Effect of Macro-economics on companies

Topics: Inflation, Economics, Monetary policy Pages: 19 (2886 words) Published: December 26, 2014

1. Introduction and Objectives
This is a report about the macro-economic environment of Germany in which Bayer AG (Bayer) was founded and listed in the European Stock Exchange vis-a-vis the macro-economic environment of China in which Bayer has a significant market and operations. This report examines and provide an insight on market structures in which Bayer operates, the impact of the macro-economic of Germany and China on Bayer’s economic activities and the monetary, fiscal and foreign trade policy and their impact on Bayer. This will assist Bayer to make strategic business plans includes major investment and expansion based on the above economic and market factors. Background of Bayer

In fiscal year 2013, Bayer employed 113,200 people and had sales of €40.2 billion. The figure below shows the key figures of Bayer (revenue & employee) by key geographical regions.

Bayer is a global enterprise with 3 core competencies. Bayer AG, Leverkusen, Germany, acts as a strategic management holding company which defines the values, goals and strategies of the entire Group.

Bayer Financial Performance Summary
The following is an excerpt of the five years summary of Bayer Group financial performance with about 88% of Bayer sales outside Germany.

The following table provides Bayer’s regional breakdown of external sales by market and of intangible assets, property, plant and equipment. China forms a significant part of Bayer overall market as well as emerging markets for growth.

Bayer in China
Bayer's links with Greater China go back to 1882 and it now employs around 13,000 people. The signing of a broadly based cooperation agreement between Bayer and the Ministry for Chemical Industry in 1993 laid the foundations for expanding business activities in China. In 1994, Bayer (China) Ltd. was established as a holding company in Beijing to coordinate technology transfer and market development, and support the preparation and implementation of joint venture projects. Global Economic Environment

The crisis in a number of European countries continued to damper economic development. Although trend was positive as the Euro­pean economy grew slightly again after several quarters of recession and economic output continued to increase in the United States, albeit at a slower pace than in the previous year, the biggest contribution to global growth still come from the emerging markets. With Bayer 88% of sales coming from the rest of the world outside Germany, Bayer would need to continue focus on emerging market economies to drive sustainable growth for Bayer Group.

2. Fiscal and Monetary Policy in Germany and China and the implications on Bayer Business Introduction
Fiscal and monetary policies are the two tools used by the government to achieve its macroeconomic objectives by influencing the level of aggregate demand in the economy to achieve economic objectives of price stability, full employment, and economic growth. When the government changes the levels of taxation and government spending, it influences aggregate demand and the level of economic activity. There may be sectorial impact but in general, macroeconomic effect is broad base and they will impact Bayer’s operations and performance. Both Germany and China are large export countries especially in manufacturing, although increasing for China, it also has developed it domestic market for a more balanced growth, Bayer’s operation and performance will certainly be influenced by the government fiscal and monetary policies1. Germany Fiscal and Monetary Policies

Germany does not have its own money so they cannot use their own monetary policy. Germany has to abide by what the ECB (European Central Bank) policies. Given the size and importance of the German economy to both the Eurozone and to the European Union as a whole, it is unsurprising that the Governing Council of the ECB might work along the lines that what is good for...
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