If you have read or seen any news lately you will know that Fuel prices have fallen, interest rates are still low, unemployment is creeping up and the Australian dollar has fallen against the US Dollar, but what does all this mean for you and your business? What should you be changing in your business to take advantage of this economic environment? What things should you be doing now to be ready for when these economic issues reverse? What does an increase in interest rates, fuel prices & currency mean for your business? What will you do about it?
Strategic Planning is not a set and forget activity, nor should it be done with a blind eye to what is happening and what may happen in the economy in the future. Although I am not able to predict when things will change in the economy, by using flow charts or mind mapping techniques I can be prepared with what impacts these changes will have on a business and what they can do about it.
To illustrate how this works I have used the resources sector as an example below. Although it’s a simplistic overview, you can see how a change in one sector of the economy impacts others. It shows that although you may be in retail or construction, you can not be myopic when surveying the economic landscape, you need to be looking far and wide to see the changes coming.
When changes in demand occur, the market price of goods changes. Of recent times we have seen a reduction in the change in demand for Australian resources, this has resulted in a decrease in the price in which they sell for (This is the same reason why your petrol is now a good deal cheaper than it was 6 months ago, the worldwide demand for Crude Oil has decreased). But while this is good news for consumers of raw materials, its not so great for operators (lower profits) or the miners & engineers who will (eventually) be losing their jobs as they slow down production.
As more and more employers in this industry cut staff in a bid to remain viable, there will be less and less demand for these miners & engineers (increasing unemployment). These people will start to tighten their belts and cut discretionary spending (think retail goods). The construction industry will also be effected as these people will not be looking to build or renovate whilst they have job insecurity. When these industries are in pain, the whole economy feels it through;
- Increased unemployment
- Decreased Interest rates
- Potentially increased national debt
As we flow these issues through, the more and more complex it becomes, but it does give you a broad outline of the outcomes of each scenario. This is where the power in this type of strategic plan comes in. If you know with a reasonable degree of confidence what is going to happen under each scenario you can build a robust plan with a set of pre-defined actions to take advantage of the opportunity or respond to the threat. It will give you a very acute awareness to the economy around you, keep you in front of the curve, and allow you to make rational decisions quickly when Chicken Little starts calling.
Resources is only one of our Themes here at Snelleman Tom. If you haven’t already I urge you to think through (and map out) the impacts these themes will have on your business.
- The weight of the Australian Resources Sector
- The Rise of Asia
- The democratisation of technology
- Access to Finance
- Innovate or die
- Owning your Sales Function
Don’t wait until things have started to change to formulate your plans. Get and keep on the front foot. Your business can’t afford anything less.