Effect of an economic recession and expansion on the Session Long Project’s organization-the US Army
Being engineering contractors from the army, there is one main way in which an economic expansion can affect our session long project. Our main customers are confined within our geographical locale. A stronger or robust economy will mean that our customers have a larger disposable income. This leads to an increase in their spending power and thus an increase in demand. As they spend more, the organization’s revenue will increase and soon enough we will be compelled to cater for the increased market needs. This will mean that we have to expand in regard to man power and thus increase our production capacity. However, this can only be sustained for as long as the economy is expanding.
In the event of an economic downturn or shrinkage
If a recession is experienced in the economy, our organization will be placed in jeopardy. This is because our customers’ spending power goes down and this will have a negative impact on our revenues. Reduced revenue will result in strains to our operational budget. The scope of operations and the size of our organizations will deny us a chance to have large reserves of money to cushion us. The reduced performance will result in us cutting our costs through liquidating some properties and letting off some of the labor force we have. An alternative to retrenching the labor would be to retain the human resource that we have albeit at reduced payments while we weather the storm. If matters become really tough, we may be forced to close down due to the fact that we cannot be bailed out by financial institutions. At times of recession, small organizations become unattractive to banks in terms of lending due to the high rates of bankruptcy that they report. This could however be avoided if our organization formulates and sticks to a strict budgeting regimes.
The Fed’s Beige Book-Employment, Wages and Prices
The most economic issues that affect the operation of our organization are the conditions of employment, wages and also prices. This is because they have a direct bearing on our budgeting and hence on our overall performance once we tabulate our revenue against our expenses.
In the coming month, it will be easier to take advantage of the conditions and hire temporary labor for our organization. This will allow us to increase our output as our capacity will have also increased. If possible we can also take on a permanent employee since healthcare is more affordable than it was in the past.
Price pressure being low is a good thing for the business both in terms of spending as well as in expenses. Lower prices mean that basic commodities are now more affordable. This allows the organization to pay lower wages which will allow the employees to afford a decent living. Lower prices also allow the organization to purchase supply and raw materials at lower prices thus either savings or alternatively enable the organization to buy more. This will allow the organization to expand its operations.
The projected stability of prices of basic commodities such as groceries is a good sign in as far as inflation is concerned. This means that we can project our budgeting for the next few months without the fear of market conditions changing (Boesler, 2013).
Boesler, M. (2013). FED BEIGE BOOK CONFIRMS RESTRAINED SALES GROWTH. Available: http://www.businessinsider.com/federal-reserve-beige-book-march-2013-3 . Last accessed 7th March 2013