External environment Essay

Recently I celebrated New Year’s Eve with a good friend – a small business owner in the automotive spray painting industry. We did the usual. Liberal doses of food and alcohol were consumed, and there was no shortage of laughter. During the course of the evening, my friend asked, â€Å"Why it is that some people have an apparent midis touch? † It’s a question I’m often asked. Is it purely luck, or is their success a result of something more cognitive? I responded by saying, â€Å"While luck may play a role, the vast majority of the highly successful business people I’ve met over the past 25 years do one thing in common – and they do it extraordinarily well. They monitor their business environment to predict future market trends. They analyse external forces, such as their competitive environment, economic conditions, technological possibilities, political and legal forces, changes in demographics, seasonal factors, as well as shifts in social behaviour†. Basically they engage their crystal ball and they do it much better than most. Needless to say, on New Year’s Day I was feeling a tad lethargic. A restful day; it did, however, give me time to think about our conversation and the various macro-external forces which confronted Australian businesses in 2011. You could say it was a self-inflicted day of reflection. These are just a mere example of what the successful men and women, above, analyse in advance. Of course, not all forces can be accurately predicted in advance. The 2010 New Zealand earthquake disaster is a prime example. Well, what a year it was. There were many challenges presented largely by macro-external forces. Although the mainstream media were reporting that business confidence was on the rise, this clearly, from my consultation with industry, wasn’t the general consensus. Sure there were pockets of our economy which performed well – a notable performer being our seemingly ever-resilient resource sector. Australia’s ASX 200, however, lost ground in the 12-months to December 31, closing at 4745. 20. While retail trade continued to display considerable volatility, as did the automotive sector. Indeed, success in the latter two areas hinged largely around the deployment of discount pricing tactics. The Reserve Bank of Australia (RBA) progressively increased interest rates. Although these were predominantly in 25 basis point increments, they adversely affected consumer confidence when it came to purchasing large ticket items, such as domestic housing as well as non-essential luxuries. However, from a global comparison viewpoint, Australia exhibited very good buoyancy. Our currency, the AUD, had reached a 28 year historic high against the United States Dollar (USD), trading above parity with the greenback for the first time since the currency was initially floated in 1982. No doubt off-shore investment in the AUD was vigorously fuelled by the variance in comparative lending rates between the two countries. The financial attractiveness of imports caught Australian consumers’ attention, stimulated by the AUD’s appreciation. Online shopping, as a result, continued to gain popularity. More consumers than ever before were importing goods directly from off-shore retailers, in the process often avoiding goods and services tax (GST). Not surprisingly, this infuriated domestic retailers, who were not able to offer their customers’ the same loophole. Major retailers including Myer, David Jones and Harvey Norman are now investigating the possibility of enhancing their e-commerce presence, in a bid to alleviate any further sales erosion. They’re also vigorously fighting the federal government in their quest for an even playing field, with this initiative let by billionaire, Gerry Harvey. And Queensland’s peculiar weather patterns caused havoc. With many Central Queensland towns and parts of the Darling Downs being flood ravaged, sadly the recent natural disaster left many people homeless. The cost of damage, as I write, is still mounting by the hour. Needless to say, the building and automotive industries will be the beneficiaries of this tragic twist of fate. South East Queensland wasn’t left unscathed, either. Hail storms caused extensive devastation in parts, keeping insurance companies and panel beaters busy for some time to come. It’s fair to say, while panel beaters and automotive spray painters can look forward to a prosperous 12 months ahead, insurers are likely to be less optimistic about their feasibility over the same period of time. Food for thought: Here are just a number of starter questions which you might like ask yourself: 1. What is likely to happen to my business should the AUD dive back into sub-parity against the USD? 2. If interest rates rise, will this help or hinder my business? Why? 3. Are my competitors’ outperforming me? If so, what exactly are they doing which is making them more successful? 4. Are my competitors’ weak in a particular area? Am I able to capitalise upon this chink in their armour? 5. Is my business sensitive to, or reliant upon, seasonal factors? These might include specific climatic conditions. And, are these seasonal needs likely to transpire? 6. Are there any looming additions or amendments to legislation which could positively or adversely affect my business?