1.
Business Situation
 Largest retailer in US sells wide range of products from
hardware to sporting goods to grocery & fresh fruits and
vegetables every week
 Fresh citrus fruits departments have stable business but
seasonal fluctuations happens due to the supply chain. The
predominant categories are fresh orange & lemons
 During the last quarters, citrus fruit department
experienced a 50% dip in sales compared to the same
quarter in last year. Given that US economy is coming out
from downturn.

2.
Problems need to be address
 What are the possible root causes of the declined sales?
 Is 50% drop in sales YoY a cause to worry?
 Will it continue in future quarters or is it a temporary
phenomenon?

3.
Assumptions
 Lets assume that retailer sales only citrus fruits:
Orange & lemon
 Lets say that US national income divides GDP into four
categories
Y= C + I + G + NX Where C is consumptions
I is investment
G is Govt. Purchase
NX is net export

4.
Economic Indicators
Macro economic Indicators Micro economic Indicators
 National Income  The dynamics of supply &
 Price Unstability demand
 Store location & footfalls
 Interest rate charged
 Competitors promotions

5.
Macroeconomic Indicators
 National Income:-Large retail sales have a tendency to follow the trend of GDP
growth & reduction. This make sense because consumption can make up a
significant amount of GDP, that would peg directly into one ‘s
another, however it is not always true.
 Price Unstability:- Growth in retail sales isn’t necessarily growth, but
sometimes it can simply be inflation. By dividing out the inflation you could
actually get negative growth rate. As expectation for inflation are increasing
, stores slowly raising their price and this leads to overall higher net sales. But
simply inflation not really increased performance.
 Interest rate charged:- Interest rate rise are beginning to affects the customer
willingness to spend. People are simply saving and invest more instead of
consuming, that hits large retail companies.

6.
Microeconomic Indicators
 Supply & Demand force:-They determine how to buyer & seller interact to each
other and also determine the quantity of each good produced and the price
that it is sold. This is one of the very important indicator that drives sales of
large retails. As per assumption
Total sales of retail=sales of orange + sales of lemon
Y = Po*Qo + Pl*Ql
Here drop in sales indicate that only half of the orange & lemon
has been sold in this quarter compare to last year. It means store have surplus
amounts of orange & lemon to supply, due to shift in demand.
 Store Location:- It may be cases of retailer has open new stores where footfalls
prefer other low cost branded beverage
 Competitors:- Since Orange & lemon are perishable and retailers suppose to
sell it fresh. It may be the case of stores of competitors are selling these fruits
with lower margin because of ample supply and low demand.

7.
Potential Solutions:-
Macro economic Factors Micro economic Factors
 Due to upward movement of  It can be the case of store’s brand
economy , Income can have product sales has gone down relative
increased and people may have to well known brands or vice versa
started spending on expensive  Store footfalls prefers sweet fruits
outlets and branded fruits juice beverage compare to citrus fruits
 Interest rate charged or offered can beverage
be higher and people may have  Competitors are offering more
started investing customize beverage with low margin

8.
Conclusion…
 As economy(GDP) is moving upwards we may say that there would be more
jobs, high income level, high consumption of expensive goods & more outputs
AND it reverse at economic downturn. When we look at the nature of US
economy, we may simply say that it is consumption driven economy and
consumer need more money in hands. Decline in sales of citrus fruits can be
due to the Macroeconomic factors. And this is cyclical phenomenon.
 Due to the Micro economic factors it can be the situation of ample availability
of orange & lemon to consume because of demand has shifted.
 Sales of well known branded products can have gone up relative to the low
cost products.