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A macro economic theory represents a study of the whole national economy. Macro analysis involves the use of specific economic tools to predict a set of stylized facts about the national economy. Despite the large coverage of macro economic studies, it is important to note that macro analysis trends can be traced back to the actions of a single individual. More specifically, a macro economic analysis is a development of the micro economic analysis. Various companies use the macro analysis to gauge the impact prevailing economic conditions will have on the national economy and how the national economy can affect a company (Arnold, 2007, p. 2).
For purposes of this study, we will analyze how the national economy can affect the performance of Barclays Bank; a major Public Limited Company that is listed in both the London and New York stock exchanges. Barclays Bank is a financial company based in Britain and has a strong market presence worldwide. Globally, the financial giant is ranked the 25th biggest company by Forbes Magazine (2008 rankings) (Boone, 2009, p. 127). The company is also ranked the largest provider of financial services when analyzed in terms of market share and also the second largest bank in the United Kingdom (UK). Currently, the company is estimated to have at least $3.7 trillion worth of assets across the globe.
Barclays bank is among the best global financial providers and therefore the macro economic environment of the countries of operation and indeed the world have a direct impact on its operations. The recent financial crisis of 2009, for example, impacted negatively on the company, with share prices experiencing a slump of about 90% at the beginning of 2009 (Brown, 2009, p. 402). However, as the world slowly comes out of the crisis, the company has recently witnessed an improvement of its financial position. The companys performance is therefore highly influenced by factors in the macro economic environment which are further discussed below:
Host Environment
Before we can specifically comprehend the impact of the macro economic environment on Barclays Bank, we should be in a position to understand the economic environment in which the bank operates. With regard to the banking sector, the rate of equity finance in the UK is more than a hundred percent (100%) of the Gross Domestic Product (GDP) of the country (Gleyberman, 2010, p. 8). The same situation is also observed in the United States (US). This means that the shareholder value is not essentially based on profits but the long-term prospects of the company through the development of unrivaled products in the market that can only be associated with the Barclays band. In such a scenario, management will most likely be motivated to improve its staff by comprehensively supplementing the companys efforts in making superior products as opposed to reducing the labor force, to improve profitability. This scenario is also good for long-term growth of the company because product improvement will be encouraged (but at the costs of invention) to increase long-term growth as opposed to short term results.
The European Market- Currency and Competition
The effects of globalization and the introduction of a single currency unit in the European market have definitely changed the liberal market economy of UK (Pisani-Ferry, 2009, p. 53). In respect to these developments, there are observable trends whereby credit could be obtained in the European market at lower rates than what banks offer. This is likely to create a friction between banks and other lending firms which is ultimately going to change the long-term financial market of the UK economy. Barclays seat and indeed those of other banks is likely to be changed at the corporate board. This is also likely to undo financial relations in the long-run and especially with aspects to do with labor. Ultimately, this will lead to a destabilization of the capital markets model that Barclays currently operates in. The introduction of the Euro as a common currency in the European market is therefore going to change the labor market in terms of the wages and remuneration to be paid.
This aforementioned situation has already been experienced in other markets such as Sweden, Italy and France. The prevalent situation at the liberal market economy is therefore going to be further affected because the level of competitiveness in the market is bound to increase. The British, low skilled financial companies are therefore poised to induce stiffer competition.
Banking Consolidation
The consolidation of banks in the general economy has created a new era of financial conglomerates (Shrivastava, 2007, p. 93). This trend has especially been observed in the United States. Barclays bank is bound to be affected by these market trends because the bank will appear to be small when compared to other banks in the American market. However, other European banks are experiencing the same pressures (Ayadi, 2004, p. 29).
Considering Barclays main focus is the retail banking sector, investment banking and the management of investments, the company is competing to offer equity financing the same way as other banks do and banking consolidation isnt improving its financial image. Nonetheless, Barclays has in the past adopted an acquisition strategy that has boosted its distribution base in the past few years; a deviation from the consolidation trend currently being witnessed in some of its primary markets today. It is however unclear on the long-term sustainability of this strategy (acquisition) with regard to consolidation but integrating the banks financial strengths with another seems to be a stronger financial strategy than acquiring other banks. This initiative will improve the banks financial services in then long run, through hybrid services.
Barclays bank therefore needs to readjust its internal operations with regard to the macro economic environment for long-term sustainability. However, currently the company is still complimented by the dynamism of the liberal market economy. In this respect, the company seeks to still gain from the prevalent economic environment because of its strengths. However, more should still be done to improve the long-term sustainability with regard to the opportunities and threats the liberal market economy poses. This can be best conceptualized through the SWOT analysis below.
References
Arnold, R., 2007. Macroeconomics. London: Cengage Learning.
Ayadi, R., 2004. Banking Consolidation in the EU: Overview and Prospects. London: CEPS.
Boone, L., 2009. Contemporary Business 2010 Update. London: John Wiley and Sons.
Brown, B., 2009. The Decline and fall of Banking. London: Troubador Publishing Ltd.
Gleyberman, A., 2010. Financial Report Next Plc: Feasibility Study of a New Investment in Australia. Melbourne: GRIN Verlag.
Pisani-Ferry, J., 2009. The Euro at Ten: The Next Global Currency? London: Peterson Institute.
Shrivastava, M., 2007. Banking Reforms and Globalization. New York: APH Publishing.
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