A business manager, to assess the risk of a regional recession, needs to monitor the fluctuation of the market between regions of of a country, A regional manager would have to track the economy in their local areas in case of a recession or depression within a local business cycle.
Although a regional economic cycle is not perfectly synchronized with its national counterpart, it tends to move up and down with the national economy. In addition to the broader national economy, two other factors influence a regional economy: the national cycle of its most important industries and its internal growth cycle associated with construction swings.
There are two different perspectives to consider in analyzing a regional economy: when a company sells into a distinct local market and when a company primarily produces in a local market and sells into a national or global market.
The first step is to assess the risk of regional recession to determine the corelation between the local and national economy. Once we see the similarities or differences, we assess what the local thriving industries are within a region, overestimation is often a mistake. Location Quotient is important, to find the best businesses for growth of a region and how they corelate with the national industries as well. Should other states be considered within regions and the business cycle for the region and industry related, this is the final step to the structure. ## Internal regional cycles Population growth is the biggest reason for internal growth, more people move in, more places are built like houses, stores, offices, which leads to new employers, expanded employers and new opportunities for all people through differetn walks of life. The construction of new places is what drives boom, internally. ## * What drives long-term regional growth? More people who move for better quality of life, and employers expand to those areas, jobs attract people, but more money, a new better job, and a better life for a family is more desired than a life of dull, lowlife cities working the same degrading job that barely covers rent for a small apartment, vs a lavish house, prospering with your family and working for a newer bigger company that has just expanded. ## Economic policy State/Local policy does not have much affect on big factors behind business cycles, local projects have less impact than government spending as a whole in this scenario. Most of the stimulated spending leaks out of the regional economy. Local recession resists government efforts to buck up the economy, because of tax cut leakages and production outside of regions. ## * Economic Policy for Growth Good tax policy, (no income tax or low marginal rate), Policy is important for small but long-term growth, also regulatory systems, be able to manage the business without jumping through hoops. Transparency between business and government is a successful combination. ## Production in a regional economy Different impact between seller and consumer, the business selling goods in a region will suffer when the area goes into recession but a business that produces goods in a recession will benefit greatly. Local economic strength hurts regional producers and they benefit from weak local conditions. ## A regional early warning system Both the national and regional economy should be looked at for business owners marketing locally and nationwide. For regional customers, adding steps to understand all of the industries not only related to your business nationwide, but specifically regionally will greatly help your warning system. +———————————+———————————————————————————————————————-+ | | indicators | +=================================+======================================================================================================================+ | national economy | | +———————————+———————————————————————————————————————-+ | national cycles of the industry | national automobile sales for car dealers | +———————————+———————————————————————————————————————-+ | local economy | 1. nonfarm payroll employment available for states, metropolitan areas, and counties, | | | 2. personal income is more appropriate for historical research for its time lag and frequent and radical revisions, | | | 3. state income tax, especially withholding | +———————————+———————————————————————————————————————-+ | population and migration | housing permits, drivers licenses | +———————————+———————————————————————————————————————-+ | consumer spending | state sales tax: drill down to exclude construction materials | +———————————+———————————————————————————————————————-+ | | | +———————————+———————————————————————————————————————-+
Things that somebody running and managing in the regional division would be the comparison over other regions, and nationwide, how do these correlate with each other, are the similar per conditions. Differences mean that threats and opportunities exist, and we should consider both, which also depends on whether your company is primarily selling or is a producer in the region. Dealing with a regional downturn
| the local economy is similar to the national economy | the local economy is different from the national economy | |
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| a company selling into the local market | Follow the pattern described in chapter 7 with no additional local considerations. |
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| a company only producing in the local market | Follow the pattern described in chapter 7 with no additional local considerations. |
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Explain each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the terms in your own words briefly.
This is a ratio or statistic to be analyzed in regards to measuring regions of industrial locations relative to a nation or country. This is used to compare size of different key factors within an industry location vs other locations. ### Leakages (page 212) Leakage is used in relation to the flow of income within a system, like savings, or capital that diverges from a system that represents a circular flow. ### Marginal Cost (page 219) The change in total costs that occurs when the quantity of something produced is described, the cost of producting extra is taken into account. ## Economic events
Describe the characteristics of the following events briefly.
The state of Idaho’s population had grown 3% a year for about a decade, but decline in the 80’s this meant consturction slowed down, people lost jobs because nobody needs a house built, which left people without solid income. ### the case of Hawaii in the mid-1990s (page 215) Hawaii had a decline in job employment due to Japan’s recession because the toursim business slowed down, leaving people in Hawaii without work.