From the course: Economics for Business Leaders
Economics as a decision-making guide
From the course: Economics for Business Leaders
Economics as a decision-making guide
- There's an endless amount of economic data out there in the world, but it's not just there for your entertainment. After all, I don't see too many people waiting for economic releases like they're watching trailers for the next movie about aliens or dinosaurs. Nevertheless, for business leaders, some of those economic reports and data can be critical for making decisions, and there are three different ways that business leaders find value in economic data and reports. First, they use economic data for business planning. Business planning is a very tactical part of the business, and economic data and reports can be helpful for informing business forecasts and predictions, like assessing future demand and future costs. Or business planners might be looking at leading economic indicators for signs of future rising or falling demand. And they may be looking at consumer inflation reports, like the US CPI, to see if they need to be adjusting their prices along with the rest of the economy. Business leaders also use economic data for investment decisions. For companies, investment decisions means buying equipment or making other capital investments in their businesses, like buying new pickup trucks, automating factory production, doing an accounting system upgrade, or investing in a big R&D project. Of course, when investment decisions are really big, like mergers and acquisitions, they usually fall under strategic management decisions, and that's the third use of economic data, and it's usually the most important because strategic management decisions can determine the future path of a company for years to come. And a bad decision could turn into a going concern issue that threatens a business' potential to operate in the future if things go wrong. Strategic management decisions are informed by the economic climate. Usually, senior leaders and executives are looking at the highest level of economic data. This includes things like GDP, interest rates, and central bank policy. And they are looking for long-term trend lines in the data, like population growth or the rise of eCommerce. When it comes to using economic data, planning, investment, and strategic management decisions aren't informed by all the economic releases out there. After all, that'd be crazy, there's so many of them. But they are informed by the most important economic data series. In reality, business leaders are usually looking to a handful of economic data in order to make the best planning, investment, and strategic management decisions possible.
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