NATIONAL ECONOMIC GOALS

1
NATIONAL ECONOMIC GOALS

• GROWTH OF OUTPUT
• PRICE STABILITY
• FULL EMPLOYMENT

2
COMPONENTS OF OUTPUT

• HOUSEHOLD CONSUMPTION
• BUSINESS INVESTMENT
• GOVERNMENT EXPENDITURES
• EXPORTS

3
PRICE STABILITY

• CPI
• PRODUCTIVITY GAINS
• INFLATION OVERSTATED

4
FULL EMPLOYMENT

• SET AT 5.75 UNEMPLOYMENT
• NAIRU RATE
• ACTUAL RATE IS 4.25

5
ECONOMIC POLICY

• FISCAL
• GOVERNMENT EXPENDITURES
• TAX POLICY
• MONETARY
• DISCOUNT RATE
• RESERVE REQUIREMENTS
• OPEN MARKET OPERATIONS

6
LINK TO FOREIGN ECONOMIES

• GLOBALIZATION OF AMERICAN INDUSTRY
• TECHNOLOGY
• EXCHANGE RATES

7
ECONOMIC EFFECT ON VALUE CREATION

• RECESSION IN THE PACIFIC RIM
• DECLINE IN EXPORTS
• DECLINE IN EARNINGS
• STOCK MARKET DEVALUATION

8
STRATEGY IN ACTION

• THE EFFECT OF ASIAS WOES ON BOEING

9
ASIAS TROUBLES

• MARKET DECLINES OF UP TO 80 WIPED OUT BILLIONS
  IN ASSETS
• INDONESIAN ECONOMY DOWN BY 20 IN ONE YEAR
• JAPAN- 600 BILLION IN BAD DEBTS, 70
  DECLINE IN PROPERTY VALUES
• CHINA- 75 OF BANK CREDIT IN STATE ENTERPRISES,
  240 BILLION IN BAD DEBTS

10
WEALTH LOSS DUE DROP IN STOCK PRICES

• HONG KONG - 75 BILLION
• KOREA - 60 BILLION
• INDONESIA - 45 BILLION
• THAILAND - 21 BILLION
• TOTAL IS 201 BILLION DOLLARS

11
EFFECT ON BOEING

• 30 OF BOEINGS BACKLOG INTENDED FOR ASIAN
  CUSTOMERS
• ORDERS ARE DEFERRED OR CANCELLED ALTOGETHER
• ASIAN WEAKNESS IS STRONGEST IN 747 AND 777 MODELS
• 48000 JOB LOSS
• 25 CUT IN PRODUCTION
• SHARE PRICE HAS FALLEN ABOUT 25
• 25 CUT IN COMMERCIAL JET PRODUCTION

12
BOEINGS PROJECTIONS
1999 2000
OPERATING REVENUE 58 B 50
B TOTAL RD SPENDING 1.7 B 1.5
B DELIVERIES 620
490 EMPLOYMENT
200000 185000 PROFIT MARGINS
COMMERCIAL
.02 .01 SPACE
DEFENSE .08
.09
13
CLASS EXERCISE
Assume that the federal reserve raises interest
rates again in October. (Third time this year ).
1. For your company, will there be any effect
on your business? 2. What, if any, functional
area will be effected most? Least? 3. If
interest rates never fall again, what will be the
long term effect?