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Factors or conditions you should know 🔥 🔥
The economic status of the world in which the company lives. The economic status affects profitability indicators positively or negatively. For example, if the economy enters a recession or a state of growth, it will affect the profitability of the sector in general, according to the company’s strategy in the market.
2- The political and security status of the region in which the company is located, such that any change in the political status of a particular region will affect the company’s profitability and financial indicators, for example, the region entering a state of war. For example, if the company is currently operating in Ukraine or a potential conflict zone in the future, such as China and Taiwan, do not ask about the company’s profitability or whether it operates in a safe economic and industrial region, such as America, Japan and Australia.
3- The company's geographic status (seography status): It affects the company's profitability and the company's budget, for example, a company operating in North America or Canada cannot operate in climatic conditions where temperatures drop below 20 degrees below zero? Or an area known for earthquakes, volcanoes, or sudden changes in climate, and the company is geographically close to these events.
4- The technological status of the company affects the company’s profit. As the technology used in the company’s work increases, the company’s expenses decrease and the quality of the product increases, which makes a fundamental difference in the company’s competition in the market.
5- Administrative status - Senior management status: It affects the increase or decrease of the company's profitability, especially if you have at the top levels of the company, for example, an experienced and skilled CEO, who is different from an CEO who does not have experience in managing the company during a global financial crisis or even leading the company towards a bright future, and what is currently known as the leadership level. The best example is Kimberly Clark, a leading company in the field of paper products, where the CEO who succeeded Darwin Smith was able to raise the company's revenues to 4 times what they were before, and the company's stock rose from $10 to $50, as he used it in the manufacture of paper products instead of selling rubber products in the market, and pushed the company to compete globally, such as Procter & Gamble.
6- Behavioral case as a working concept in the company: What is known as the culture of discipline is not killing the spirit of business initiative. It is the lifeblood of the company and the creative magic. It is often associated with the upper levels of management. The departure of the creative magic from the company will affect the company’s ability to create new products and great ideas that will affect the company’s competition in the market and then reduce the company’s profitability in general.
7- The cyclical nature of the product: The idea of not developing the product and sticking to an old technology will quickly lead the company to bankruptcy in complete silence, for example, in companies that manufacture an old technology and are still working with it, such as photovoltaic lending, even if they find a good profit margin, the product cycle has finally come to an end or is nearing the end, and thus the company’s work in this field for years to come may affect the company’s profitability in the future to decline or vice versa for current work in the field of semiconductors, especially artificial intelligence technologies, which have begun their cycle.
8- Scarcity of natural resources (resource scarcity): As basic inputs for the company's work, for example, the scarcity of electronic chips, which are very small chips that may be smaller than the size of a matchbox, and are an indispensable material for all electronic products in our daily lives. Example: The American car manufacturer (Ford) announced that its sales in July 2021 declined by 27% year-on-year, due to the scarcity of electronic chip supplies, and the company expects to lose about a tenth of its planned production in the second half of this year 2021, which means that it will produce about 1.1 million fewer cars this year (as the chip shortage negatively affected its annual operating profits with a loss of about $ 2.5 billion).
9- Health crises (Health crisis: at the global level or a specific region, and it is a difficult situation or a complex health system that affects people in one or more geographical regions, mainly due to natural hazards, from a specific place to include the entire world. Health crises generally have major impacts on the health of society, loss of life and the economy. They may result from diseases, industrial processes or poor policies. The best example is Mr. Corona in 2020 AD. What did it do to the economy and people?
10- Legal environment: The legal aspects related to the systems, regulations and decisions in effect in a region, such as a country or an international union. For example, the government may impose taxes on some imported goods in order to support local industry and protect the company so that the company’s profit increases within the region. However, if, for example, a good law or a new agreement is signed that enables foreign companies to invest in the region, the profitability of local companies will decrease in the future.