Write one key takeaway per chapter. Write at least 100 words for each chapter summary.
One key takeaway I got from Chapter 1 is how there is more to economics than just forecasting. Obviously forecasting is a big part to economics but this chapter talks about other important needs that must be understood. Being able to describe the economy is crucial. The author spoke about how the economy can be described as very strong, strong, moderate, weak, and very weak. This makes life easier for companies rather than reading a numerical GDP forecast. Making things easier for clients and other consumers will always be a big help. Understanding economics and being able to speak about past or current events is vital.
This chapter focuses on learning the economic cycles in your sector of the economy. This is important for businesses because the managers would like to know when there is a downturn or upturn, and how long these turns could last. Economic cycles aren’t the entirety of sales numbers either. The quality of companies products, services, and marketing efforts still play a big role. Talking about companies and their products, managers would also like to know when their costs are going to rise or fall. It is important to learn about your economical cycle no matter what sector of business you are in.
The focus of this chapter is how to anticipate recessions and downturns. The book mentions that business leaders must understand the causes of recessions and downturns. But, at the same time the book acknowledges how it could be difficult to understand. Recessions are impacted by many things, and can cause different outcomes because of certain things. We see this with monetary policy related recession. We see interest rates dropping eventually throughout those recessions, which leads to recovery afterwards that has occurred. There are other recessionary factors that you want to keep an eye on. Some of those being credit crunches, consumer confidence, fiscal policy, etc.
The focus of this chapter is recession triggers and profit squeezes. Right from the jump the chapter mentions inflation, and talks about the three that are commonly discussed. Those three are Consumer Price Index (CPI), Producer Price Index (PPI), and the measures of wage inflation. Throughout the chapter we also learn about tough business decisions companies must make, and profit squeezes. The one that stuck out to me most is when the costs of raw materials are rising faster than the prices of finished products. As a company it would be tough financially to recover from a situation like that so you must stay up to date and alert on raw material price changes around the world.
The chapter opens up by saying every executive or business owner should begin by assessing the businesses unit’s vulnerability to a recession. Then later on it gives “key steps” in managing through the business cycle. The list is 1. Assess the company’s vulnerability to recession 2. Sketch out a contingency plan for dealing with recession 3. Build flexibility into the day-to-day operations 4. Develop an early warning system for identifying coming downturns. Another great piece that was talked about in this chapter is the importance of a contingency plan. Every company should have their own contingency plan for when a recession hits.
The main focus of this chapter is early warning systems. Early warning systems give management the earliest possible signals of change in the sales environment. The system should include signal changes in costs. The book lists four systems that should be monitored, those four being macroeconomic warning signals, end use information, customer sales forecasts, and critical costs. Another piece that gets talked about later on in the chapter is seasonal adjustments. Which basically means you should be watching over what is making you the most profits in certain seasons in comparison to others, utilize the strengths that you are given.
This chapter talks about things that were previously mentioned in chapter 5. The book gave some key steps in managing through the business cycle. There a lot of steps mentioned throughout chapter 7 about how to manage properly through the business cycle. The steps are easy, moderate, and survival. A great point that gets brought up is how to take advantage of recessions. There are a lot of steps and practices that take place while managing a company through a business cycle. Being able to identify the opportunities at hand is vital to the companies success and overall bounce back from a recession.
Foreign economic cycles are different when in comparison to the U.S. economic cycles, and this is for various reasons. One reason for example is the different locations around the world. Certain companies thrive better in certain locations of the world. Supply shocks is another great example of the changes in foreign countries and the United States. The book brought up the oil crisis from an American perspective, and other countries around the world don’t have to worry about that as much as we have do. There are tons of risks in foreign countries when it comes to exchanges or ethics. As a company you have to be aware of what is and isn’t legal or morally correct.
Just like I talked about the risks of companies in foreign countries and their economic cycles. The same can be said in the United States and the differences in regional production structure. We see this with crops for example, there are some parts of the country like Pennsylvania that are known to be great soil lands for corn! I don’t think that corn would thrive in Arizona with the constant heat, but maybe I’m wrong. Early warning systems vary when looking at different regions across the United States as well, so you must keep that in mind as a business manager or owner.
This chapter focuses on capital intensive industries. It talks about the early warning systems, why capital intensive industries are different, and how to manage through the business cycle. The biggest parts I got out from this chapter is that capital intensive businesses have additional problems that many other companies don’t have to face. They also need more to their early warning system that can monitor industry level capital investments. Companies must be able to recognize the nature of their cycles and capitalize on the opportunities that they are faced with. Like buying out weak competitors as an example. There are many other steps capital intensive industries should follow along.