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PUBLISHED DATE: - 29-08-2024
DOI: -
https://doi.org/10.37547/tajmei/Volume06Issue08-07
THE ROLE OF ECONOMIC DATA ANALYSIS IN
MANAGING MEDIUM AND SMALL
COMPANIES TO MAKE STRATEGIC
DECISIONS AND IMPROVE PERFORMANCE:
AN ANALYTICAL STUDY
Hadeel Fawzi Mohammed
University Of Dijlla College, Iraq
Mustafa Tilab Abd Ali
Ministry of Education, First Kurkh Education Directorate, Iraq
Ola Thaer Kamil
University of Dijlla College, Iraq
INTRODUCTION
A broader vision of investing in dynamic and
unpredictable market scenarios must come in. To
discern the ways of profiting from investing, one
must be able to understand predominant economic
issues that form the basis for market movement
and affect potential investment opportunities. That
is where economic analysis comes in. Various
investment strategies incorporate a measure of
potential risk against rewards, where investors can
arrive at by analyzing a host of financial data,
market trends, and indicators. This paper looks at
the role of financial analysis in making informed
investment decisions. (Wickinson,1986).
Economic analysis evaluates the position held by
economic factors to an investment decision. It
provides a framework for assessing the potential
RESEARCH ARTICLE
Open Access
Abstract
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risks and rewards in available investment
opportunities. This is considering the various
economic indicators, market trends, and other
data, which afford clarity to an investor about the
general health and the direction of an economy and
how it might affect the investment decision.
(Robbins,1999)
In making investment decisions, investment
analysis helps investors identify key factors
affecting the performance of various assets, such as
stocks, bonds, commodities, real estate It
empowers investors to weigh the potential risks
and rewards of various investment options in, and
make informed decisions based on sound economic
principles (Rayburn,1996)
2. Concepts and Terms:
2.1 Economic data
Economic data refers to information that describes
the actual economy in the past or present. This data
is typically found in the form of time series,
covering multiple time periods (e.g., monthly
unemployment rates for the past five years), or
cross-sectional data, representing a single point in
time (e.g., consumption and income levels for a
sample of households. (Pandey,1995)
2.2 Data analysis
Data analysis is defined as the process of
examining, verifying, and selecting data,
transforming, storing, and modeling it with the aim
of extracting useful conclusions or information that
can be used to understand the causes or explain
events that occurred in the past, or to improve
future events and assist in making better decisions.
(Moscove,1990)
2.3 Managing companies.
Management is the process of utilizing resources to
achieve specific objectives. It involves various
functions such as planning, which sets goals, and
organizing, which allocates resources to
accomplish these goals. Additionally, management
includes directing, which involves leading and
motivating employees, and controlling, which
entails monitoring performance and taking
corrective action. Management serves as a compass
for organizations, guiding them in their operations,
decision-making, and ensuring that they stay on
track to achieve their objectives. (Morse,2003)
2.4 Medium and small companies
SMEs, or (SMB), are firms whose revenue, assets, or
number of employees fall below certain thresholds.
The definition of SMEs varies across countries and
economic organizations. (Moorbeard,1995)
2.5 Strategic decisions
A strategic decision is defined as a choice made by
an organization depending on a variety of factors,
this includes its operating environment, overall
resources, and the individuals who have
contributed to its development. What distinguishes
a strategic decision is its long-lasting impact, often
spanning years or even decades. Once made, it is
exceedingly difficult to reverse in a brief period.
(Kaplan,1998)
2.6 Improve performance.
Performance improvement is the measurement of
results of a particular process or activity, and then
modifying that activity, or activity to increase
growth, productivity, or effort. Performance
improvement could be applied to individual
performance
—
for example, an athlete
—
or it could
be organizational performance, such as a running
club or business. (Horngren ,2000).
3. Methodology
The researcher employed a descriptive method to
present theoretical definitions and an inductive
method in the applied aspect to evaluate the
research hypothesis.
4. Research Objective:
the study aimed at investigating the effect of the
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data analysis of economics on guiding medium and
small enterprises towards strategic decision-
making and enhancing performance, thereby
achieving the desired goals and objectives of these
decisions.
5. Research Hypothesis:
Economic data analysis plays a pivotal role in
guiding medium and small enterprises, particularly
those in Baghdad, towards strategic decision-
making and improved performance.
6. Research Population:
Medium and Small Enterprises (SMEs) in Iraq.
7. Sample of the research:
The following medium and small companies were
selected as a sample for the research:
Company Name
Address
Al-Mahfaza for Mobile and
Internet Financial Payment
and Settlement Services
Company Limited
Baghdad / Al-Khadrah neighborhood
/ St. 631 / Bl. 10 / Bldg. 129 /
Opposite
Al-Aidi
Residential
Complex / Fl. 1 and 6
info@zaincash.iq
Al-Arab
for
Electronic
Payment Company
Baghdad / Abu Nawas Street
66/13/Bataween / Adjacent to the
Communications Building
info@ait.iq
Iraq Electronic Gateway for
Financial
Services
Company
Baghdad / Karrada / Al-Jadriya /
Near the New Central Bank Building
compliance@switch.com
While all companies in this sample provide
electronic payment services, Al-Mahfaza for Mobile
and Internet Financial Payment and Settlement
Services Company Limited and Al-Arab for
Electronic Payment Company have adopted data
analytics as a primary tool for strategic decision-
making since 2019. In contrast, Iraq Electronic
Gateway for Financial Services Company did not
adopt this practice until 2022.
8. Sources of Data and Information:
To prepare and complete this research study, the
researcher was assisted by the following data and
information.
•
Theoretical aspects: Arabic and foreign
sources.
•
The practical resources: these will include
company records, production reports, cost
accounts, and personal interviews with a few
company executives.
9.
Understanding
market
trends
and
forecasting economic indicators
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Likewise, therefore, a crucial part of financial
analysis is the comprehension of prevailing market
trends and forecasting the innovative economic
indicators. By analyzing historical data alongside
the actual situation in the market, investors can be
able to discern patterns and trends capable of
predicting what the future of the market will be
like. This will help in determining the most
appropriate time to make a purchase and to sell
stocks. (Edmonds, 2000)
While assessing the market trends, most of the
investors attempt to keep track of prime economic
indicators like gross domestic product growth rate,
inflation, interest rates, unemployment, and
consumer confidence index, among others. This
valuable information about the overall health and
direction of the economy is provided by the
indicators. For example, increasing Gross Domestic
Production growth and decreasing unemployment
rates could be indicative of economic growth,
which might be a suitable time for investment
opportunities. (Mondi R, 1995).
It involves the prediction of future prices, given
past trends and present conditions in the market.
The same could be achieved through various
statistical algorithms and methods of forecasting. A
forecast of economic indicators would provide the
investor with a competitive edge with respect to
decisions relating to investment. (Hilton, 1999).
An analysis of the annual reports of the three
companies revealed that Al Mahfouz Company for
Mobile and Internet Financial and Remittance
Services Ltd. and Al Arab Electronic Payment
Company demonstrated a significantly improved
understanding of market trends and economic
forecasts in their business decisions made in 2019,
2020, and 2021. This was due to their reliance on
market data analysis results in their decision-
making processes, compared to Iraq Electronic
Company for Financial Services, which did not
utilize data analysis techniques, as illustrated in the
figure 1.
Figure 1: A metric indicating the results of the annual reports analysis for the three companies
regarding their understanding of market trends and economic forecasting.
10. Risk and Return Analysis in Investment
Opportunities
Investment decisions thus involve an assessment
of the possible risks against the advantages that
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2019
2020
2021
Al Mahfouz Company for Mobile and Internet Financial and Remittance Services Ltd.
Al Arab Electronic Payment Company
Iraq Electronic Company for Financial Services
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may be associated with various investment
opportunities. In making such risk-reward trade-
offs, economic analysis has a particularly key role
to play. (Daft, 2001).
Risk simply denotes the uncertainty or volatility of
returns that may originate from market
fluctuations, economic conditions, geopolitical
events, and firm-specific risk factors. The analysis
of economic data and trends in the markets gives a
view of the possible risks associated with
investment strategies. (Barfeed ,2003).
It is the profit or return on investment, in other
words. Capital may be measured in terms of capital,
dividend income, interest income, or rental income.
An investor will use investment analysis to
establish the probable returns from various
investment opportunities that exist against the
risks involved. (Maryam,1988).
Most used statistical models to analyze these
dimensions are Sharpe Ratio to measure the
returns adjusted for risk and investor risk
tolerance. Potential rewards and risks can be taken
in these dimensions, respectively, by the investors
in framing and making a suitable investment
decision. (Al-Kaabi,2003)
The annual reports of the three companies show
that Al-Mahfaza for Mobile and Internet Financial
Payment and Settlement Services Company
Limited and Al-Arab for Electronic Payment
Company were able to avoid inflation problems
and technical crises, unlike Iraq Electronic Gateway
for Financial Services Company, as shown in the
following figure.
Figure 2: An indicator that demonstrates the role of data analysis in risk and return analysis for
investment opportunities.
11. Company Performance Evaluation and
Competitive Advantage
Macroeconomic factors provide the overview of the
economy, and microeconomic analysis ensures that
0
1
2
3
4
5
2019
2020
2021
Al-Mahfaza for Mobile and Internet Financial Payment and Settlement Services Company
Limited
Al-Arab for Electronic Payment Company
Iraq Electronic Gateway for Financial Services Company
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one focuses on a specific firm or industry. It involves
an analysis of firm performance, its advantage, and
the ability to generate profits. (Abdel-Rahim, 1990).
In microfinance analysis, investors consider factors
such as financial information, industry trends,
competitive environment, and management. From
the consideration of such factors, an investor can
form an opinion on the growth potential and
profitability of a company and hence make relevant
investment decisions. (Al-Shama, 2000).
Financial data, like statements for income, balance
sheets, and cash flow, provide relevant information
concerning a company's health and performance. It
is through the analysis of this information that one
can measure the cash earnings, profits, debt levels of
a company, and the earnings. (Zuilleff, 1995).
Industry trend and competitive landscape analyses
enable investors to understand industry-specific
trends and to identify companies with competitive
advantages, whether in unique products or services,
or a strong brand name or market position that may
give a firm a competitive advantage over its peers.
Such identities. (Garrison, 2002)
Microeconomic analysis can thus help to reveal the
variables underlying corporate performance, trace
potential investment opportunities, and come up
with informed investment decisions. (Bader,1982).
An analysis of the annual reports of the three
companies revealed that the competitive advantage
and performance of Al-Mahfaza for Mobile and
Internet Financial Payment and Settlement Services
Company Limited and Al-Arab for Electronic
Payment Company have significantly improved
compared to Iraq Electronic Gateway for Financial
Services Company, as shown in the following figure.
Figure 3: Market share of the three companies in 2021
CONCLUSION
Finally, economic analyses are quite instrumental
in delivering investment decisions. It is for
investors to understand the dynamics of the
market, forecast financial indicators, assess risks,
Al-Mahfaza for Mobile and Internet Financial Payment and Settlement Services Company
Limited
Al-Arab for Electronic Payment Company
Iraq Electronic Gateway for Financial Services Company
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and returns, analyze macroeconomic and financial
products, apply economic data and statistical
analysis, apply economic models, analyze
government policy, help evaluate behavioral
finance and better allocate investments. By putting
financial analysis into a decision-making process,
an investor will confidently sail through the
complex
and
time-changing
economic
environments for all of them to increase their
chances of reaching their financial goals.
Based on the preceding discussion, the following
conclusions can be drawn:
•
Economic analysis is a key instrument in
judicious investment decision making.
•
Understanding
market
trends
and
forecasting economic indicators are crucial
elements of successful investment analysis.
•
Assessing risks and expected returns is an
integral part of any investment decision.
•
Both macroeconomic factors (such as GDP
and inflation) and microeconomic factors
(such as individual company performance)
must be considered.
•
Economic data and statistical analysis
provide valuable insights for investors.
•
Economic models can help predict market
behavior.
•
Government policies significantly influence
investment decisions.
•
Behavioral economics helps understand
investor behavior and make more rational
decisions.
•
Effective allocation of investments is a
primary goal for every investor.
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