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Different sources identify indicators that may be the leading cause of the upturn or downturn of the economy. Some of the indicators tend to be different due to the viewpoint of the source. Though they may be different, they all play a part in the direction of the economic forecast. In this paper, we will identify economic factors that we feel may have an impact on the U.S. economy in the next eighteen months for MCI.
The "sources of personal income" is the first economic indicator that will be discussed. Since MCI is a company [and part of an industry] that is more needed by businesses, rather than individuals, the sources of personal income can play a role for the next eighteen months. If persons of the eligible workforce are receiving monies from a source other than their normal source and in the amount of what the individuals are used to, growth for MCI can slow down drastically and even cease. The reason for this is, just as stated above, MCI is more of a personal amenity rather than a need for individuals. If a person is on unemployment assistance, they will more than likely take care of the essentials, such as food, water, shelter and clothing, before indulging themselves in the luxury of communications and/or communications devices. When on the other hand, communication services for businesses are vital organs that keep them running. As we can see, unemployment is at an all time high, thus validating this forecast as what we tend to expect over the next eighteen months. The next indicator that will be discussed is, the "status of the labor force."
The status of the labor force should be a concern to all industries. With unemployment rising, consumer confidence down and the current state of war, the economy can continue to be in a trough. President Bush however has a different outlook on what the strike on the Middle East can do for the U.S. economy. As several presidents before him has done, he is also attempting to do. In U.S. history, going to war has mostly been assistance to the economy by creating government jobs to assist the country that has been destroyed. The more government jobs created, the more businesses are needed to support the government's needs. The more reserve soldiers that are called to active duty, the more positions that will need to be
All of the following economic indicators outline the business implications based on research of the eighteen-month forecast and the expected outcome for MCI.
Corporate Profits
When we look at the economic indicator known as corporate profit the economy looks promising. According to econoday comparing corporate profits from the fourth quarter of 00 and the first quarter of 00 there is a .5 percent increase in the after tax area. If we compare the first quarter of 00 and the first quarter of 00 then there is an after tax profit increase of 10. percent.
It is expected and predicted that corporate profits should continue to rise throughout the year. Careful analysis will show that a consistent increase in the corporate profit will help to maintain a continuous rising stock market. There is a relationship between corporate profits and the stock market. As it appears when there is a rise in corporate profits there is also a rise in the stock market, the same is true for a corporate decline in profits.
Now that corporate profits are on the rise and this is the income of any corporation, the effect is that companies will now be able to increase their capital spending. When the capital spending is increased then the company grows and increases in value and is reflective of a healthy corporation. This is more evident when a corporation is relatively strong during harsh economic times.
Gross Domestic Product
Gross Domestic Product (GDP) is one measure of economic activity, the total amount of goods and services produced in the United States in a year. It is calculated by adding together the market values of all of the final goods and services produced in a year.
· It is a gross measurement because it includes the total amount of goods and services produced, some of which are simply replacing goods that have depreciated or have worn out.
· It is domestic production because it only includes goods and services produced within the U.S.
· It measures current production because it only includes what was produced during the year.
· It is a measurement of the final goods produced because it does not include the value of a good when sold by a producer, again when sold by the distributor, and once more when sold by the retailer to the final customer. We only count the final sale.
Changes in GDP from one year to the next reflect changes in the output of goods and services and changes in their prices. To gain a better understanding of what actually is occurring in the economy, real GDP is also calculated. In fact, these changes are more meaningful, as the changes in real GDP show what has actually happened to the quantities of goods and services, independent of changes in prices.
U.S. GDP. Bil. USD--SA.
Jun00Jul00Aug00Sep00Oct00Nov00Value10,48010,810,610,6510,4810,544Standard Deviation1.0.16.0.46.61.Correlation Coefficient0.50.50.50.50.50.5
Government Regulations
Government regulations can be categorized as one of the economic indicator that will affect any organization's performance. Over the years the General Services Administration have imposed different standards on several telecommunications providers. The restrictions can vary from interstate commerce to deregulation. All these regulations are contributing factors that affect forecasting. Organizations must generate forecasts based on these economic factors.
In the case of MCI, it is imperative that the eighteen-month forecast makes provisions for these regulations if the government imposes them. Just recently in a published report, the inspector general's office announced that they are considering suspending MCI license as contractor. This announcement is the latest of mishaps surrounding MCI. The pending suspension alleged that MCI was delivering above- average performance to government clients, providing . percent network availability when .8 percent is required, and taking .1 hours to make repairs when GSAs standard is four hours. Michael Hardy ( 00). With this shadow over MCI clearly this will have a negative impact on the troubled telecommunication provider future, MCI forecast must make provision for these changes for at least two years.
Monetary Conditions Index
Just as significantly Monetary Conditions Index plays an essential role in the economic stability of industries. MCI can and use the Monetary Conditions Index as another indicator for the economic forecasting. According to the Granger Causality results, changes the monetary conditions index can lead to changes in inflation, money supply and MPI. These moves can help MCI to accurately forecast for months to come. Additionally, the company will be able to predict the future government responses and the interest rate trend.
Consumer Goods
In preparing MCI eighteen-month forecast, consumer goods must be a priority on the list. This is an economic indicator that will determine if the organization will 'sink or swim'. Extensive marketing research must be done to determine the buying habits of consumers and importantly the goods that they want. To emerge from all the problems surrounding the organization, the economic future the process of establishing such a move lies in the hands of the organization economics. Enough data must be collected figuring out demographics and geographical locations on consumer spending.
Weekly Hours Worked
It must not be over looked that weekly hours can also affect economy. If MCI must recover from the scandal and develop a bright economic future, it is the responsibility of senior management pay close attention to the numbers of hours that their employees worked on a weekly basis. Management at MCI can use hours worked to project actuals and estimates. Additionally, they can use this information to perform weekly plan performance. Moreover working excess hours by employees can inflate MCI's operating expenses. Knowing the uncertainty of MCI future the eighteen-month forecast should not include excess work hours.
Unemployment Rate
Corporate America experienced another unstable year. Many events have had quite an impact on workplaces across the country. A sluggish economy, mass layoffs, and corporate and accounting scandals were issues that made headlines. The year started out with an unemployment rate of 5.6 percent and ended with an unemployment rate of 5.6 percent. The economy rode a roller coaster throughout the year. The worst point came in April when the unemployment rate rose to 6 percent, the highest in nearly eight years. The economy has had a difficult time recovering, and many companies had to layoff a large number of workers. Once a strong industry, telecommunications weakened considerably over the past year. The cutbacks, which hit 0% of MCIs 75,000-strong workforce, stemmed from the telecoms $40 billion takeover by WorldCom. Despite the planned layoffs, MCI still hiring aggressively in many areas. With all of this in our recent telecommunications history, it may be safe to say that with high unemployment comes low profit. We can potentially foresee that within the next 18 months the telecommunications industry may continue to see no significant growth or changes on their profit margins.
Exports
The economic recoveries of our most important global trading partners have appeared increasingly fragile, as weve moved through the year. Although the economy was at a low for exports, MCI began looking for a business partner to address its goal of supplying consistent, high-quality communications services globally. MCI wanted to align itself with a strong global service and support presence, as well as the ability to support customers' desktop, or LAN environments. MCI Communications Corporation merged with its current partner, Avantel, and WorldCom, Inc. to form a new giant in the global telecommunications market called MCI WorldCom. MCI WorldCom is now considered the first integrated global communications company. Operating in more than 50 countries, MCI is a premier provider of facilities-based and fully integrated local, long distance, international and Internet services. This was a strong innovative step taken by MCI and they should continue to thrive in the next 18 months as long as they make profound changes in their assessment of the market and the relevant strategies needed to warrant profitability and acceptable levels of service.
Technology
In the last five years, information technologies have been responsible for more than one-quarter of real economic growth, states Secretary of Commerce William M. Daley. (Daley, W., (18) para 1) Information technology makes up 8% of the economy and has been increasing its presence and share of the Gross Domestic Product. However, the Federal Agency still doesn't include the tech sector separately in its annual report that groups Gross Domestic Product by industry. It is treated as a separate contributor of the Gross Domestic Product. The rapid growth of the telecommunications industries has created a great demand for different groups, such as, programmers, system analysts, computer scientists and engineers. MCI has tripled its Internet bandwidth and as a result, the cycle has accelerated as faster data backbones enable more services, which will attract more users. Though technology is seen by most people as a way for computers to take away some of the "human workforce", it can also act as stimulant for businesses that benefit from these services. When businesses save more on overhead spending, they tend to spend more to attract business or in other areas of the company. With the implementation of new technology, there are new positions that are created to support it, thus creating more revenue that is generated throughout the economy. Although government regulations may try to regulate the growth of technology within telecommunications, we can foresee that MCI will continue to move forward to gain success, expand and grow, which will assist in stabilizing the economy.
References
Hardy, M. (00). MCI haunted by vocal critics
Retrieved from the World Wide Web on 06/0/0 at
http//www.fcw.com/fcw/articles/00/0616/news-mci-06-16-0.asp
Monetary Conditions Index Guidelines for Preemptive Steps to Forestall
Retrieved from the World Wide Web on 06//0 from
atec710a.htm+mci++economic+indicators&hl=en&ie=UTF-8
Fels & Elga (London)
Retrieved from the World Wide Web on 06//0 at http//www.morganstanley.com/GEFdata/digests/000048-fri.html
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