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Textrons Strategic Analysis Report
Economic Forces
Inflation and Interest Rates. Through the last several quarters the Federal Reserve and its former Chairman Alan Greenspan have made measured and consistent increases in the Fed Funds Rate. This is the rate at which banks borrow from each other on terms as short as overnight; it also serves as a basis for every other interest rate in the economy. As the economy has been heating up recovering from recession the Fed has been forced to continue to increase the Fed Funds Rate to keep inflation in check. Rising interest rates trying to hold back inflation has caused the cost of money in the U.S. economy to increase. The only incentive for the companies to borrow money to develop new technology is if they have some guarantee from the government to buy it when it is completed, but if the government keeps up its spending habit inflation will only get worse which simply compounds the problem of rising investment costs.
Private Sector. If we look to the private sector to see the effects of the economy of the last few years well find that Boeing and Airbus, the only two major producers of commercial aircraft, both saw orders decline by 45% and 28% in 2001 as well as falling deliveries of 28% and 7% respectively (Yahoo! Finance). A few years later as the economy began to pick up, so did order for both companies. Airbus and Boeing for the last several years have had secret projects to develop the next plane of the future and both companies are just on the cusp of entering their creations into service Airbus A380 is due in 2007 and Boeings 787 Dreamliner is due in 2008. With traveler confidence on the rise there is no reason these companies as well as all the corporate jet manufacturers to have any losses. The economy is rising, more people are traveling, this will lead to businesses and consumers requiring, and paying for, more travel (Choe 2006). The airline industry is only a small example of the flexibility of our economy and its rising strength, evidenced by steady increases in GDP (Johnston & Williamson, 2006).
Sociocultural Forces
The influences from society and culture have a strong affect on how people behave. Our vastly changing society has caused many Americans to have a change in attitude and lifestyle. For a closer look at some of the more recent changes brought on by sociocultural forces, we examine several major issues: consumer confidence and terrorism and security.
Consumer confidence. Catastrophic events such as the hurricanes in the Southeast have had a major impact on consumer confidence (Cooper, 2006). Primarily, higher fuel prices have led to weaker demand in the automobile industry (Sprinzen & Schulz, 2005). Despite the major events in that have been influencing the economy, the New Year seems to bring hope for consumers. The consumer confidence index rose to 128.4 from 120.7 and “showed that more consumers in January than in December believed that jobs are available” (DInnocenzio, 2006, p.1).
Terrorism and security. The United States Government continues to closely monitor the national threat level to prevent terrorist attacks and protect our homeland, but study from Columbia University reveals that “49% [of Americans] reported being more concerned about personal and family safety with respect to possible terrorism” (The Marist Institute for Public Opinion, 2003, p.7). The study also exposes that “nationally, 41% lack confidence that the government is providing adequate airport security” (p.8).
Demographics
Women. There is an ever-increasing presence of women in the workforce. (The Importance of Sex, 2006) Women are stepping out in the working world to become one of the major parts of this diverse occupational society. Women are being placed in higher positions among their male counterparts, but are not presently holding as many top positions at corporate levels. The women are also no longer lagging behind in their education and career aspirations. Women are seeking to become degree holding citizens, as well as, holding upper management positions throughout firms and business enterprises.
Minorities. In such states as California, Hawaii, New Mexico, and Texas minorities are now the majority of the citizens residing in various major areas. (Moss, 2005) The minority population continues to increase as more and more immigrants continue to enter the borders of the United States. With this increase in immigration and simply the overall increase of the minority population with in the country, the workforce will eventually follow suit in the shift to a major minority increase.
The Older Crowd. The workforce is growing older as the baby boomers are reaching closer and closer to the retirement age. (Moss, 2005) A large portion of the workforce consists of the baby boomers. There is an overall feeling of anxiety within the labor force to start worrying about replacing this major portion of society as they begin to retire. However, this generation of individuals is also living healthier longer lives allowing many to continue to work well in to an older age than generations before. The workforce age will continue to increase with this generation until a new generation of worker can begin to replace them.
Political, Legal & Governmental Forces
Every aspect of business must adhere to certain rules and regulations. These elements of the political, legal, and governmental forces can have great impact on the overall outcome of success. Government spending, PACs, Lobbyist, and regulation are all element that must be considered in these forces.
Government spending. Since Bushs launch of “War on Terror” around the world government spending has steadily been on the rise. According to the Bureau of Economic Analysis, national defense spending decreased on an annual basis by 13.1 percent in the fourth quarter of 2005 compared with an increase of 10.0 percent in the third quarter.
This is quite a sharp and sudden decline in spending considering the governments continued and necessary spending against terror around the world. However, the Presidents budget provides $401.7 billion for the department of defenses budget, an increase of seven percent over last year and 35 percent since 2001 (Department of Defense). These increases will serve all government contractors well.
PACs and Lobbyists.
The aerospace and defense industry in the United States is very active through PACs (Political Action Committees), corporations short cut to giving money to political candidates, in getting what it wants from