Macro and Micro Economic Factors (Essay Sample)

Macro and Microeconomic factors
(Student’s Name)
(Affiliated Institution)
(Course)
(Instructor’s Name)
(Due Date)
Macro and Microeconomic factors
Introduction
The financial performance of an international organization is determined by both Micro and Microeconomic factors are factors such as forces of demand and supply that are linked to several markets and segments of the economy. Other examples of microeconomic factors include competition and the price of goods and services. On the other hand, macroeconomic factors affect the whole economy. They include aggregate variables like national output, aggregate demand, interest rate, and inflation. There are several microeconomic and macroeconomic factors affecting the financial performance of Schibsted. Therefore, this paper aims at addressing these factors. Organizations tend to make many operational and strategic decisions which are normally determined by economic factors such as operational decisions, financial decisions, and investing decisions. For this reason, the firm’s financial performance is always gauged by economic stability.
Schibsted is an international organization dealing with several digital consumer brands. It has over 5,000 employees (Crunchbase, 2020). The company has world-class media houses in Scandinavia, providing marketplaces and digital services that empower consumers. The organization has many companies across the world, allowing people to interact with them every day. Trading in both domestic and global market exposes Schibsted to macro and microeconomic factors, which it has to understand and deal with them to promote its financial growth (performance). The company connects with millions of buyers and sellers as it provides online marketplaces in the Nordics. Its digital marketplaces such as Tori, Finn, and Blocket enable consumers to buy old and new things. 
Macroeconomic factors
Some of the macroeconomic factors impacting Schibsted’s financial performance include Inflation, Gross Domestic Product (GDP), exchange rate, and money supply. 
* Inflation rate
Inflation is a persistent increase in the general price level. It measures changes in the average price level in relation to the price index. The current (2021) inflation rate for Norway is 3.3%, 2020 had 1.4%, and the average inflation rate for 2019 was 2.17% (Plecher, 2021). This shows a rise in inflation. Extremely higher prices reduce consumer expenditure resulting in a decline in the GDP. A negative effect of inflation on GDP or economic growth will affect the company’s financial performance since there is a negative relationship between market volumes, GDP, and market all share index with inflation. Studies reveal that there is a deleterious impact of inflation on financial growth; Identified as a credit to the private sector as a share of GDP, quasi money as a share of GDP, and as a broad definition of money as the ratio of GDP (Ghareli & Mohammadi, 2016).  
* Exchange rate 
It is the price for which another country’s currency can be exchanged with another country’s currency. Norway’s exchange rate as at 2019 was 9.84 per EUR, 10.89 per EUR in 2020, and 10.48 per EUR in 2021 (FocusEconomics, 2021). There is a depreciation in the currency between 2019 and 2020 and a slight appreciation in 2021. Depreciation of the local currency makes the importing cost of goods very expensive, resulting in a decline in the volume of imports. When depreciation is happening in Norway, the main location for Schibsted, domestic companies including Schibsted will benefit due to increased sales and huge profits.  A relative appreciation being experienced in 2021 will negatively affect Schibsted since export costs are becoming expensive as import costs become cheaper.
* Interest rate
Interest rate is the price a borrower has to pay for the lender’s money borrowed; it is the fee paid on borrowed assets. Interest rate reflects market information concerning the expected change in the purchasing power of money. It controls the flow of money and affects financial performance in business. Norges bank held policy interest rate at 0.00% in December 2020 and the interest is to remain the same until there is clear signs of the economic conditions resuming normality. The Norway’s forecasted interest rate by the end of 2021 is expected to be 0.02% and 0.30% in 2022 (Trading Economics, 2020). Lower interest encourages people to borrow a lot of money from financial institutions, leading to a high flow of money among the public. This makes business organizations increase the prices of their goods and services, thus, generating more profits for the sales (Ghareli & Mohammadi, 2016). Schibsted tends to benefit from this condition (0.0% interest rate.). It will only get hurt when the economy becomes normal. This is because a high-interest rate will discourage borrowing, and many people won’t be willing to spend. This information indicates the existence of a significant relationship between the interest rate and financial performance. Therefore, it is upon this company to fully utilize the period of the lower interest rate. 
* Gross Domestic Product (GDP)
GDP is the total market value of goods and services produced in a given economy within a certain period of time. It is the total market value or monetary value of all the final goods and services produced in a country in a given period of time. According to Trading Economics (2020), the Norway’s GDP as per 2019 was 403.34 billion US dollars. By the end of 2020 its GDP was 360.00 USD Billion. This shows a slight drop in GDP. The decrease in GDP affected Schibsted through a decline in consumer expenditure, thus recording a lower financial performance. A strong GDP growth will promote financial growth of this company, being able to hire more employees and pay higher wages leading to more consumer expenditure on goods and services (Dioha et al., 2020). Increased consumer expenditure will impact Schibsted’s financial performance as it will generate more revenues from the sales. Strong GDP or economic growth will not only promote its financial growth but also enhance its confidence to invest more.
Microeconomic factors affecting financial performance
There are several microeconomic factors affecting Schibsted
* Demand and Supply of its products and services
 Demand is the number of goods that consumers are willing and can pay for at a certain price within a given period. It is the desire of consumers to buy goods and services at certain prices. This definition presents the relationship between price and demand level (Groenewegen, 2018). Supply is the total amount of goods or services that are available for consumers. It relates to the number of goods available at a specific price. Supply and demand impact Schibsted’s income generation in a unique manner. The law of demand and supply explains supply and demand are related and how this relationship affects the prices of goods and services. Changes in prices impact the company’s sales, as well as its income generation. An increase in supply, exceeding the demand for goods or services leads to a fall in prices but if demand is higher than supply prices rise. 
There is an inverse relationship between prices and goods when demand is constant. With a rise in supply for Schibsted’s good or service, while maintaining demand unchanged, the price of the service or good tend to fall to a lower equilibrium price. The lower price implies that the firm will not earn a lot from the sales because the profit margin is small. Also, high supply means that goods or services are flooded in the market, so selling becomes difficult sometimes. However, an increase in supply with demand remaining the same leads to a rise in price (Groenewegen, 2018). If the firm can sell its products at this price it will earn a lot. The same inverse relationship happens in demand. An increase in demand with unchanged supply leads to a higher equilibrium price and vice versa. Increased demand while having a higher equilibrium price increases Schibsted’s financial performance. 
* Competition
The level of competition tends to affect a company’s financial performance in terms of the number of potential customers. Schibsted is operating in a perfect competition market with many buyers and sellers, undifferentiated products, perfect information about price, and no transaction costs. Having many competitors means that Schibsted’s share of dollars customers spend on its pr