If nothing else, the current crisis has clearly underlined the global nature of our economy. We are now, more than ever, influenced by the actions and reactions of our international partners. The flow-on effects of the sub-prime mortgage fallout in the United States has swept Europe, Asia, Australia and the Pacific.
It is therefore, critical to understand how your business fits into the global economy. Even if you have no direct trade at a global level, there is a good chance that many of your customers and/or suppliers will be impacted.
Even if the direct global impacts on your business are slight, the indirect impacts via changes in the national economy can be immense – decreases in consumer spending, reduced government spending, higher interest rates, higher unemployment, rising fuel and input costs can all have an impact.
Knowing the extent of your “global exposure” is critical as global changes can change demand for your products from customers and/or increases in input costs from suppliers. This can make your business uncompetitive overnight by driving down revenue and lifting costs.
The good news is that some businesses will be largely unaffected by the changing economic environment. If your business is one of these, what strategies will you employ to take advantage of your position?
Key Questions to ask: What will be the impact on our customers and/or suppliers of a change in the global economy? How will this impact our business?
For 2 models (there are others) that may help you in your analysis, you can use PEST Analysis to summarise the overall impacts on your immediate business environment. (Note: PEST is an acronym that stands for Political, Economic, Social & Technological areas.
Then I would summarise the potential impacts on your business by summarising your thoughts under the following topics: Customers, People, Products (and Services), Prices & Profits, Processes.
Once you have completed this initial analysis – start developing some strategies.