Business, Stocks, Strategy, and Assumptions

Please visit yesterday's post, right below this one, for the first five assumptions that can force a review of business strategy.

6. Public values: business and stocks both depend on consumers. Some companies sell direct to final users: automobiles and consumer durables are examples (in cases of company showrooms). Such enterprises feel the effects of changes in consumer tastes immediately and directly. Other sectors of the economy have multiple links in chains between producers and final users. This is why Other Equipment Manufacturers which supply automobile and consumer durable manufacturers with components, may take time to feel the effects of changes in consumer preferences. Nevertheless, the effects are never to be denied. Business managers and stock investors have to set fresh course when consumer tastes and preferences change. These things happen gradually most often, and can be covered in annual strategy reviews. However, public demonstrations by icons and natural events are typical instances of sudden and disruptive changes in consumer behavior. A popular star can cause upheavals of brands by endorsing or rejecting some form of clothing. Reports of virus outbreaks have turned masses of people away from meat overnight.

7. Nature: the tragic May 2008 earthquake in China is a stark reminder of how nature can put paid to the best-laid plans in a flash. One of the main tests of the quality of strategy is to check the number of scenarios with which it can deal optimally. However, possibilities that something totally unforeseen happens cannot be eliminated. Thus, major course correction following a human-made or natural event of cataclysmic proportions, is an essential management process for business managers and for stock investors. Large corporations commonly restrict their Business Continuity Planning thinking to breakdowns for Information Technology systems, but Stock Investment Continuity Planning should respect no such limits.

Three other categories of assumptions impact business and stock market strategies. They will form topics for tomorrow's post.

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