We often talk of the need for a “business climate” to be just right for an area to be suitable and receptive for business. Yet for a CEO, it’s not just the broader environment that is the key to growth, it’s the specific elements of that environment that need to be understood and leveraged for optimum growth.
There are at least 7 elements of a broader business climate that need to be understood for maximum growth:
- Logistics – How accessible is a market to customers, suppliers and employees? Does the location support contingencies?
- Infrastructure – What is the condition and suitability of the areas supporting infrastructure (air, road, rail, port)? Are local utilities reliable and of suitable quality?
- Talent – How large is the relevant talent pool? Does the local talent offer the right types of education and experience? How do talent costs compare with other locations? Is the area of suitable quality and amenities to attract talent from other locations?
- Competitive Landscape – How mature is the local market? How robust is the competition?
- Regulatory – What policies impact employment, trade, permitting, etc.? Are there restrictions that currently impede the business in a meaningful way? Are there ongoing restrictions that will impact future business plans?
- Cost of Doing Business – What costs can a business anticipate in terms of startup capital requirements, licenses and registrations, loss of work (downtime), taxation, credit access costs, trade costs, etc.?
- Operating Risk – Is the geopolitical situation stable? Is the area prone to natural disasters? Is there more potential for corruption or theft?
Today’s overall business environment in many areas and markets is as robust as it’s been in years. However, for a CEO to truly maximize an organization’s success in any given market, it’s the understanding of the market details that are the key to success.
Understanding the Elements of a Business Climate is Just the Start
The key elements listed above must be understood for overall success in a broader business climate.
Yet, of course it’s more than just an understanding of those elements. For success, a CEO must deploy and maintain assets and resources to meet business climate objectives.
Armed with a comprehensive definition of business climate, organizations should be proactively evaluating their business climate for each major geographical asset. Use of this ongoing top-down evaluation and process can help improve corporate performance while re-energizing employee focus on strategic goals.
Implementing and managing business climate nuances should be an integral part of strategic management – providing a continuous sequential business snapshot in a constantly changing environment. CEOs must have the expectation that every business climate factor will likely change over time (often forcing a business climate evaluation to be a mission-critical exercise). Increases in labor costs, tax and trade policy changes, emerging threats, and new customer needs will shift emphasis with time.
As organizations evolve and make strategic transactions, the importance an organization puts on business climate factors will change. Regardless of industry, organizational structure or location, CEOs need to understand how their growth and success is impacted by business climate factors. Success will often depend on a constantly updated understanding of business climate variables affecting business growth and efficiency.
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Michael Roth is President and Founder of Michael Roth Advisors, a business consulting firm headquartered in West Orange, NJ. Roth brings extensive experience in business services for Turnaround Management Firms and Private Equity Firms to improve organizational structure and performance. Learn more about MRA at http://michaelrothadvisors.com.