Connecting Your Business to What Drives Your Service Area’s Economy
Is your business being threatened by the slightest fluctuations in the market?Do you have the feeling that a whole bunch of companies in your area are doing well while yours is spiraling downward?Then you may need to take a second look at the relationship of your company to the economic drivers of your area and how relevant is that relationship.
First, Something about “Economic Drivers”
Every service or business area (whether it is a city, a state or a region) has what is referred to as “economic drivers”.What are these?These are the main industries that contribute a significant portion of the area’s employment, taxes and income.These are usually not just passing trends but economic activities that have been there developing for years.Economic drivers usually have sturdy demand, have fairly big or enduring markets and have significant players that constantly interact with each other and with the market inside as well as outside the area.These are industries that are perceived as basic and important for the area’s well-being.Broadly, a local economic driver could be any of the global economic drivers: food, shelter, clothing, government, transportation, communication, information processing, energy, industrial metals and entertainment. (Hight, http://www.strategies-tactics.com/global.htm) If your company has been monitoring the local as well as the regional economies, identifying your business area’s economic drivers should be easy. If you need more information, data from the local chamber of commerce and industry or similar government agency will help.
A simplified way of identifying your business area’s economic drivers is as follows:
- For each of the global economic drivers, find out how many businesses are operating in your area, where they are located, at what capitalization and for how many years now.If you want, you can identify the specific companies here.Again, data from the government or chamber of commerce and industry will be highly beneficial here.
- Next thing, find out how many are employed and how much taxes are generated per economic driver through the last several years.Here, you will be able to see how each industry or business is expanding or contracting.Find out the economic or political context of those changes.
- Finally, try to find out how particular industries or businesses will fare during the next several years.You can compare the economic/political developments of the past (which became the backgrounds for the changes that you saw in the previous step) with the present and the next several years.The comparative analysis that you generate here will help you more or less predict how particular industries will fare at present.However, you need to identify significant differences between the present and the past that you used for comparison.Sometimes, seemingly small differences could prove to be critical in spelling out the difference between the present and the past no matter how seemingly similar are the circumstances.This will guide you in weighing your options.
See the Connection
Once you have identified the economic drivers of your business area, it is now necessary to see where and how your business is connected to any or some of these.Understanding what industry your business feeds into and how important is that industry to the overall economy of your area is vital in predicting how well your business can survive hard times.Threats that face your particular industry and its connection to the economy are also threats to your business.The same thing could apply to opportunities.
See the Opportunities
The purpose of the foregoing analysis is for your company to enable to see itself in relation to other businesses within the same industry offering similar products or services.If there is a general malaise in your industry, then the downtrend in your company could be something you should expect.If some of your peers are doing well while you are not, then you might be missing out something.It may be time to take a look at your current business model, or perhaps at the products or services that you produce vis-à-vis others.
Your company’s current business model, products or services need not be a box to hem you in. If there are economic drivers that are doing relatively well and have better prospects than where you are now, then your analysis could lead you to cross-over or create connections into those industries.If you are in the transportation industry and noticed some decline in your business but see that there is somehow an increase in the vigor of the food business (something that happens during hard times), think if you can offer food services to your commuters. There are a host of other cross-over possibilities, but whatever you do should be backed by a good analysis on your part.
A Final Note
What are given here are meant only to be a starting point for you and your company.A lot will depend on how you go about with establishing a real connection with the gaining industries and the ones that are more affected by the hard times.
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