Friday, February 23, 2007

What is Corporate America Trying to Tell Us?

A recent blurb in a CNN article caught me off guard claiming that, "Despite the hike in energy prices and the slump in housing, the US economy remains resilient--especially consumer demand." I too would agree that the economy certainly looks strong from a superficial glance. The stock market is nearing all time highs, inflation is moderate and for the 4th quarter of 2006 the US gross domestic product grew by 3.5%. Quite impressive for a fiscally indebted nation hindered with soaring energy prices (petroleum) and a declining housing market.

The importance of these issues in relation to the global economy all depend upon perspective and timeframe. With most Americans the timeframe is right here and right now, but with multinational corporations this type of myopic indifference will not suffice. For this reason successful corporations establish quarterly, annually, 5 and even 10-year business prospectuses. For them to successfully strategize they must systematically reorganize their hierarchy and business objections so that they synchronize with the economy. It doesn't make sense for DaimlerChrysler AG to maintain current production levels if they foresee consumers making fewer purchases of durable goods like cars or computers. Therefore they cut production prior to an economic downtrend, so as they are lean and capable of surviving the changing economic environment.

Due to the survivalist natural of these entities, observing the actions of corporations can often paint an accurate preview of coming economic attractions. Through the next series of posts I will examine in detail the current concerns facing our economy while simultaneously exploring the predictive behaviors of these multinationals.

1 comment:

Woodshedder said...

Heady stuff. I'm looking forward to it.