Industry factors
Introduction
The business industry is an increasingly vital resource in most life aspects like employment, government, healthcare, social interaction, education and commerce. Business industries can realize substantial returns on investments (ROI) that can offset any costs of implementing industrial factors. The decision to make the initial investments requires one to understand the social, financial and technical benefits of the industrial factors and the expected returns. Therefore, an industrial organization should show the factors aimed at meeting the objectives, expected outcomes and cost benefit analysis of the business. Industrial factors are, therefore, essential for the development of a business case in the following ways. Industry factors require to be chosen critically since they contribute to the outcomes of the business firms (Ettredge et al). Depending on the business firm and the potential market targeted by the business, appropriate industry factors should be given serious considerations. It is, therefore, the decision of the business owner to decide on the favorable factors for the initiation and business operation.
Implementation of industrial factors helps a firm examine its competitive ability among the available business firms in the market. With this knowledge, a firm can determine its interests in the wide field of the operations and the market valuation put on the business portals. Market reach ability of an industrial/ business organization is the beneficial aspect of industrial factors. This is the percentage of the population accessing a given business portal at a given time. Suitable factors ensure that an organization maximizes its market reach capability hence determining market leadership (Cavalgia et al. 35). Knowing a firm’s position in the market enables the examination of market competition in the market places.
The market size of a firm is an effect of industry factors and trends. Making a business case, therefore, requires consideration of the factors that present exact opportunities and challenges to the business. The right and reliable factor for the firm should be considered, and this is only possible through researching on the factors and their potential impacts on the market size. Quantification of the market is also possible, and it enhances the determination of the firm’s market size (Lieven and Piet). Working with the familiar industry factors is essential for the market size determination and the future success of the firm.
Market dominance is also affected by industrial factors. Through this, the brand value and loyalty is determined. Appropriate industrial factors bear strong brands with quality values, customers then consider such available business brands hence the growth of a firm in the market. High value brands provide customers with lower search costs and quality the brands. Trust between customers and the firm is enhanced through the application of industry factors. Good industrial factors promote stickiness between the firm and the service consumers. This practice encourages customers to have repeat visits to business firms, which at the end promote the profit margin of the firm. The concept also establishes switching of costs to help customers choose on the business as the main service and goods provider. Virtual communities add value to businesses by encouraging the adoption of social services depending on the industry type (MSCI). Without industrial factors, social activities cannot be cultivated to the consumers. From this social connection, customers get to enjoy one on one dialogs. This system is derived from the network externalities that are at the disposal of the firm and its use increases as its user expand. There has been an increase in the frequency with which market returns are raised by industry factors. The returns are often different from zero, and the firm is bound realize maximized returns. Through these social business activities, the firm gets the advantage of interacting with its customers at personal or community level (Ettredge et al). The interests and needs of the customers can then be known by the business firm hence helping in the process of decision making.
Global diversification is also an advantage of industrial factors. Business organizations taking in to consideration these factors are always diverse in every aspect. The evolution of technology has occupied a larger portion of the business industries, and it is receiving a lot of positive feedback from its users. Global diversification helps firms attain the highest positions and reach in the market. Being the top of the market produces substantial business returns. Appropriate business factors in the businesses enhance business models that are connected to the right and reliable sectors. Such connectivity based firms have the chance to enjoy product based success. The success of the different companies today depends on the services they provide, the content of the services and the connectivity (Austin et al. 46). These services can only be provided by the foundational resources, which are the industry factors.
Technological advantages of industrial factors also exist. Industrial solution implementation has an advantage of improving technical performance. These benefits are different for different organizations and situations. For example, an organization concerned with cutting- edge technologies might experience benefits of interoperability and advancements in technology. An organization with a high traffic businesses are benefited by increment in customer demand. The ultimate results of implementing industrial factors on technological improvement are a total reduction in time needed for developing and maintaining business networks. Another importance of the factors is the enhancement of service and good provision and deliverance to customers (Austin et al. 49). This leads to an improvement in the business speeds which is a technical advantage in any industrial field.
Financial structure is an element of business organization that is influenced by the industrial factors. Interaction of finance and the product market are used by identical firms decide on the best financial structure for use. Product market competition is also affected by the financial structure. The market and business models utilized in industries can show how reputable financial decisions can be determined in competitive industries (MSCI). The choice of technology as an industrial factor dictates the costs of services provided by varying companies hence the financial system to be used. The financial structure of the firm is in turn an effect on the ultimate outcome of the business and its operation.
The business firm characteristics are strengthened by the industry factors. This is possible through positively affecting the decisions of the firm either by capital- labor riots or regression of the firm level financial leverage. The cash flow volatility on the industry medians can also be affected. The characteristics are determined by regression of the level of firm’s financial leverage to find out the importance of the industrial factors. The changes of the industry are also regressed to determine the response of the firm to the industry changes. Reversion of the firm level variable should be checked to confirm the industry’s regression effects on the firm (Lieven and Piet).
Industry factors impact heavily on the firms that exit, enter or stay in the industry differently. Firms are bound to exit, enter or stay in an industry due to factors like bankruptcy liquidation or by selling their assets through corporate mergers. Acquisition of assets by firms can also be caused by industrial factors. The transition patterns of the firms enables the companies follow a uniform distribution, which is contributed by the business industrial traits. Policy and regulatory benefits are the acts of industry factors. A business firm having the correct mode of action and is legitimate is the right business ground for consumers. A market can only trust a firm if it is legitimate and is ruled and controlled by the right policies. The products and services provided by the firm should be consumer friendly and of expected quality (Cavalgia et al. 40). Protection of consumer interests through the provision of legitimate services and dealing in the goods demanded by the market increases the chances of a business to flourish.
Risk and security return are analyzed through the application of industry factors in business. A combination of technology and other factors promoting diversification can help a firm in controlling its business related risks and security returns. It is advisable for a firm to hold portfolios of stocks and not just one stock. The use of a capital asset pricing model can also help in measuring of risks, through the linkage it forms between risks and returns expected. The factors enhance the addition of risk free assets to the investment opportunities. This makes it possible for all the investors to acquire the same well established and diversified business cases taking care of the possible risks (Ettredge et al). The relationship between risks and returns is defined fully by the application of these factors.
Conclusion
Considering industry factors is essential for the evolvement of business cases. Industry factors affect most business industries and have serious implications for any business or firm applying them. The factors are directed at affecting certain aspects of the business using them. The social, economic or financial, technological, regulatory/ policy and demographic aspects of the firm are affected by these factors. The effects realized by firms are either positive or negative depending on the way the factors were implemented. The significant impact caused by these factors lies on the financial aspect of the firm. Industry factors affect the returns made by a firm and they help in the determination of possible future risks a firm can experience. Diversification of the firms operations is also enhanced through the provision of services required by market and the application of technology. Industrial factors are vital because they give the firm the chance to maximize its activities hence its profit margin. The regulatory aspect of industry factors gives the firm a chance to work in a legitimate state making its activities trusted by its customers. It is, therefore, a necessity to consider factors aimed at developing and increasing the success of a business before engaging in any business.
Works cited
Austin, Kairnes., Emre, Kati., Jae, Hyun., Lee, David., Russ, M. Schwartzman. Country Factors vs. Industry Factors. Stellar Asset Management. 2009.
Cavaglia, Stefano, Brightman, Christopher, Aked, Michael. On The Increasing Importance of Industry Factors: Implications for Global Portfolio Management. Brinson Partners Inc. 2000.
Ettredge, Michael, Kwon, S. Young, Chee, Y. Lim. Client, Industry, and Country Factors Affecting Choice of Big N Industry Expert. Journal of Accounting, Auditing & Finance. vol. 24 no. 3 433-467. 2009
Lieven, DeMoor and Piet, Sercu. International portfolio diversification: do industry factors dominate country factors? KU Leuven, Graduate School of Business Studies. 2006.
MSCI. The Relative Strengths of Industry and Country Factors in Global Equity Markets. 2012 Available at:
<http://www.msci.com/insights/asset_allocation_and_asset_liability_management/the_rela tive_strengths_of_industry_and_country_factors_in_global_equity_markets.html >
