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Power Tool External Factors

As power tool industries strategically plan to compete with globally recognized power tool industries they must continually make methodical business decisions while considering external factors that impact their journey. After a power tool company has conducted an external analysis of the power tool industry by examining external indices, they should further their trek to gain a competitive edge in the power tool industry by conducting a current review of general economic indicators as well as a current review of tangentially-related industries.

This discussion will examine the current economic indicators of housing, interest rates, unemployment, and exchange rates. Furthermore, this discussion will include the examination of power tool components and how it affects pricing.

General Economic Indicators

When comparing the August 2007 National Economic Trend report to the September report, we will see that there are a few changes that would impact the prior month's forecast, either good or bad. First of all, when revisiting the housing starts and new home sales in August, the data showed that they were meeting at just below 1.5 million (National Economic Trends, 2007). In September, the new home sales are increasing at about 1.6 million while housing starts are still declining (National Economic Trends, 2007). Interest rates were at 5% and now they are declining.

When combining the two pieces of data, a power tool company with little clout in the industry would be a little discouraged that the interest rates are declining and the new home sales are increasing because the new housing starts are still declining. If homes new homes are selling and new starts are declining, then construction is at a stand still while the new houses that have been built have been stagnant. The encouraging look at this would be that if new homes are selling they are removed from the market new construction will be a demand after the new homes currently on the market are depleted.
Secondly, unemployment rates are rising from 4.5% of the labor force to about 4.7% but yet the job opening rate is holding steady (National Economic Trends, 2007). Additionally, the length of time to become employed (for the seekers) has risen from eight weeks to nine weeks (National Economic Trends, 2007). As unemployment rates rise, the amount of job seekers decline, and it taking longer to find a job, people are not spending money. This increases the potential of declining sales for power tools.
Finally, exporting is an excellent opportunity at this time. A power tool company that is U.S. based should become a global company because the power tool market is dead in the U.S. Exporting is good because the dollar is weaker overseas. At this time the dollar is worth 73¢ to the Euro which is worth about $1.40 (National Economic Trends, 2007).

Tangentially-Related Industries

In addition to the general economic factors that impact the sale of power tools, is also industries that are closely related. For instance, power tool companies must rely upon other industries when constructing their tools. The costs for electric motors are driven up by labor and copper prices.

Exporting Creates Growth

All of the recent findings for the power tool industry has led to the realization that the success of a small company is contingent upon so many factors that they will need to stay up to date with the ever changing environmental factors. Any struggling power tool company should also consider e-commerce and begin exporting at this time. The opportunities, as we have studied, within the U.S. is limited due to market conditions that are closely related to the power tool industry.

Frankly, the current U.S. market is unhealthy. It would behoove a company to export their product overseas and import the components to manufacture their tools from other countries. This will enable them to maintain competitive pricing while lowering costs and they will be taking advantage of conducting business overseas during the U.S. market slump. Eventually, when the U.S. market recovers, a power tool company will potentially increase their sales dramatically thus, helping them to become competitive.