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The economic outlook of the US Government on different companies playing a great role in the country’s stability is also considered with the Big Auto Drive Company. The main stakeholders for it are a tripartite unity of the firm, consumers, and Fed. In this respect, it is vital to mention that the relationships between each of the constituent parts are developing in a direct proportion. Thus, several factors can project increase or decrease of the company activity. The firm and the consumers are interested to achieve some benefits in the flow of relationships. On the other hand, Fed controls such processes by applying stability in the refinancing rate. In terms of high recession marked in 2000 and 2001Big Auto Drive develops its relationships on the interest rates to have more glimpses for making a better provision of its products. In this respect, it is needful for the company to get a credit in the bank with 3-5% per annum for 5 years. On the other hand, the company may have a greater deal if it would take a loan for a year from a 5-year perspective. Such speculation can contribute to the average of interest rates during five years with a rate of a bit more than 5% instead of 25% in the first case. It is a great gain for the company.
The data of consumers’ activity and the situation in the exchange market can be pointed out from both the long and the short run. In this case, short-term interest rates are lower than long-term. The yield curve reflects higher interest rates in the future and turn higher exchange rate of a dollar. In this scenario, the company may succeed in importing materials in a period of one or two years, so that not to get higher prices. The rationale according to this may be constructed with the help of the example of Central Banks. Thus, Fed decreases its refinance rate when the market cannot prove the predictions of price changes. Futures in turn can be outlined with more prospects on further upward trends in the picture of interest rates on the whole. Thus, for Big Auto Drive it would be costlier to develop business in the long run. Therefore, the company should be able to provide a financial reserve for its future activity.
It is apparent that a buying power determines the rates of consuming the products. In this respect there is a grave reason to underline that interest rates are not essential when the economy is situated in the stage of recovery with effects after recession and high unemployment rates. Though, Big Auto Drive should be quick in getting mortgage at the time. It is vital until the economy shows the marks of consumers’ activity which in return will provoke the growth of interest rates. A higher reading of consummation will project a higher compensation for interest rates growth.
Business planning is another strategic touch according the problem. The firm should point out in what currency it will provide further assets for import and export of the products. Moreover, it should outline the financial and legal homes of its headquarters (Desai, 2008), so that to be in a prior position as of price movements and making decisions in different points of interest rates’ ups and downs.
Reference
Bloomberg yield curve. Web.
Desai, M. A. (2008). The Decentering of the Global Firm. Cambridge, MA: Harvard University and NBER.
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