Economics in Business
by Fairy Dharawat
As global brands market their brands in new locations with customized marketing strategies in different retail formats to reiterate their strong brand equity, there is a lot of learning for the ones starting out a new business venture these brands can provide which uses economics.
Economics plays an integral role in starting any new business venture as understanding supply and demand is crucial in building up a brand and eventually to making profits. Recently I have written a post on NIVEA and their new brand motto is ‘It starts with you’ for retail as they re-launched the global brand with a new face, a well known movie star, for male grooming category. Their re-launch has been talk of the town as their strong marketing strategies ensured positive results. But there is no such thing as surety in business, only preparation to cover possible risks. Economics helps to point out possible risks and to measure risk appetite (ability to take on risks) by understanding business from an economics perspective. This includes understanding demographics, shopping behaviour and local culture.
The campaign first took place in the home country; measured the success in the home country and then went global. The global brand campaign which points to the message that ‘confidence is in you’ to the masses provides an important lesson to those starting out that, even for global brands meticulous planning is essential along with an estimation of your reach in geographical areas. Start local, test your market and then think of spreading out. Keep a tab on your growth. Provide an identity which people can associate with. In this case, Nivea started with ‘it starts with you’ which gave emphasis on the power and strength one possesses to overcome obstacles. Everyone can associate with this brand message, giving it a universal appeal.
Risk appetite provides a map for implementing 1) Plan of action for present and future 2) Sustainability and long term growth opportunities 3) the SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) of a business.
We take a look at the business plan reviewing these fundamental aspects of business – Supply, Demand and Risk Appetite. (1) Plan of action (2) Sustainability (3) the SWOT analysis – to show before actually starting your business the implementing of which economic pointers can be beneficial in the long run.
How can you test the feasibility of your business brand using Economics?
Answer below questions with utmost honesty to find if the business you have in your mind is feasible to today’s economy:
· Who is your target group? How do you intend to understand their buying tendencies?
· Is there a demand for the business you are planning?
· Is there competition in the chosen business? Do you have a USP? What is your USP?
· How big is your risk appetite?
· Does your business model have a contingency (emergency) plan?
· What are your short term business goals? How do you plan to reach that goal?
· What are your long term business goals? How do you plan to reach that goal?
· How long will it take you to get ROIs (return on investment)?
· When do you get to break even or profits?
Above few questions give you perspective that you are on a right track to your dream venture and whose answers will help to understand feasibility of the business from the point of view of Economics.
Before you even start a business venture, imagine all the problems you might face and all the possibilities. Have a plan of action for every eventuality. Consider the worst case scenario and be prepared for it. Listen to other people and do a critical analysis of your business plan. When you’re confident that you can cope with whatever problem you’re likely to encounter then you can be brave and risk your capital investment and start a new enterprise with confidence.