Dendro Macroeconomic Factors There Are a Number

Dendro

Macroeconomic Factors

There are a number of macroeconomic factors that will affect Dendros, but the most important one is the overall health of the local economy. The GDP is the most oft-cited measure of broad macroeconomic health. For some in the Dendros target market, arbor services are discretionary, meaning that purchases will either be cancelled or delayed in response to downturns in the economy. The Congressional Budget Office bases its projections on the policies that are currently in place. This means that its forecast for 0.5% decline in GDP over the year from Q4 2012 to Q4 2013 has built in the provisions of the so-called "fiscal cliff." It is expected that between the present moment and January 1, 2013, new laws and policies will be enacted to replace this scenario, so the actual forecast for GDP growth is more likely to be slow growth in the range of 1.7% (CBO, 2012). The California state budget has built in a forecast of 2.5% increase in GDP, above the national average, assuming that key elements of the Budget Control Act are ultimately not enacted.

Interest rates also could affect Dendros, depending on the company's debt structure. If the debt is floating, there is the risk that if inflation and interest rates move upwards, the cost of the company's debt would also increase. However, prospects for a slow increase, or even small decrease, in the GDP reflect an environment where there would be little need to increase interest rates. Therefore, neither inflation nor interest rates are expected to be a significant risk to Dendros in 2013.

Non-Economic Factors

The social and cultural environment is generally positive. Consumers tend to appreciate arbor services, and when these services are conducted in an environmentally-friendly manner there are few objections. The political environment will often follow the lead of the social environment in creating regulations. In general, licensed practitioners have little to worry about as they have a high level of familiarity with respect to the regulations governing the industry. Dendros will need to be aware, in particular, of legal guidelines with respect to the use of pesticides, as these guidelines can vary by city or county. In addition, Dendros must ensure that it complies with all of the legal guidelines surrounding the hiring and treatment of workers. These guidelines range from the patchwork of anti-discrimination laws to laws governing the use of illegal workers, of which there are many in San Diego County.

The technological environment is characterized by a moderate pace of change. The basic technology in the arborist trade changes at a slow pace, and with years of experience Bill and Sue are well familiar with the latest technologies. Marketing, however, is affected by a rapid pace of technological change. Marketing via social media is an emerging, rapidly-changing area, for example. The company must also consider the possibilities of technology with respect to taking orders, organizing workflow of its employees and managing finance and inventory. With a rapid pace of change and the two principles spending ample time in the field, there is the risk that they will be unable to keep pace.

San Diego has a growing population, so demographic changes can be seen as favorable to Dendros. The couple will expand their potential market if they have a good knowledge of Spanish, however, as the area has a large Spanish-speaking population. In addition, San Diego has a somewhat transient Navy population, and this transience creates opportunities for one-off residential customers. However, the demographic changes are relatively slow, and the key factor is that the increasing population should increase the overall size of the San Diego market gradually.

Microeconomic Analysis

Microeconomics focuses on individual behavior patterns and consumer decision-making processes (Investopedia, 2012). Consumers typically seek to maximize their utility by balancing quality and price. Dendros is going to emphasize quality, on the basis of their experience and qualifications. The Williams' believe that demand is driven by quality of service offered, so will focus on that approach. They realize that they need to offer superior service both in terms of arbor service quality and customer service quality.

Strengths & Weaknesses

The key strengths for Dendros lie with the skills and experience of the two principles. They have ample experience in the field, are well-certified, and even have an MBA between them, which will help with the marketing, strategy and accounting functions. They may not have run their own business before, but they are better prepared that most entrepreneurs. With any luck, they have good contacts with their customers and have been building up those contacts during this planning process for their own business. One weakness is that the company may not have much capital. They have $200,000 to start, and may need a loan. This necessitates that they are a bigger company than just the two of them, and they may need to grow. They are older, so they also have a shorter time frame with which to build the business.

Long-Term Strategic Objectives

Bill and Sue need to build their business as the first long-term strategic objective. This concept should include ideas about geographic scope, in particular the degree to which they want to expand beyond San Diego County. They should also set objectives for revenues, profits and growth in these metrics. The couple are probably in their late 30s or early 40s, so they need to set an exit strategy for twenty years down the road. The couple will need to set a terminal value that they will need for their retirement and take the necessary steps to get there. This approach is required because Dendros is going to be the single most significant asset for their retirement, assuming they keep their San Diego house. Their business plan therefore doubles as their retirement plan.