How to make more profit - macroeconomic influences
Usually, there are three sets of factors that are influencing the profitability of a firm and the way you could make more profit:
- The external environment in which the company operates
- The way the company interacts with the market environment
- The efficiency and effectiveness with which you work
Both the economy and markets are influenced by the same processes: large groups of people who take numerous decisions, leading together to the formationof the tendencies, trends that are influencing the immediate circumstances faced by a firm. Learning how to read the trends and the processes in the external environment, you are more likely to foresee how it will influence the evolution of your company, and you will be able to be positioned in the market in such a way that you could fully exploit the future circumstances.
When analyzing the economical factors in terms of your own business, ask yourself the following questions:
- What are the most important economical factors for my firm performance?
- Do I benefit in parallel or contra of the business cycle? It is known that most of the discretionary products are following an economical cycle (cars, vacations, etc)
- Does the ompany provide discretionary and non-discretionary products? We know that if customers did not really need what you offer, sales can fall in the crisis periods .
- What is the most likely evolution of these factors?
- How should I act now, assuming my assumptions will proveto be correct?
In general, you may consider three sets of economical factors, more or less perceptible for the profit of a business.
- Global factors. Even if you have a strong position on the market, you should know that information travels quickly, and you may never know when you may end up with a competitor from an exotic country. It’s great if you know what the major trends economic activityis leading to, having the opportunity to make plans for the future.
- National factors. National forecasts are as hard to do because the future is full of potential future events that have nothing to do with business and economy: electoral campaigns and elections, for example. The best thing you can do is to conceive some possible scenarios and ways to plan the appropriate actions. We know that under a socialist government we can expect to increases in taxes or in public spendings.
- Regional factors. Remember that, generally, different geographical regions are specialized in different activities. When the level of activity in a given sector changes, the region specialized in that activity will be crucially affected.
Remember that regardless of the type of business you are involved in, you should anticipate the probable reaction so that you could plan accordingly, before such changes are becoming a problem and are generating panic
Informations taken from the book "How to make more profit" by Michael Lawson.
Good luck with your business!