recession happens or unemployment is high, the consumer spending rate will reduce causing the AD to decline and businesses will need to halt on any new projects or investments or even having to sell less products, causing decrease In profit.
All those macroeconomic variables mentioned above are significant indicators to measure the health of the overall economic environment as well as the business environment. They not only help to measure business performance, some industry also uses these variables to predict business performances for the next financial year.
Agreed. Most of the companies are using macroeconomic variables on decision making and for forecasting.
Macroeconomics variables include growth, unemployment, and inflation, and these do affect the business decision-making. These variables can help the CEOs and management of businesses to understand how policies, level of employment, cost and finances and inflation can affect their businesses and help them to predict, and strategically plan their business according to the growth and state of the economy. Identification of priority areas, estimation of resources, and coordination among various sectors will help the management to carefully devise their strategic planning to promote growth as per desired. Also, depending on the changes in the state of the economy, the management can understand the problems and issues that is happening in their environment and make decisions to apply fixes in the best interest of their company.
Indeed, macroeconomic is the study of economics as a whole, and the variables are important indicators to measure the health of the economy in a particular country or nation. These variables also helps the government to see the problems and fix them, and determine whether any interventions are required. This being said, it is consistent to the major goals to promote economic growth, limit unemployment and keep the prices stable while limiting inflation.
Crisp and well defined. Agree with your points 👍🏼
Macroeconomics is the study of the behavior of the economy. This is different from microeconomics, which concentrates more on individuals and how they make economic decisions. Macroeconomic analysis broadly focuses on three things that is national output (measured by gross domestic product), unemployment, and inflation. My view on the impact of macroeconomics variable on the business decision-making environment are as per below:
1) Gross Domestic Product (GDP)
Is a measure of a country’s output and production of goods and services. The Bureau of Economic Analysis releases a quarterly report on GDP growth that provides a broad overview of the output of goods and services across all sectors. An especially influential aspect of GDP is corporate profits for the economy, which is another measure of an economy’s comprehensive productivity.
2) Inflation
Is a key factor watched by economists, investors, and consumers. It affects the purchasing power of the US dollar and is closely watched by the Federal Reserve. The target rate for annual inflation from the Federal Reserve is 2%. Inflation higher than 2% significantly diminishes the purchasing power of the dollar, making each unit less valuable as inflation rises.
3) Unemployment rate
The unemployment rate of a country offers an indication of the economic health within a nation. A higher employment rate versus those unemployed indicates a stronger economy. When most citizens are employed, their spending increases the amount of money in circulation and boosts the economy.
Thus, I can say that macroeconomics variables are a good indicator to measure business performance. Macroeconomic indicators may perform better in specific periods, while others may be more suitable for forecasting business cycles in other sets of conditions.
Well constructed answers, Bob. Agreed with you that macroeconomic variables such as GDP, unemployment and inflation rate are good indicator of business performance.
The main objective of macro-economic are economic growth, inflation and unemployment, government borrowing. When the economic meltdown, macroeconomic variables may impact on business decision-making environment. Macroeconomic can maintain macro equilibrium of the economy.
The indicators that we need to look at are leading indicators and lagging indicators. Macroeconomic indicators are statistics or data readings that represent a nation, region, or sector’s economic situation. It was used by analysts and government to assess current economic and financial market health.
Leading indicators forecast on where economy might be heading. This often used by government to implement policies. These indicators include yield curve, interest rate, and share prices.
Lagging indicators used to confirm a trend underway. It reflects economy’s historical performance and change after trend has been established. These include gross domestic product (GDP), inflation and employment figures.As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment. Are macroeconomic variables a good indicator of business performance?
Microeconomic variables known as indicator or main trend signaling the current status of the economy. In order to do in current good job of micromanaging the economy, must study, analyze, and need to understand major variables that determine the current market. There are 3 macroeconomic variables which are gross domestic product (GDP), unemployment rate and the inflation rate.
GDP describes overall economic value of goods and services produce by country. It also measure the citizens and government spending along with financial impact of trade and investment in nation. GDP is usually calculated annually. For unemployment rate of country offers an indication of the economic health in a nation. A higher employment rate vs unemployment shows a stronger economy. When major citizen in country employed, their spending increases along with the amount of money and boost the country economy. For the last variables inflation rate describes the increase in average cost of goods or service over a time frame. Inflation mostly happen due to instability economic or downturn while steady inflation is usually predicted as a normal economic factor.
When examining macroeconomics trends, we must look how stable the overall business environment status. if we see increase in unemployment, home foreclosures and bankruptcies, we can predict that consumers may have wary attitude towards making purchase. We can do decision making by scaling down our plans to purchase inventory or commit to costly expansion projects.
Sometimes trends in our neighborhood and region can have an immediate impact on our small business. We don’t just examine economic trends near our premises but need to have look at economic environment of customers too. These conditions have most direct effect on our small business. We need to make business decision based on rising and falling expectations for our customers.
We all know bad news sells newspapers and internet stories. Media can distort bad economic in international and local levels. If its possible we need to make our own observations. Sometimes bad economic news may lead to new opportunity for small business. For examples, we can switch to selling less-expensive products with less features or can offer services that are cost-effective for people who have low budget preferences. Bad economic headlines does not means bad news for our business.
Lastly, we also need to check our company finances for decision making. We need to consider the trends in our profits, sales and expenses just as we would trends in any other economic entity. If we are doing well in business despite bad economic times which, we positioned properly in a competitive market. We can’t let news about nation or world to lead us to make decision which can make us unsuccessful. In down trend people don’t stop buying, its just that they buy less or purchase economically. We can service that change in buying habits to make profit.
In my opinion the macroeconomics variables are good indicator which can make business successful or downfall. There are many variables that can be consider for a successful business plan. For example, Microsoft following this macroeconomics variables which makes them successful. There was a study conducted which is impact on macroeconomics variables on Microsoft. This is the result of the studies. “It can be showed in 2017 to 2018 where interest rate increase, the return on assets (ROA) decrease which mainly because of Microsoft has to pay more interest expense that directly cause Microsoft’s net income drop, then return on assets (ROA) decrease too. Furthermore, the decreasing in gross domestic product (GDP) caused the return on assets (ROA) of Microsoft increase. Therefore, the United States’ gross domestic product (GDP) decline will lead to the total assets that generate by company decrease which also include Microsoft Corporation which indirectly cause Microsoft’s return on assets (ROA) increase”.
Reference
Macroeconomic factors: What are they and how do they impact the economy? Indeed Career Guide. (n.d.). Retrieved January 27, 2022, from https://www.indeed.com/career-advice/career-development/macroeconomics-factors
Ingram, D. (2016, October 26). How does a political trend affect a small business? Small Business – Chron.com. Retrieved January 27, 2022, from https://smallbusiness.chron.com/political-trend-affect-small-business-64909.html
Great sharing
In my opinion, macroeconomic variables are economic indicators or primary signposts that indicate current economic developments.
To perform a successful job of macro-managing the economy, the government, like all specialists, must research, evaluate, and comprehend the primary elements that define the macro-present economy’s behavior.
Economists measure an economy’s overall success by examining how it might attain high rates of output and consumption growth.Three macroeconomic factors are particularly significant for this type of analysis: Gross domestic product (GDP), the unemployment rate, and the inflation rate.
Gross Domestic Product (GDP): The GDP is the total worth of goods and services generated in a country in a given year. Economic growth is defined as a long-term rise in the number of goods and services produced in a given country.
Macroeconomists often compare the economy’s growth and development performance against that of other economies (cross-sectional study) or over time (time series analysis). In other words, macro-economists look into why many developing nations grow at a lesser rate than industrialized countries, and how to enhance a country’s rate of economic growth over time.
Although economic policymakers strive for long-term growth, economies do not always expand consistently and might experience periods of contraction or expansion. Recessions are periods of slowing economic development. Depressions are severe economic slowdowns. Aggregate earnings fall during recessions, as does demand for goods and services. As a result, companies make less money, more companies go out of business, and employment prospects become scarce.
On the other hand, economies can grow at a breakneck pace at times. Expansions are times of fast economic development, and exceptionally powerful expansions are known as booms. Businesses see increased growth and, as a consequence, profits; incomes are greater as a result of more individuals receiving raises and promotions; and, as a result, demand for products and services rises, causing firms to realize even more profits and more employment possibilities. Given their relevance, macroeconomists are interested to examine economic volatility and determine whether policymakers can (or should) intervene.Unemployment Rate: The unemployment rate, which is important indicator of the condition of the labor market, is the second most significant macroeconomic concept. The unemployment rate is defined as the percentage of persons who are willing to work at the current wage rate but are unable to find work. When the unemployment rate is high, work is not only tough to come by, but it’s also less rewarding since those who currently have jobs may find it difficult to earn raises or promotions. A low unemployment rate indicates that the economy is doing well. As a result, economic policymakers are continually concerned about keeping employees employed.
Inflation: It is defined as an increase in the total level of prices as assessed by the consumer price index and it is the third most significant macroeconomic concept. This index depicts the changes of money’s value over time. Inflation is one of economists’ and policymakers’ main worries since it imposes a range of costs on the economy. When inflation is strong, money’s actual worth depreciates. People on fixed incomes, such as retirees who get a monthly fixed dollar payment, are unable to keep up with escalating living costs. Inflation also redistributes income across the people in a manner that is unrelated to merit. Because many labor and loan contracts in the economy are stated in terms of money, lenders and employees lose while borrowers and employers win when there is a protracted period of inflationary pressure. Inflation also has the effect of discouraging people from saving. Even if some of the nominal interest rate just compensates for inflation, the income tax recognizes nominal interest gained on savings as income. This lowers the after-tax actual interest rate, making saving less appealing.
A well defined answer on macroeconomic factors which are particularly important in context of business decision making.
As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment. Are macroeconomic variables a good indicator of business performance?
From my perspective and understanding industries who are aware of macroeconomic variables tend to minimize the negative impact in future cash streams and profitability. Macroeconomic variables can’t be controlled and rely on the need for industries to forecast the impact and future state of business performances to come up with a viable decision-making relating to business conduct. All business parties should comprehend the effect of shifting customer trends and activities, employment stages, interest rates, banking and financial trends, and inflation. One should know the legal aspects impacting business decisions which includes government regulations regarding business activities such as employment, marketing and trade.
Two examples of macroeconomic variables that affect business decision-making:
Employment: The economy is recurring. In prosperous times, companies hire more to keep up with high consumer demand. In a down cycle, companies hire fewer new employees and may conduct layoffs. For well-capitalized businesses, strategic advantages grow from moving against these trends. In periods of prosperity, they can invest in technologies that yield more productivity from fewer employees. During a downturn, they can capitalize on the availability of talent and acquire sharp employees for less money.
Inflation: Inflation is the rising wave of costs in an economy. It affects both consumers and businesses. Most businesses raise prices in accordance with inflation to maintain their profits. Well-capitalized companies have the luxury of deciding to use inflationary periods to gain market share by not raising prices as much as their competitors.
I agree that macroeconomic variables are good indicators of business performance. An economic indicator is a macroeconomic dimension used to know present and upcoming economic motion and prospect. Economic indicators can be whatsoever the stakeholder selects. However, such indicators include but aren’t limited to consumer price index (CPI), gross domestic product (GDP) and unemployment figures. These indicators correspondingly support to evaluate the complete condition of an economy and business performace respectively.
As we discuss macroeconomic issues and identify problems related to the economic meltdown?
GDP(Gross Domestic Product)
During economic down, the GDP growth of a country because lesser. Firstly, it effect the consumption which is purchase consumer goods and services. People will not spend money to buy things during economy down. They more save money for worst case scenario. Secondly, the organization will will not investment to do inventory, building or on capitals goods. Thirdly, government will reduce their spending to buy good and services in both domestic and foreign market. Finally, the imbalance in the Net Export where the import is more than export. It happen because manufacturing companies will shutdown their operation during economic down to reduce cost, so the country cannot export good outside the country as per plan. So, the reduce in purchase of consumption, foreign investment, payment to government and export will affected the GDP of a country.
Inflation
The inflation is where the average price is rising and fall in the value of the money. This may happen too much money chasing for few goods. So, the price of the item increased due to it’s demand. At the same time, the cost of living also increased.
The Cyclical unemployment
The workers is laid off because of economy down. This happen because the company plan for cost reduction and recover during bad economy.
As we discuss macroeconomic issues and identify problems related to the economic meltdown?
GDP(Gross Domestic Product)
During economic down, the GDP growth of a country because lesser. Firstly, it effect the consumption which is purchase consumer goods and services. People will not spend money to buy things during economy down. They more save money for worst case scenario. Secondly, the organization will will not investment to do inventory, building or on capitals goods. Thirdly, government will reduce their spending to buy good and services in both domestic and foreign market. Finally, the imbalance in the Net Export where the import is more than export. It happen because manufacturing companies will shutdown their operation during economic down to reduce cost, so the country cannot export good outside the country as per plan. So, the reduce in purchase of consumption, foreign investment, payment to government and export will affected the GDP of a country.
Inflation
The inflation is where the average price is rising and fall in the value of the money. This may happen too much money chasing for few goods. So, the price of the item increased due to it’s demand. At the same time, the cost of living also increased.
The Cyclical unemployment
The workers is laid off because of economy down. This happen because the company plan for cost reduction and recover during bad economy.
What is your view on the impact of macroeconomic variables on the business decision-making environment.
In my point, macroeconomic variables like inflation and unemployment rates are good indicator to make decision.
Firstly, the government can take decision to control the inflation by adopt monetary policies to increasing money supply and reduce interest rates to stimulates demand. They also can adopt the fiscal policy by increasing government expenditure and reduce tax.
Secondly, the Government can directly control price of the product and help the people as below:
a)price pegging- The government fix the floor and ceiling prices. So, the price of good did not increase and people effort to buy.
b)price tagging- All price should be labeled to avoid the seller over-charging the consumers.
c)rationing- the government provide cash to people to buy good to increase the buying power.
Finally, Government should introduced policy to reduce the unemployment. They should encourage NGO to do seminar, upskill activity ,job fairs to encourage the unemployed to get a job. Government to enforced the company to to hire and train the unemployed which help them to get the job.
Are macroeconomic variables a good indicator of business performance?
Yes, macroeconomic variable a good indicator of business performance. The variable like Balance of Payments, Inflation, Economic Growth and Unemployment creates awareness that we need to do right thing at right time. There is possibility in business failure when wrong decision is made during rescission. Example, the organization cannot take risk in investment during economy down because the buying power is less. They have to control their production to meet demand of the customer. If the product increases and buying power decreases, there is possibility the price of the will reduce in the market and it way cost lost to the company. At the same time, the organization and government should plan their activity to recover the economic and reduce the negative impact to the people.
Businesses will look at the macroeconomic such as GDP, unemployment rate, inflation rate and current account position variables to analyse before making any final decision to continue the business or continue investing. All these data are vital to identifying that particular year’s business position.
For example, if GDP is low, it will hit a small country or small businesses because it shows less growth; thus, more unemployment, staff reductions, and poorer quality of life will establish. As a result, foreign investors will move elsewhere since the country is no longer attractive for investment.
Low GDP will worry politicians because it means their administration fail to improve citizens’ life, fail to get more investment from foreign investors and will impact their plan for re-election.When GDP goes up, the country’s economy is assumed to be well. GDP growth creates confidence and economic stability because financial institutions use GDP as a core indicator. Expansion of the economy will create jobs; thus, more customers are ready to spend, borrow, and produce good quality of life in the country.
For companies GDP growth indicates a favourable investment; hence it is a good indicator for business performance.
When inflation goes up, the purchasing power of consumers will eventually drop since the power of the currency decline and goods are becoming expensive. With high inflation, fewer goods and services can be bought, resulting in fewer sales and revenue.
Low unemployment in the country means there are lots of job opportunities; thus, it improves the lifestyle of the citizens vice versa.
Low unemployment means business is growing, jobs everywhere that help people improve their skills and improve the domestic economy. However, a high unemployment rate will impact the person, family, community and the country. The government needs to support all the unemployed individuals, which will lead to excessive spending from the government. The crime rate could also rise. If the person stays unemployed for a long time, he will lose his skill.
Unless the economists introduce other variables and widely used and proven correct by the practitioner such as people in the financial industry or the government; I would have to say macroeconomic variables are a good indicator of business performance.
As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment?
Macroeconomic variables impact businesses by altering market fluctuations. Because of this, business owners frequently conduct macroeconomic research and use their knowledge to make key business decisions to minimize economic losses. The top macroeconomic variables influencing business discuss below are economic growth rates, interest rates, unemployment, international trade and inflation.
Economic Growth Rates
You can use the gross national product (GNP), the Gross Domestic Product (GDP), or sales rates to determine how much growth have occurred. When sales rates fluctuate as a result of the economy, firms must adjust their strategies accordingly. In order to stay up with demand as the economy grows stronger, you will have to boost your production rates to keep up with it. As a result, you make a further contribution to the overall pace of economic growth. Then you may take advantage of the increased demand for your items as well as the readiness of clients to purchase them. When the economy is good, business owners want to hire more people because they want to outperform their competition whenever the opportunity presents itself.
Interest Rates
Changes in interest rates particularly impact businesses that take out loans. It’s common for small firms to look out for business loans to expand their operations today. As a result, interest rates affect a large number of companies. Macroeconomic research is necessary for these firms to keep track of their finances. The financial health of a small firm can be jeopardized if the owner isn’t adequately prepared for a change in interest rates. The higher interest rates, the more the business owner has to pay back in principal and interest. If you’re considering taking out a company loan, try to keep this macroeconomic factor in mind.
Unemployment
Unemployment also has a big impact on businesses in a lot of ways. Consumers spend less money when there is more unemployment. When people lose their jobs and have a hard time finding new ones, they don’t have the money to buy things. As a result, business owners sell fewer products, which means they make less money. While unemployment might be good for your hiring costs, it might not be good for your company’s bottom line. Depending on the industry, unemployment rates can have a big impact on businesses on a lot of different macroeconomic levels.
International Trade
Companies also conduct macroeconomic research in order to stay abreast of the latest developments in international trade. This macroeconomic factor can affect your business if you currently sell and ship products overseas. If you have not scaled your business to sell globally yet but want to, this factor still impacts your company’s success. Typically, companies that expand internationally experience double digit growth rates. However, if the desire of free trade agreements decreases, companies’ chances of growing their companies into international corporations decreases as well. As a result, this macroeconomic factor affects both large and small businesses who are attempting to expand their brands.
Inflation
Finally, inflation has an impact on the success of businesses across a wide range of industries. Whether you own an online retail company or a restaurant franchise, you need to keep track on this macroeconomic element in order to stay competitive. It is inflation that is responsible for the rising costs of goods as a result of a rise in the availability of money in the economy. When the price of products and services rises, the ability of the nation to purchase such goods and services reduces at the same rate. As a result, businesses are forced to raise their prices for their goods and services. Deflation happens when the prices of products and services fall, and this occurs in a variety of conditions. Customers have more purchasing power during a deflationary period. Thus, they will be able to acquire more goods and services. This, too, has a direct impact on the number of sales generated by enterprises. Keep a close eye on inflation because it has the potential to have a detrimental or good impact on your business.
These macro variables affect business decision-making related to spending, borrowing, and investing. Because macroeconomics impact businesses profits, there is a need to conduct macroeconomic research on a variety of factors.
For instance, sales rates for businesses in all industries shift as the economy does. If you obtain enough capital to operate your company through loans, you need to monitor interest rates and predict how they will change with the economy. Unemployment rates affect companies in a variety of ways as well. International trade influences the success of both international companies and small businesses trying to grow. Furthermore, inflation plays a major role in business success because it alters the purchasing power of consumers. To thrive in the competitive market, we need to keep track of the macroeconomic factors that affect business.
Are macroeconomic variables a good indicator of business performance?
Macroeconomic indicators cause increased volatility in the financial markets and in the economy. It is a good indicator of business performance because we can analyse the performance of a business by comparing it with the substitutable businesses. Macroeconomic indicator measures systematic risks which have same impact on the whole economy.
- This reply was modified 1 year, 10 months ago by Karen Xaviour.
- This reply was modified 1 year, 10 months ago by
Macroeconomic variables such as example listed below are beyond the business firm control and causes financial market volatility. The types of macroeconomics variables that can determine business performance are as follows:
Employment and unemployment rates : Unemployment rises when businesses reduce their production, usually when the economy enters a recession. The unemployment rate falls when the economy is growing. If the economy grows too fast, shortages may increase, leading to higher prices.
Inflation: Happens when the supply of money exceeds the demand for money, which occurs when the supply of money increases faster than the economy. People and businesses are negatively impacted by short-run inflation, but over the long term, the economy adapts to the greater supply of money, causing higher wages and prices. When prices for goods and services rise, the nation’s ability to purchase the items decreases at the same rate. In turn, businesses have to charge more for their goods and services. In more unique situations, deflation occurs when the prices of goods and services decline. During deflation, consumers have more purchasing power. Hence, they can purchase more products and services. This, too, directly impacts the amount of sales businesses make.
Interest Rate: For banks, interest rates affect not only how much customers will borrow. Lower interest will attract more customers hence higher income for the banks. On the other hand, interest rates are relevant to many businesses too. These companies need to conduct macroeconomic research to stay on top of their finances. If a small business owner is not prepared for a shift in interest rates, they could end up putting their business in a poor financial state. After all, the higher interest rates rise, the more business owners have to pay.
Economic Growth Rate: Includes gross national product (GNP), gross domestic product (GDP), or sales rates. When sales rates change due to the economy, businesses need to respond accordingly. If the economy grows stronger, business need to increase production rates to keep up with demand. In turn, contribute to the overall economic growth rate and the higher demand and customers’ willingness to purchase products. Business owners often hire more employees when the economy is strong because they want to out-do their competitors when they have the chance.
International Trade: This macroeconomic factor can affect your business if you currently sell and ship products overseas. If you have not scaled your business to sell globally yet but want to, this factor still impacts your company’s success. Typically, companies that expand internationally experience double digit growth rates. However, if the desire of free trade agreements decreases, companies’ chances of growing their companies into international corporations decreases as well. Therefore, this macroeconomic factor affects both large enterprises and smaller companies trying to scale their brands.
So back to the question – “Are macroeconomic variables a good indicator of business performance?”; My answer will be – yes they are but I believe microeconomics factors also effect business performance such as availability of employees, availability of investors, level of competition, organization characteristics and firm’s public image.
Just my 2 cents,
Ida F Shah
This is a nice sharing with details explanation on how it impact the business and how business can take action for each variables.
Good points Ida – very thorough and you pretty much covered everything.
As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment. Are macroeconomic variables a good indicator of business performance?
In my opinion, macroeconomic variables play an important role for corporate business decission-making. The three most important factors are GDP, Inflation and Unemployment. Governments should keep their eye on these to ensure everything in balance or get economy grow steadily. 😇
During recession (economic downturn), consumer spending power decrease and they might lost their jobs, hence Unemployment increase; During boom (economic upturn), prices of the goods and services increase, thus, inflation increase.
The Phillips curve relates the rate of inflation with the rate of unemployment. The Phillips curve argues that unemployment and inflation are inversely related: as levels of unemployment decrease, inflation increases.
By knowing and realize the economic cycle, business owners and management can get well prepared and strategize future plan for economic downturn and upturn. Whether should take aggressive plan to expand business or conservative to maintain their current market by provide better service or increase customer loyalty. Although we can see all of these business decision can perform no matter economic upturn or downturn, but one apparent factor to decide is company budget and resource for all of these activities, as we always aim for using lesser bullets to kill more birds, So, in order to get better business performance, beside consider macroeconomic factor, our own product, corporate branding and business model are utmost crucial. 😇
Reference:
A.W. Phillips(1958), The Relationship Between Inflation and Unemployment. https://courses.lumenlearning.com/boundless-economics/chapter/the-relationship-between-inflation-and-unemployment/#:~:text=The%20Phillips%20curve%20relates%20the,of%20unemployment%20decrease%2C%20inflation%20increases.
What I like about you Kenny, is that you always have the easiest and best way to explain, including to your input above. You have helped me to understand the Phillip curve, thank you for that.
Nice thoughtful points Kenny!
As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment. Are macroeconomic variables a good indicator of business performance?
Macroeconomic variables are:
- Balance of payment (export/import or X/M)
- Inflation or how much cost of buying product has increase over time.
- economic growth or how much output in an economic system over time.
- Unemployment of how much percentage of people able to work but not.
- Gross Domestic Produce (GDP) or total amount of product produced by an economic system.
In my opinion, business may be able to make decision from the data of economic variables, as we can say that,
As the market performs, business in good condition, Inflation will push the price higher, increase Average Demand (AD) and unemployment (UE) decrease, hence more people working and have the capital to purchase goods. In this condition business can take the data from governments on these trends and utilize it for their business approach to be able to provide consumer with goods as anticipated.
The alternate situation is also true, as the market become bearish, business is not in a good condition, price will deflate due to AD decrease and UE increase, lesser money to be shifted in the market, so business may decrease their inventory and maximize profit by creating temporary demand with providing discounts and price cuts.
Although it can be said that most of the variables may provide indication on market performance, as discussed in journal below, there are condition and situations that will not fit the structure, as seen in Malaysia’s heavy relation on international trade (surplus), negative relationship is observed between stock exchange and stock price. (link)
Macroeconomics include the unique context on asset allocation. While microeconomics includes variables of assets accessibility and utilization that sway people and organizations independently. As an organization administrator, understanding the fundamental macroeconomic and microeconomic aspects affecting a business aids in planning, as well as long-term business approach development. Clients, representatives, competitors, media, investors, and suppliers are the top microeconomic business aspects affecting almost every business, while the top macroeconomic variables affecting the organisation are financial development rates, loan fees, joblessness, global exchanges, and expansion.
Macroeconomic variables influences businesses by altering market fluctuations. This leads to company owners doing extensive macroeconomic research on a regular basis. They apply their results to make important business choices in the intention of mitigating the impact of the loss from economic fluctuations. The GDP, fiscal policy, monetary policy, inflation, employment rates, and consumer spending are all examples of macroeconomic variables. These variables affect business decisions related to spending, borrowing, and investing.
Many researchers analysed that macro variables affect the business’ decision making environment.
Macroeconomic indicators cause increased volatility in the financial markets and in the economy. It is a good indicator of business performance because we can analyse the performance of a business by comparing it with the substitutable businesses. Macroeconomic indicator measures systematic risk which have same impact on the whole economy.Q4 What is your view on the impact of macroeconomic variables on the business decision-making environment. Are macro-economic variables a good indicator of business performance?
In my personal view, monitoring macroeconomic variables are important element in business decision-making especially at the strategic level. There are many variables and the most common is GDP, national income, levels of employment and inflation.
For example, when the unemployment rate is high, launching a new premium product at premium price may not be a wise decision. Many people will take extra careful when spending, to buy as cheap as they can and necessity instead of needs.
When GDP is increase significantly, it gives signal that people have confidence in spending their money, as well as corporate and government, which eventually give opportunity to the company to expand further.
The decision-making on macroeconomic variables indicators is purely on how the business owner is able to capitalize on the opportunities that can be found in positive or negative variables. If business owners are nonrisk takers then the decision could be based on the economic trend which is the common decision taken by many business owners.
Macroeconomics is the study of how an entire economy—the market or other systems that operate on a broad scale—behaves. It is a subfield of economics that is taught in universities. Macroeconomics is the study of economic phenomena that affect the entire economy, such as inflation, price levels, the rate of economic growth, national income, gross domestic product (GDP), and changes in the labor force participation rate.
In contrast to microeconomics, which is more concerned with the decisions made by individual actors in the economy, macroeconomics is concerned with the performance, structure, and behavior of the overall economy (like people, households, industries, etc.).
In my opinion is that tracking macroeconomic factors is an essential part of company decision-making, particularly at the strategic level. There are various aspects to consider, the most popular of which are the gross domestic product (GDP), national income (national income), employment levels, and inflation. Therefore, macroeconomic is definitely a good indicator of business performance.
- This reply was modified 1 year, 10 months ago by Yaamini Renganathan.
- This reply was modified 1 year, 10 months ago by Yaamini Renganathan.
- This reply was modified 1 year, 10 months ago by
Every business decision-making based on macroeconomic variables impact requires detailed statistics. There are many variables in macroeconomics but the most prominent variables are Gross Domestic Product (GDP), interest rates, unemployment, inflation, balance of payment, Consumer Purchase Index (CPI), Purchase Manager Index (PMI), and growth. Usually, all the variables are measured on yearly basis.
Although every aspect of macroeconomics has direct and indirect impacts, the most direct impact shall be inflation, unemployment, and GDP. However, the variable impact on decision-making is purely indiscretion of how the business owners look at the indicator.
When the supply of money exceeds the demand for money, which happens when the supply of money grows faster than the economy, inflation factors might emerge. Short-term inflation hurts people and businesses, but the economy adjusts to the increased quantity of money over time, resulting in higher salaries and prices. One example of how businesses could make decisions to avoid the negative impact of inflation shall be purchasing raw materials which will be much higher than usual due to the increase of inflation. As business owners or managers should keep an eye on the economic trend and plan to purchase the raw materials earlier in bulk prior to the inflation period.
Another macroeconomic variable shall be employment and unemployment rates. When businesses cut back on production, which normally happens when the economy enters a recession, unemployment rises. When the economy is growing, the unemployment rate decreases. For example, at a point of the recession, most of the time businesses will reduce their workforce due to reduction of revenue and profit which causes a rise in unemployment rates. If business owners and employees are able to discuss and compromise on salary and benefit reduction, then unemployment rates can be reduced.
Many interpretations and examples can be given but economic variables can be negative or positive for businesses based on the decision-making made by the management. If business owners look at the opportunities which can be acquired for their benefit then any situation can be positive for the organization.
I concur with your statement that economic variables can be negative and positive, hence it is up to the business to plan their strategy accordingly
As the impact of macroeconomics variables do affect individual decisions, they undeniable will affect business decision making as well. Since macroeconomic variables may lead to a decrease or increase in demand for product, this will be reflected to decisions by company managers to expand or reduce productions. For example, an economic boom could lead to increase in demand for goods thus business managers may want to increase production, which in line will stimulate the business decision of hiring more employees, and thus will encourage business expansion based on the decisions made. Another important macroeconomics variable that may impact businesses is the influence of government policy which may have manifestations such as imposing heavy or lower taxes, strict rules, and regulations. Considering this, affected businesses’ management may decide to close production or exit the market if government regulations too strict or may want to expand production if the imposed taxes are lowered and government incentives are given. The variables in term of macroeconomic parameters within different country could also have different significant impacts on the business entities operating in their specific country.
Thus, accurate perception and adequate assessment of macroeconomic risks by managers should be done effectively to enable business managers to make effective decisions for companies. Companies need to evaluate these macroeconomic effects on their operations to find out how they affect business success. Due to these, macroeconomics variables in my opinion should not be an indicator to business performances, but instead should be utilized as a tool or resources for business decision-making process in order to attain their desired performance.
A macro environment refers to the set of conditions that exist in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in the gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro-environment is closely linked to the general business cycle as opposed to the performance of an individual business sector.
Analyzing the macro environment is an important part of strategic management. Business analysts often conduct a PEST (political, economic, socio-cultural, and technological) analysis to identify macro-economic factors that currently affect or in the future may affect business. Some of the key factors composing the macro environment include the following
Macroeconomic factors are the broad indicators of financial growth or decline that affect an economy. A macroeconomic factor is a geopolitical, environmental or economic event that can impact the monetary stability related to the whole economy of a country or region instead of a specific part of the population.
A macroeconomic factor may be considered positive, negative or neutral based on the way it affects the economy. A natural disaster can negatively impact the production and sale of goods while higher production rates due to a demand for more goods are considered positive macroeconomic factors.
Macroeconomic factors are studied by economists, financial analysts and other professionals who help report on the financial health of a country. These factors also aid policymakers and economic advisors who work with governments, businesses and international markets.
Interest rates
The value of a nation’s currency greatly affects the health of its economy. Interest rates reflect the amount of return earned by investing money within a country’s financial system. Higher interest rates indicate a higher value for the currency of a national economy.
Inflation
Inflation describes an increase in the average cost of goods or services over a period of time. Inflation that occurs rapidly is a measure of economic instability or downturn while steady inflation is usually predicted as a normal economic factor.
Fiscal policy
Monetary policy is shaped by large financial institutions in both the public and private sectors. Large banks and government agencies make decisions that impact interest rates, inflation and federal budgets. This guides the flow of money in circulation within an economy.
Gross domestic product (GDP)
Gross domestic product describes the overall economic value of the goods and services produced by a country. GDP is also a measure of spending by a government and its citizens along with the financial impact of trade and investments within a nation. GDP is usually calculated annually.
A macro environment refers to the set of conditions that exist in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in the gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro-environment is closely linked to the general business cycle as opposed to the performance of an individual business sector.
Analyzing the macro environment is an important part of strategic management. Business analysts often conduct a PEST (political, economic, socio-cultural, and technological) analysis to identify macro-economic factors that currently affect or in the future may affect business. Some of the key factors composing the macro environment include the following
Macroeconomic factors are the broad indicators of financial growth or decline that affect an economy. A macroeconomic factor is a geopolitical, environmental or economic event that can impact the monetary stability related to the whole economy of a country or region instead of a specific part of the population.
A macroeconomic factor may be considered positive, negative or neutral based on the way it affects the economy. A natural disaster can negatively impact the production and sale of goods while higher production rates due to a demand for more goods are considered positive macroeconomic factors.
Macroeconomic factors are studied by economists, financial analysts and other professionals who help report on the financial health of a country. These factors also aid policymakers and economic advisors who work with governments, businesses and international markets.
Interest rates
The value of a nation’s currency greatly affects the health of its economy. Interest rates reflect the amount of return earned by investing money within a country’s financial system. Higher interest rates indicate a higher value for the currency of a national economy.
Inflation
Inflation describes an increase in the average cost of goods or services over a period of time. Inflation that occurs rapidly is a measure of economic instability or downturn while steady inflation is usually predicted as a normal economic factor.
Fiscal policy
Monetary policy is shaped by large financial institutions in both the public and private sectors. Large banks and government agencies make decisions that impact interest rates, inflation and federal budgets. This guides the flow of money in circulation within an economy.
Gross domestic product (GDP)
Gross domestic product describes the overall economic value of the goods and services produced by a country. GDP is also a measure of spending by a government and its citizens along with the financial impact of trade and investments within a nation. GDP is usually calculated annually.
We can look at three important variables which have a direct impact on the business decision-making environment, which are GDP, inflation, and unemployment. GDP allows businesses to gauge whether there is slow growth or decline in consumer spending which shows a decline in aggregate demand, which economists consider to be a symptom or even a cause of macroeconomic downturns and recessions. Businesses can then decide their business strategies accordingly, it would be helpful for a business to look into customer spending habits, it would help in deciding to introduce new products or to delay launching new products or even to tweak the products to cater to the current needs of the customers during the economic downturn. Where there is inflation, prices of goods would increase but the consumers purchasing power would decrease, this would be beneficial for certain businesses such as banks as customers would be more inclined to save and also would be more inclined to take loans to allow them to continue purchasing, businesses can look into how inflation would affect their business and decide their marketing strategy accordingly. The Government would usually seek to regulate employment levels through monetary policy stimulus and credit measures. These policies can ease borrowing rates for businesses to help improve capital spending and business growth, resulting in employment growth. When there is an economic downturn, businesses would be doing poorly and would need to lay off people hence unemployment rate would increase with the help of government intervention, businesses would be able to sustain in the market and hence does not need to plan to reorganize and reshuffle as there would not be a need to lay off staffs. It can be opined that macroeconomic variables are not good business indicators, this is because, these variables are dependent on external factors and external parties such as government policies or international events, covid 19 measures taken by the government is not beneficial for nonessential businesses and it was out of their control hence to determine whether a business performing, other internal factors should be taken into consideration.
View on the impact of macroeconomic variables on the business decision-making environment :
As the economy reopens and recovers, we can see what is happening now. Demand for commodities has risen, and if it continues to outstrip supply, prices will rise. For instance, the fast-food chain is facing shortages, like McDonald’s Malaysia has been forced to control fries due to supply chain problems. Large portions of French fries , as well as one type of large meal set, have been taken off menus at outlets in the Southeast Asian country until further notice.
As a result of our suppliers’ operations being heavily and unexpectedly disrupted, this has consequently impacted their operations resulting in a number of their main menu items currently being out of stock. The shortage was due to global supply chain disruptions caused by the Covid-19 pandemic.
Because of factors such as a scarcity of personnel and shipping containers, the cost of doing business rises as a result of Covid-19.
Gross domestic product (GDP), unemployment rate, and inflation rate are the three economic indicators that governments, corporations, and consumers regularly follow.
The gross domestic product (GDP) is a unit of economic production that is used to measure a country’s economic activity. Countries with lesser GDPs generate less goods and services and often have a lower standard of living. When the companies lessen their hiring activities, therefore the unemployment rate will increase. When unemployment rate increase, it will diminishing the purchasing power. Hence, this can lead to a shortage of goods sold in the market. Therefore, there will be drop in revenue and reduce GDP.
The unemployment rate is calculated as a proportion of the working population. It’s a trailing indicator that rises or falls in response to changing economic conditions rather than anticipating them. When the economy is bad and jobs are few, for example, one may expect higher unemployment. During high unemployment economy situation, people take job below their ability level, resulting in a loss of human capital. People become a liability to the economy because cannot be utilised as a resource. Therefore, this will lead to fall in standard of living, due to lower output. The output will decline , as factor of production (labor) is not fully- utilized. On the other hand, when the economy is growing at a good pace and jobs are plentiful, one may expect unemployment to fall.
The rate at which a currency’s value depreciates, raising total prices for goods and services, is known as inflation. The rate of inflation is critical for a business because it influences the price of raw materials and, ultimately, the profit margin on goods and services. The world is presently in cost-push inflation as a result of the pandemic. As a result, central banks throughout the world are keeping a close eye on the situation and may use monetary policy to help countries with excessive inflation.
Are macroeconomic variables a good indicator of business performance?
Because management will change the business strategy based on the analysis of macroeconomic factors, each macroeconomic variable is an important indication for enterprises.
The data gathered can be used to predict total business confidence. GDP drops and the unemployment rate rises when the economy isn’t functioning well (e.g., recession). As a result, businesses might expect decreasing demand for their products, lowering their performance.
As a result, businesses can use macroeconomic data to forecast their performance, but it will not be a direct indicator of their performance.In conclusion, macroeconomic variables are not all indicators of company performance. The level and degree of association may differ, and it is also influenced by other factors such as company size, industry, and product type.
Reference:
https://www.brookings.edu/research/11-facts-on-the-economic-recovery-from-the-covid-19-pandemic/
https://www.dbs.com/newsroom/Macroeconomic_insights_on_economic_recovery_after_Covid19_pandemic
https://www.channelnewsasia.com/asia/mcdonalds-malaysia-french-fries-supply-crunch-2465516
Yes it is effecting the business performance and they need to adapt their sales rate to stay up with the demands. By keep up with the consumer demands. The business owner can have growth in the consumer spending of the product or services. Interest rate also change have impact the changes if the company take out the loans. So if the interest is high, the company need to pay more thus this could be simulate the economic activity. In this pandemic era, the unemployment rate is higher. this will indicated the spending amount circulations and will slow the economic activity.
As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment. Are macroeconomic variables a good indicator of business performance?
Macroeconomics, study of the behavior of a national or regional economy as a whole. It is concerned with understanding economy-wide events such as the total amount of goods and services produced, the level of unemployment, and the general behavior of prices.
Unlike microeconomics—which studies how individual economic actors, such as consumers and firms, make decisions—macroeconomics concerns itself with the aggregate outcomes of those decisions. For that reason, in addition to using the tools of microeconomics, such as supply-and-demand analysis, macroeconomists also utilize aggregate measures such as gross domestic product (GDP), unemployment rates, and the consumer price index (CPI) to study the large-scale repercussions of micro-level decisions.
Taking GDP as a point here, GDP is used to determine the health of the economy and cross checking the effects of inflation and deflation. (and bubbles as well). In my opinion GDP plays important role in making decision, for an example during pandemic era, the GDP rate goes down results in policymakers making multiple decisions regarding the interest rates, taxes, trade policies and further assistance to the people in monetary form to boost the GDP. Of course, if the GDP is at some neat tidy sum, then it makes way for investors and other form of economic ventures to take place.
For an example : GDP data can also indicate how other countries or economic regions measure against each other. China has historically had the largest GDP in the world, which has only been interrupted in the past two centuries, first by the British Empire, then by the United States, and, briefly, by the European Union. The United States currently has the world’s largest GDP as of 2018, though China’s GDP is expected to surpass it by 2022.
With that said, GDP does help in decision making – however they are not the only factors, because taking GDP there are some limitation in decision to be made by the policymakers. This is due to the way the GDP is calculated – an expenditure approach, and income approach or a value-added approach. GDP doesn’t include open global economy data, underground economy which could result in difference in projected future GDP trends. However in my opinion, the variables discussed is a realizable one and has been used in years throughout multiple recession times.
The macro-economic refers to the overall state of an economy of a country which consist of GDP, fiscal policy, financial policy, inflation and employment rates. Besides that, consumer spending creates impact on the macro-economics and it influences all aspects of business decisions such as spending money, borrowing and also investing them. Moreover, macro-economics is well connected to the overall businesses and also to the performance. For example, if our country has a good employment rate which means our economy is good and if not unemployment rate is high, our country’s economy is in bad situation. Thus, we can conclude that the variables of macro-economic determine the economy status of a country.
The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
One of the most important indicators of a country’s health is its unemployment rate. When the economy grows, wages rise, and industrial production rises, the unemployment rate tends to fall. Expansionary fiscal and monetary policies have the potential to reduce unemployment, so it is reasonable to assume that government officials would aim for a lower unemployment rate using these policies consistently.
Policymakers are reluctant to take action because of the link between the unemployment rate and inflation.
Inflation and unemployment have historically been linked in an inverse manner. It’s not as simple as it appears, and it has fallen apart on numerous occasions over the past half-century. 1 To better understand the economy as a whole, we’ll focus on two of the most closely watched economic indicators: inflation and employment (and unemployment).
Economic growth can only be sustained if there is a certain level of unemployment in the economy. Having a low unemployment rate indicates that the economy is expanding faster than it can sustainably, which puts upward pressure on salaries and prices as a whole, leading to higher inflation.
Wages and prices fall, which leads to lower inflation, if the unemployment rate rises above the natural rate of unemployment. When wages rise or fall, so does the price of goods and services, because wages account for a large portion of the total cost of goods and services.
1:Decide with speed over precision: If you look at what is going on now, it’s changing all the time. In the best leaders, they quickly look at all the information that is available, quickly figure out what is important, and make decisions with confidence. A crisis can cause a lot of mental stress because there isn’t enough information, people’s needs don’t always line up with each other, and emotions and anxieties are high. Because of the natural tendency of matrixed organizations to build consensus, this can lead to analysis paralysis. Leaders have to break through the inertia to keep the organization focused on business continuity today, while also increasing the chances of long-term success by focusing on the few things that matter most to the group. A simple framework for making quick decisions is important.
Prioritize. Identify and communicate the top three to five. For example, early on in a crisis, employee and customer safety may be priorities. Document the issues, make sure leadership is on board, and adjust course as needed.
2: Adapt boldly: Exceptional leaders are always one step ahead of the curve. Rather than hiding their ignorance or failing to acknowledge their own shortcomings, they actively seek out and incorporate additional expertise when it is needed. Choose not to do anything. Large projects and expenses should be put on hold while you prioritize. It is important to make clear your “don’ts” to others. Toss out the playbook from yesterday. It’s possible that the actions that got you success in the past are no longer relevant. The finest leaders are able to quickly adapt and devise new strategies. Technology can bring the parties together; think internal wikis that capture issues, solutions, innovations, and best practices. Effective leaders extend their antennae across all the ecosystems in which they operate.
Behavior 3: Reliably deliver:
When a crisis arises, even though many elements and problems are out of their control, the best leaders accept personal responsibility for the situation. A new set of measures for measuring performance is established, and a new culture of accountability is established. Keep a daily dashboard of priorities in front of you to keep you on track. Ensure that those above you are on the same page with your top five priorities, which should take no more than half a page. Make it a point for managers to discuss this information with their direct reports on a regular basis, if not daily, then at the very least weekly. At the end of each day or week, go through your “hit list” and make any necessary changes.Behavior 4: Engage for impact: Taking care of your employees is more vital than anything else when things are tense. Leaders who are empathetic to their teams’ challenges and difficulties discover ways to energize and energize their teams by delivering new objectives and information in a straightforward and thorough manner. Despite the fact that the COVID-19 epidemic is unquestionably a health problem, it has also resulted in an economic disaster. To keep everyone on the same page during these trying times of constant and difficult change, your leaders must often reaffirm new priorities.
How do we manage crises efficiently at times of recession / economic downturn?
Training your team for crisis leadership:
The demands on your time and attention as a leader of leaders are constantly shifting. Support and coaching for your leaders can make a big difference in their performance. You may learn a lot about your subordinates in times of stress.
Take a breather once the immediate fire has been put out and you’ve had a chance to reflect on what happened and why. Think about how your company’s senior executives would fare in the post-crisis era and whether or not they are well-suited to the task.Finally, ask yourself who you want at the table in both the current crisis and when we emerge from it into a new normal in the future.
Reorganizing your workforce or your organizational structure To ensure that your clients’ needs are being addressed, you must constantly evaluate your products and services. Recalibration of benchmarks and projections of future growth A range of goods and services Think about decreasing or deleting products that don’t create earnings or have low profit margins.
Take a look at how much work goes into each product. Low-margin products may be a better use of your employees’ time than profit centers, if that is the case. Find out what’s wrong head-on: A company’s decision to keep layoffs and other major changes under wraps can really be detrimental to the company. A public relations catastrophe might result from withholding information from your employees. Having an open and honest conversation with your coworkers will help you avoid rumors. People will appreciate you more if you are open and honest with them about the terrible truths of their jobs.
Demonstrate that, despite the difficulties, the tide will finally turn.
The company will survive if everyone works together. When they’ve done something well, let them know. Recognize those in leadership roles. Encourage your workers to hunt out undiscovered natural leaders. When times are difficult, who does everyone turn to? Who, without being asked, answers questions, gives guidance, and acts as a mentor? Provide opportunities for high-performing staff to stand up and fill in where necessary as soon as you identify them. Keep an eye out for anything. Metrics are used to track and identify critical competencies.
Recognize who your backups are and whether they are capable of taking on more responsibilities if necessary. This manner, you can begin cross-training individuals of your squad. It is critical to pay attention: Regularly engage your top performers, power players, and daily employees in discourse and solicit their feedback. Their deep knowledge of the organization may enable them to resolve issues of varying magnitude. Morale and output can be maintained if the plan is widely accepted.
2)As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment. Are macroeconomic variables a good indicator of business performance?
A macroeconomic factor can have a positive, negative, or neutral effect on the economy depending on how it impacts it. Macroeconomic variables such as higher production rates due to increased demand for commodities are considered positive macroeconomic factors in the wake of a natural disaster. Economic experts, financial analysts, and other experts who report on a country’s financial well-being study macroeconomic aspects. Additionally, politicians and economic consultants who deal with national governments, corporate entities, and global markets benefit from these aspects as well.Macro economic policy:
Macro economics helps in formulation of economic policy. The subjects of an economic policy are monetary policy, fiscal policy, incomes policies and policy on balance of payment. Economic policy should be such that it promotes the business environment and provides impetus to business activities.
Economic planning:
A serious attempt towards self sustained growth of business is only possible by efficient planning. Planning is now a days synonymous with growth and development. Identification of priority areas, estimation of resources and coordination among various sectors of economy can be done through proper planning. Planning directs the growth in desirable corners.
Solving macro paradoxes:
Macro economics helps in solving macro paradoxes like paradox of thrift related to savings, paradox of assumption by commercial banks that all depositors would not withdraw their money on any particular day and their right to withdrawal.
Tracing effect of government policy on business
Macro economics helps in tracing the implications of government policy changes on existing business activity.
Help in solving problem of general unemployment
Effective demand is the focal point of macro economics. Reduction in effective demand brings economic depression and thereby general unemployment. Hence, the level of effective demand should be increased in order to increase the level of employment.Analysis of trade cycles
Macro economics tries to know about the behavior and occurrence of booms and slumps and their implication on business activity. This analysis is very useful for a free enterprise economy. Business cycles are bound to occur. Macro economics helps the business in facing booms and slumps so that negative impact is minimized.Macro analysis helps in development of micro analysis
In the deductive method process of logic goes from general to particular. We go on deducting to draw specific conclusions. Many of micro economic conclusions are outcome of macro conclusion.The assumption that consumer is rational has been decided only after knowing about the behavior of a group. A medico is allowed to specialize in some part of human body from surgical view point only when he has understood the anatomy and physiology of human body.
Inability of micro economics to study some areas
Micro economics is not able to study monetary problems, fiscal problems, financial sector problems, foreign exchange regulation problems and inflationary and recessionary situations problems. Business needs to be protected from these ticklish problems and therefore, needs the help of macro economics.Macro economic models
Macro economics helps in building or constructing macro economic models.The major objective function of a macro economic model is to maintain the macro equilibrium in the country at the full employment level. The role of government through its monetary and fiscal operations becomes important as independent variables i.e. these policies are used to explain the dependent variable i.e. maintaining macro equilibrium.
When economic growth slows, the overall economic environment becomes negative for business. Businesses depend on economic growth. As the economy slows, demand for goods and services falls, and businesses are forced to scale back their activities.
For businesses, the rate of inflation is critical. There is a slight increase in aggregate demand due to a mild inflation, which in turn creates new prospects for expansion in business. Businesses can use dynamic marketing to raise demand for both existing products and new products they want to promote in such an environment. For a country’s business potential to grow, it must have a high level of savings and investment. There are two types of investment: those that directly benefit the economy and those that build infrastructure. The balance of payments of a country should not have an excessive current account deficit. In such a scenario, a lack of foreign currency requires import restrictions.
In terms of productivity, this might have a significant impact. Businesses require a healthy current account balance to function properly.
Considering that money is an essential part of any firm, the development of the financial system is critical. It is the primary duty of financial markets, both money and capital markets, to collect savings and transmit them to businesses for investment purposes, so promoting capital formation, which in turn promotes business expansion. The transfer process relies heavily on the efficient use of domestic savings and the acquisition of external financing. When monies are transferred from surplus to deficit, they are primarily used for this purpose. In a well-developed financial market, financial resources are distributed more evenly among the many businesses.
1.Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies? <div>
Government mediation alludes to government approaches that are forced on associations and should be followed. The No Plastic Bag Initiative, sent off by the Malaysian government not very far in the past, is one illustration of such government strategy.Taking a gander at Malaysian purchaser conduct preceding the execution of the No Plastic Bag strategy, we can reason that Malaysians love their plastic packs, as proven by scenes of streetcars loaded with plastic sacks being pushed to vehicles following an hour of shopping for food. Notwithstanding, when the No Plastic Bag strategy was carried out, there was a 20-penny charge for plastic sacks, and in certain states, no plastic packs were permitted by any stretch of the imagination. <div>
Understanding the buyer conduct when the strategy was first carried out the grocery store started selling their recyclable/reusable packs set at the look at passageway. This pack go for several ringgit to many ringgits for extravagant marked ones. In the underlying months of the execution of the No Plastic Bag strategy, general stores raked in huge profits selling such reusable packs as it was apparent numerous shoppers are not bringing back the reusable sacks and expecting to buy new packs each time they shop.
<div>However, over the long haul, this act of being your own reusable pack was gradually getting on and the offer of reusable sacks would fall. Understanding this conduct change, store then, at that point, center around alternate ways rather than simply selling the reusable pack. They acquaint reward framework like focuses with their dedication program (for example Tesco – Green Points, Village Grocer – Bites Points) on the quantity of reusable sacks you use. The more packs you bring the more focuses you get. It is my perspective here this is done in a manner to urge more buys to top off the numerous reusable sacks that is brought to the store. Understanding the purchaser conduct because of the No Plastic Bag strategy as I would like to think would give open doors to the store to acquire additional income streams and give a constant income stream related to their current market systems.</div></div></div>
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3. The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?. <div>
At the point when the economy is in a condition of downturn, joblessness and expansion will be common. The public authority should guarantee that the downturn is settled and that the economy keeps on growing. The main administrative issues during seasons of emergency are the administration of financial development related to expansion control in the economy, just as the control of the actual economy. </div><div>
Most significant administrative difficulties now and again of emergency are to deal with the financial development along with the expansion control in the economy with the control of the economy. crises are very much overseen during seasons of downturn/monetary decline in two ways:
– Through the public authority’s methodology of expanding consumption on economy government assistance through foundation development or individuals government assistance
– Through tax breaks. By cutting the money hold proportion, making advances more reasonable, and buying securities in the open market, the Federal Reserve builds the cash supply and liquidity on the lookout, guaranteeing quick development
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- This reply was modified 1 year, 10 months ago by Darmathan Francis Xavier.
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4. As we discuss macroeconomic issues and identify problems related to the economic meltdown, what is your view on the impact of macroeconomic variables on the business decision-making environment. Are macroeconomic variables a good indicator of business performance?
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Macroeconomics remember the extraordinary setting for resource distribution. While microeconomics incorporates factors of resources availability and use that influence individuals and associations autonomously. As an association head, understanding the key macroeconomic and microeconomic angles influencing a business helps with arranging, just as long haul business approach advancement. Customers, agents, contenders, media, financial backers, and providers are the top microeconomic business angles influencing pretty much every business, while the top macroeconomic factors influencing the association are monetary advancement rates, advance charges, joblessness, worldwide trades, and extension.
Macroeconomic factors impacts organizations by modifying market vacillations. This prompts organization proprietors doing broad macroeconomic examination consistently. They apply their outcomes to settle on significant business decisions in the aim of moderating the effect of the misfortune from financial changes. The GDP, financial approach, money related arrangement, expansion, work rates, and shopper spending are for the most part instances of macroeconomic factors. These factors influence business choices connected with spending, acquiring, and contributing.
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Numerous analysts investigated that full scale factors influence the business’ dynamic climate.Macroeconomic pointers cause expanded instability in the monetary business sectors and in the economy. It is a decent sign of business execution since we can investigate the exhibition of a business by contrasting it and the substitutable organizations. Macroeconomic pointer estimates orderly danger which samely affect the entire economy.
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Question 2 about IR 4.0 already done previously at top there Ms.
hi
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