Essay Sample on Macroeconomic Variables

Published: 2020-03-30 15:45:06
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Macroeconomics denotes the study of an economy as well as the variables, which control the macroeconomy. It involves the study of policies of the government as far as controlling and stabilization of the economy over a given period is concerned. The goal of this is to ensure fluctuations in an economy, if any, are reduced. Macroeconomic variables, thus, refer to indicators or the key signposts, which signal the current goings-on in an economy. Some of the variables within this context include inflation, unemployment, money supply, economic growth, exchange rates and budget deficits. Aramark Corporation is a provider of facilities management and other services, which include food facility services. Even though the company mainly operates in the US, the company does business in 22 other countries around the world. As such, variables such as inflation, foreign exchange rates, unemployment rates and economic growth in those countries determine the demand and supply of its products and services.

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The impact of currency, as seen in the companys press releases from Q1 2015 indicates that the strengthening of the dollar impacts sales and operating income. For Q1, it was indicated that while the earnings would not change, the changes in exchange rates would lead to 3% decline in sales. Aramark provides food services to hundreds of colleges in the US (Arnaout, 1999). With inflation rates and labor wage rates rising, prices for food in the dining facilities that Aramark runs across the US are also going up (Alwood, 2013). The result is that students are abandoning the campus provided-Aramark run dining plans due to the rise in costs as a result of inflation (Alwood, 2013).

Aramarks Food and Support Services (FSS) Industry in the United States has been able to reach millions of consumers among them the students, patients, sports fans and employees in the United States (Aramark, 2015). Aramark has remained profitable despite the point that food production prices have gone up due to inflation (Noverini, 2015). This is due to the wee structured business model they have in place (Noverini, 2015). Most of the contracts they have with their clients have been renewed (Aramark, 2015). This model guards the company against any negative impacts brought about by inflation. This is because their clients shoulder any risks. The company has a 90% customer retention rate.

Year Average Annual Inflation Rate (US) Total Revenue

2011 3.169231 13.08B

2012 2.084615 13.51

2013 1.484615 13.95

2014 1.630769 14.83

Total Revenue in Billions and Inflation Rates in Percentage. Adapted from www.aramark.com

Adapted from Google Finance.

Information presented above indicates that the rise in total sales by Aramark has been marked by the reduction in inflation rates in the US. While the company is not immune to the rise in food costs, the operational, as well as, structural advantages that it has, are key factors as far as food inflation is concerned (Noverini, 2015). It manages to cushion itself against such macroeconomic variables given that it generates 10% income from its uniform services and 50% the facility services it provides (Noverini, 2015).

Unemployment rates have been going since 2011. Comparing percentages from 2011 July to 2015 July, the rates are 9.0, 8.2, 7.3, 6.2, 5.3 respectively as shown in the table below:

Year (Month of July) Unemployment Rate

2011 9.0

2012 8.2

2013 7.3

2014 6.2

2015 5.3

The drop in the unemployment rate also means that more people are in work and earn incomes, which they can then spend on food and other necessities.

Aramark has managed to record organic revenue growth within its international segment owing to the boost from the strength in China and Germany (Baumol & Blinder, 2006). This accounts for 6% each year (Noverini, 2015). Food and labor costs are responsible for huge variations which the company has managed to adjust to efficiently. It has taken advantage of the volume of sales from strengthening economies like China and Germany to position itself for growth (Noverini, 2015). Just as pointed out in the market analysis and supply and demand analysis of the company, movements in micro and macroeconomic variables are key in Aramarks business (Baumol & Blinder, 2006). While variables such as inflation and employment rates go down, demand for food services or uniform services does not necessarily go up. However, the point that the company operates in a highly segmented market means that it has been able to shape a niche for itself in the education, sports and health sectors and secure key contracts to secure business and drive sales (Aramark, 2015).

By ensuring that they retain customers through high-quality support and great relationships with its clients in the corporate as well as institutional industries, revenue has continued to grow (Noverini, 2015). This is despite inflation in the food services industry. The company also provides variety in its packages for the dining services it provides in educational institutions (Noverini, 2015). This means that students have freedom of choice from the range of products and services they make available for the students. It runs such services in over 600 colleges making that its largest segment in terms of revenue generation (Aramark, 2015). Thus, the microeconomic variables and the macroeconomic variables work in tandem to ensure the company remains profitable and stable regardless in movements in markets and the economy (Noverini, 2015).

References

Alwood, A. E. (2013, June 10). IUP meal plans: dining at double the inflation rate. Retrieved from The Hawk Eye: https://thehawkeyeonlinenews.wordpress.com/2013/06/10/iup-meal-plans-dining-at-double-the-inflation-rate/

Aramark. (2015). Aramark Reports First Quarter 2015 Results. Philadelphia: Aramark.

Arnaout, R. (1999, October 15). Aramark Price Increase Due to Labor Agreement. The Tech.

Baumol, W. J., & Blinder, A. S. (2006). Macroeconomics: Principles and Policy. 10th ed. Mason, OH: Thomson SouthWestern.

BLS. (2015, August 29). Labor Force Statistics from the Current Population Survey. Retrieved from United States Department of Labor: http://data.bls.gov/timeseries/LNS14000000

Google Finance. (2015, August 29). Aramark Income Statement. Retrieved from Google Finance: https://www.google.com/finance?q=NYSE:ARMK&fstype=ii

Noverini, B. (2015, August 13). By continuing to deleverage, a more nimble Aramark can pursue growth in a fragmented market. Retrieved from Morning Star: http://analysisreport.morningstar.com/stock/research?t=ARMK&region=USA&culture=en-US&productcode=MLE

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