Economic Indices for PEPT
In order to identify company’s potential, frame its mission statement, execute its value proposition, and set achievable strategic objectives, it is necessary to perform an analysis of the direct general economic indices that are used to forecast sales of the PEPT. We have identified four direct general economic factors; they are housing starts, expenditures for residential construction, expenditures for commercial construction and expenditures for home repairs and improvement. Additional indices that are more fundamental are factors such as interest rates, inflation rates and foreign exchange rates.
External Analysis of the economic indices for the PEPT is how strategic managers determine the opportunities and threats that affect their company. We can define the environmental uncertainty by determining if the company’s external environment is dynamic or stable. We can look to the U.S. Census Bureau for current statistical data and trends in population characteristics; this is commonly done in making strategic decisions.
The following data is New Privately Owned Housing Starts in the thousands by year.
(Above chart, partial historical table, U.S. Census Bureau)
As you can see in the table above, yearly the new housing starts is growing each year. The PEPT market has seen a steady 20% growth over the past five years. We can directly relate this to the increase in housing starts and the dramatic increase in spending of residential construction outlined in the table below.
The below table is the Expenditures of residential construction in the Millions of Dollars.
Expenditures for residential construction …………… 152,975
Expenditures for residential construction …………… 157,765
Expenditures for residential construction …………… 173,324
Expenditures for residential construction …………… 176,899
Expenditures for residential construction …………… 198,556
Expenditures for residential construction …………… 215,030
Housing improvement and repairs also shows a steady increase upwards, along with new commercial construction costs. Looking at the underlying more fundamental factors such as inflation rates, we can look to the U.S. Census Bureau for the CPI, the consumer price index. The Consumer Price Indexes are available from the Bureau of Labor Statistics Web site www.bls.gov. We can adjust the yearly inflation though the CPI, to determine consumer buying power per year. The other underlying factor as interest rate determines housing affordability.
By doing an analysis of these external factors, you can be considered to be a proactive manager. You can plan and anticipate changes in the market and plan according to adapt to these changes. A challenge that you may face is that the environment might be changing more rapidly than you can keep up with. By keeping track of the trends you can prepare the company.
Market Studies, 2001, The Complete Marketing & Statistical Reference Source, “The Complete Marketing & Statistical Reference Source”, [Electronic Version] Retrieved on July 20, 2006 from http://www.marketstudies.com/hpt2001/hpthigh.htm
U.S. Census Bureau, Historical Data retrieved on July 20, 2006 from http://www.census.gov
Coulter M.K., (2005) Strategic Management – In Action, Third Edition, Upper Saddle River, NJ: Pearson Education, Inc., Pearson Pretense Hall.