We have been examining STEEP Analysis used to gain insight into developments of the external (macro) environment. The past, current and/or future of your macro environment has a direct effect on your business. In this segment we will discuss the first E of the STEEPAnalysis. I think that many will agree that the economy has had some sort of effect on their business. The local or global economic situation is core to the buying position of the consumer (GDP). There are factors like interest rates, taxes, international trade, entrepreneurship and jobs availability that effect the economy.
The economy plays a crucial role on life of your business. The economy can serve to expand your business or it can serve as destructive if you do not foresee the trend prior to its impact. A bad economy can be the best thing that happens to certain businesses. A bad economy boosts innovation, creativity and solutions, hence business is birthed. Many of today’s Fortune 500 companies were created during a bad economy. One example is jewelers. Prior to 2008 jewelry stores were selling gold jewelry for special occasions as well as holidays. The sudden change in the economy made gold skyrocket and it was no longer affordable. Another example is real estate – many brokers have boosted sales with foreclosures. Homes can now be purchased at a fraction of what they once were and interest rates are down. A perfect economy for real estate. Not to mention the fact that unemployment rates suddenly grew to unprecedented levels, hence no income no buying jewelry. Jewelers seized the moment and rather than sell gold they suddenly bought gold back, oftentimes, from the same individuals who purchased the items.
On the other hand the economy can also have an adverse effect on business. Making sales of your product or service decrease. Some industries hit hardest by a bad economy are hotel, travel agencies, stationary/office supply, furniture stores, printing and related support, newspaper, cement and concrete manufacturers, construction, motor vehicles, lumber and construction material, building supply businesses. This is a great time for businesses in these industries to change their tactics and find new ways or new clientele to do business with.
We have reviewed how the social and technological components can have an impact on your business. Knowing current economic conditions makes it possible to know what to buy what to sell and how and when to increase or decrease the price. Understanding what move to make during economic change is imperative to make the most suitable decisions. Without knowledge of economics, you are going to be losing money and/or customers. Whether the economy has an adverse or positive affect on your business you want to be prepared. Preparation is key! The focus is to be vigilant of the economy’s impact on small business because you are a small business that does not want to be caught off guard.