Business Conditions Analysis
This article identifies five discernable areas conducive to the development and maintenance of a successful business environment. Using examples from the US and abroad, the essay defines and illustrates the following concepts as integral elements for business and economic development: Market demand, workforce development, political considerations, the cost of doing business and access to technology. Each of these components are manifest or lacking in many high-profile industrial development profiles, including Honda's US expansion in central Ohio, Google's 2007 operation in western North Carolina, and the US lodging industry in sub-Saharan Africa.
Keywords Business Climate; Corporation; Economic Development; Economic Stimulus Package; Market Demand; Public Policy; Tax Incentives; Technologies; Workforce
Economics: Business Conditions Analysis
In the early 1980s, residents of Midwestern America thought they were under siege. The prevalence of foreign-made automobiles, many of which were imported from a surging Japanese motor industry, intimidated US automakers and those loyal to them. United Auto Workers were rumored to be behind a rash of vandalism to Japanese vehicles, using keys to scrape the paint of privately-owned Hondas as retribution for purchasing a foreign car instead of an "American" automobile. In the eyes of these miscreants, the Honda plant that had opened in 1979 in Marysville, Ohio, took away jobs from American workers in greater Detroit, which is only a few hours north (Brat, 2006).
It did not take very long for attitudes to shift, however. "Rust Belt" communities like Marysville, have since enjoyed a thriving local economy due to Honda's operations there. More than 16,000 Ohio residents are currently employed by Honda, and since the plant's opening, layoffs have been virtually nonexistent. $1.1 billion is pumped annually into the Ohio economy. Two decades after Honda arrived in the US, the very same communities whose residents used keys to express their displeasure at Japanese vehicles were offering the keys to the city to the same company as it considers expanding Midwestern operations (Honda, 2004).
Determining a fertile business climate can be based on a simple word: Need. This refers to the needs of the market, the needs of the workforce, and the needs of company itself. This essay illustrates the areas in which these multiple "needs" manifest themselves as five quantifiable factors that contribute to a successful business model. These elements are market demand, workforce development and base, political considerations, operating costs and access to technology.
Arguably, one of the industries in which the concept of demand is most well-defined is automobile manufacturing. The significant rise in crude oil prices that began in the early 2000s in the US and abroad, coupled with increased public attention to the issue of global warming, spawned a trend toward fuel-efficient vehicles. After a sustained preference for large, low-mpg trucks and SUVs during a period of cheap fuel, car buyers began seeking smaller vehicles that use much less regular gasoline or diesel. Hybrid vehicles (which alternate between gasoline and electricity as fuel sources) became popular, and cars that operate on alternative fuel sources, such as biodiesel, hydrogen and 100 percent electricity, entered the market as well.
Periodic plateaus and declines in gas prices somewhat placated consumers' initial frenzy for jettisoning their gas guzzlers. One study at the time revealed that 50 percent of new car buyers were considering a hybrid, down from 57 percent in the previous year ("Hybrid," 2007). This slight decline in market demand was largely attributed to consumers' increased understanding that the fuel-cost savings offered by certain hybrids were not necessarily enough to justify the premium vehicle price when compared with some other conventional cars in the same class. In other words, consumers, who only two years earlier had decried the skyrocketing cost of fuel (and were more inclined to accept the hype surrounding hybrid vehicles), adjusted to those increases and became more critical when shopping for new vehicles. Car buyers remained concerned about fuel efficiency, however, and hybrids continued to be one response among many to the overarching issues of oil prices and environmental responsibility. As one industry analyst put it (North, 2007):
Any doubt that a focus on environmentally friendly vehicles is of growing importance to consumers should be gone by now. Regardless of which side you come down on in the global warming debate, fuel efficiency, low emissions, and recyclability are all becoming more important in vehicle design and production.
Indeed, Lienert (2006) reported that among the ten top-selling vehicles in the US, seven were small and mid-sized cars, each of which boasts better-than-average mileage. According to Forbes, "Gas prices used to be a consideration in car purchasing. Then they became a decisive factor. Now they are the decisive factor." Forbes's 2013 list of 20 bestselling vehicles in the US once again saw a boost in (considerably more fuel-efficient) trucks and SUVs, and small and mid-sized cars still dominated the list.
The example of environmentally friendly automobiles demonstrates the significance of market demand on a business's viability. Successful business development relies on the needs and concerns of the customer. In terms of the automobile industry, hybrid gasoline/electric vehicle sales soared immediately upon placement on the market due to the fact that those cars directly responded to the rising cost of gasoline as well as the issue of global warming. Interestingly, in this case, the concerns over oil prices and the environment created a market and even a product concept, rather than a single product that would address that demand. The "green" car market continues to evolve, with customer demand still strong.
Joseph Joubert once proffered: "Genius begins great works; labor alone finishes them."
Indeed, without a strong workforce on which to hang a business's hat, a corporation cannot thrive very long. An interesting example of this premise can be found in the lodging industry. To the casual observer, a hotel's employees are few and identifiable: The front desk employee, the housekeeper, room service and a small handful of miscellaneous staff. In fact, the lodging industry employs an extremely large number of staff, each of whose talents require specific training and whose pay scale spans from minimum wage through the highest echelons of management. The lodging industry employs millions of these personnel in locations around the globe.
To illustrate this point, one may look at one of the larger international hotel chains, the Hilton Hotel Company. In addition to its well-known eponymous properties, Hilton owns such brands as Doubletree, Embassy Suites and the luxurious Waldorf Astoria. There are more than 2,500 managed and franchised hotels under the Hilton purview, employing an impressive 105,000 men and women worldwide.
Unfortunately, recruiting well-trained staff for a hotel is no easy undertaking. Most US colleges and universities that offer hospitality degrees are located near major lodging and tourist centers: New York, California and Florida. Despite the plethora of hotels, motels, inns and B&Bs that operate in greater Washington DC, there are only six programs that offer hospitality certifications within an hour's drive of our nation's capitol (there are eight law schools and 10 MBA programs in that same radius).
In the case of the lodging industry, it is clear that jobs are available in great numbers. The problem is two-fold. First, while there are enough people to fill posts, they may not choose to do so because of the low pay and/or benefits. Economist David Rosenberg echoes this concept. Those who claim there is a shortage of employees, he argues, may be overlooking the fact that the manpower is there — employers are simply not willing to pay for what they seek (Herbst, 2007).
The second issue is exemplified in the model offered by the lodging industry. Training is absolutely pivotal to ensuring the success of any business, and in an arena that requires sales, culinary arts, engineering, management, marketing, administrative and customer service training (as is the case in hospitality), it is always a challenge to draw a pool of eligible workers from any region. Adequate training of staff is therefore essential, if not drawing from another base. As is the case in a variety of large-scale industries, the lodging industry sometimes calls upon foreign-born workers to perform some of the more low-level jobs. Despite the relatively basic parameters of these minimum wage positions, some training is required (including, for many, coursework on English as a Second Language). On any level, a well-trained workforce can make the difference. This point remains sage and yet challenging for any major industry.
"I would have voted for a 100% tax incentive if that's what it would have taken to land them," said Herbert H. Greene, a County Commissioner of Caldwell County, of which the small city of Lenoir, North Carolina, is the county seat (Burns, 2007). Commissioner Greene was understandably excited for Lenoir. Earlier in the year, that community of about 17,000 residents was skyrocketed into the public arena, thanks to its newest local business: Internet giant Google.
(The entire section is 4257 words.)