Studying Industry Trends (Environmental Trends)

Environmental Trends
                   As discussed  environmental trends are very important. The strength of an industry often surges or wanes not so much because of the management skills of those leading firms in a particular industry, but because environmental trends shift in favor or against the products or services sold by firms in the industry.
                    Economic trends, social trends, technological advances, and political and regulatory changes are the most important environmental trends for entrepreneurs to study. For example, companies in industries selling products to seniors such as the eyeglasses industry and the hearing aid industry benefit from the social trend of the aging of the population. In contrast, industries selling food products that are high in sugar, such as the candy industry and the sugared soft-drink industry, are suffering as the result of a renewed emphasis on health and fitness. Sometimes there are multiple environmental changes at work that set the stage for an industry’s future. This point is illustrated in the following statement from IBISWorld’s assessment of the future of the motorcycle dealership and repair industry:
                    Demand for motorcycle dealers is expected to speed up over the next five years. Industry revenue is anticipated to increase 2.5% to $24.2 billion in the five years to 2016. Disposable income is poised to increase over the next five years while the U.S. economy gains steam. With more money in their pockets, consumers will hit motorcycle lots again. Furthermore, the tight lending standards of the past are projected to dissipate, and more financing will be available for consumers to use when purchasing a motorcycle. High fuel prices will also feed into industry demand as some consumers switch from cars to motorcycles.5
                   This short assessment about sales in the motorcycle industry illustrates the degree to which environmental trends affect the prospects of an industry. Note that nothing is said about improvements in the management of motorcycle dealerships or enhancements in motorcycle product quality. The somewhat positive assessment of the future of the motorcycle industry is tied to an improved U.S. economy, a lessening of tight credit standards, and high fuel prices. High fuel prices work to the advantage of the motorcycle industry because motorcycles use less fuel than cars. Similar forces are at work in all industries.