Write one key takeaway per chapter. Write at least 100 words for each chapter summary.
The opening chapter to this textbook speaks about forecasting the economy. The first part to this chapter was about understanding economics to help figure out the causes in the change of sales volume and costs. A few factors involved could be an inevitable increase or decrease in the national market or competitive pricing. The chapter speaks about how business decisions must be made regarding the future. Thinking about the future and always staying innovative is a necessity in today’s world as there is so much competition in each market. The key to forecasting is economics because economists are good at predicting the trends of the future while somebody in the marketing team is only focused and good at understanding the current trends in the market. The chapter ends by speaking about how managers should focus on the magnitude of changes rather than specific numbers. It is a far better way to predict your success. The book discusses using adjectives such as strong, moderate, weak, or very weak rather than predicting a 3.5 % increase. These adjectives give more value for the business and those in the business than the numerical numbers.
Chapter 2 speaks about the cycles in your sector of the economy and how fluctuation occurs in business. It taught us the basics of what a manager needs to know which is when the downturns and upturns in their sales are coming, how steep the increase or decrease will be, what their market is trending towards and the trends of all the other markets. They need to know the predicted future for their business. If the prices of their products or services are going to increase or decrease. Interest rates are very important for managers because they play a role in financial strategy. This chapter was the introduction to recessions as well. Recession are predictable in the sense of when they might be coming but there are a lot of unknowns that come with such a heavy downturn. Being prepared as a business and knowing what you plan to do if a recession comes is key to staying in business.
Chapter 3 speaks about the anticipation of recessions and downturns. The information explained in this chapter is very important for business managers to understand. It goes over monetary policy, supply shocks, credit crunches, optimism and pessimism, consumer confidence, fiscal policy, and trade wars. Understanding these factors and what it means when they are not running smoothly allows business managers to know when a recession or downturn is incoming. This chapter speaks to the fact that a lot of different factors can lead to a downturn in business and the only thing a business manager can do is stay on top of things to help prevent a failure.
Chapter 4 speaks about inflation, recession triggers, and profit squeezes. The idea of inflation is that with high volatility in inflation rates it makes banks and business persons weary about making long term decisions which results in slower rates of growth. They touch on inflation rates which are CPI, PPI, and WPI. They state that the CPI is not a great but contradictory to consumer belief the consumer price index is a good measure of inflation in the fact that if it rises from 3 percent to 5 percent, inflation may not be 5 percent, but inflation did most likely rise 2 percent. This lets companies look at the CPI and learn enough from it to get a visual of the big picture happening in the economy. This chapter really sums up the idea that a manager needs to monitor inflation within the economy because high inflation can lead to a recession and profit squeezes.
Chapter 5 speaks about planning for a downturn and recession. They speak about the contingency plan which allows a business plan ahead for a downturn in the economy. Creating flexibility inside your business is key. Most ordinary business decisions limit or increase flexibility in the future. All of these decisions being made need to be made with an understanding of how much flexibility is being gained or lost.
Chapter 6 gives us an insight on early warning signs. As a business manager you need to to develop an early warning system that includes macroeconomic warning signals, end-user information, customer sales forecasts, and critical costs. You must look at changes and react to them properly. You must look at forecasts to understand if a potential downturn is incoming, but you must take them with a couple grains of salt because these forecasts can be very optimistic. The biggest weakness a manager can have is the perception that things will always go as expected and this is because things nearly never go as expected. Having an early warning system implemented into your business allows you to forecast the economy and understand when a downturn or upturn is brewing. Being well prepared is the name of this game when it comes to success, and this is one step to stay prepared.
Chapter 7 speaks about the necessary planning methods you must have in case a downturn or recession occurs. The first step is the “easy steps” which is the when the downturn first starts. You want to review your contingency plan and think about what steps you must take if things continue to trend downward. Next is the “moderate steps” This is very similar to the “easy steps” but you must start acting on them. You want to look at any lay offs that you can endure, look at capital spending, and financing. The final steps are “survival steps” are do or die and no business manager wants to be involved with these. You have to do anything you can to stay a float as a business. This chapter lastly speaks about taking advantage of a recession by expanding your business since assets will be cheap. The strongest businesses get stronger during recessions.
Chapter 8 speaks about the foreign market and what companies need to be aware of if they are doing business overseas. Understanding the monetary policy in these countries is important. It can be hard to take money out of these countries and understanding what their dollar is to the US dollar. Staying up to date to worldwide news lets you anticipate any issues you may have. If war is brewing that could hurt your company and worst scenario lose assets in the process. Fluctuations in the economy are varied and depend on what country you are trying to do business in for many factors. One way to limit risk is to diversify your portfolio as a business owner and keep track of variables inside of the countries you are associated with.
Chapter 9 speaks about the regional and local economy. It is important to know that the regional economy will not be aligned with the national economy but tends to follow it. New Hampshire for example is about a year behind the national economy. To see the risks for you business inside the regional economy you must look at how much it compares to the national economy. If it is similar, you can use a similar index.
Chapter 10 speaks about how to prepare for trouble in your sector of the economy. They speak about how you need to really understand your industry cycles. In a boom add cash and during a downturn you should buy out competitors. Capital intensive industries were touched upon and the fact that they may face issues with new capacity being added to an industry.