html5-img
1 / 60

Positioning Your Business for the Future

Positioning Your Business for the Future. Overview. The economy will remain sluggish for a few years before returning to steady growth Chester County’s economy is one of the best in the country and offers numerous opportunities The competitive environment is changing fast

wright
Download Presentation

Positioning Your Business for the Future

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Positioning Your Business for the Future

  2. Overview • The economy will remain sluggish for a few years before returning to steady growth • Chester County’s economy is one of the best in the country and offers numerous opportunities • The competitive environment is changing fast • You must recognize these changes to protect and grow your business

  3. Trends • Defined as the direction in which the economy and society are moving • Occurs in small steps, not revolutionary • However, rate of change is accelerating • Over time, dramatic impacts • Every business owner must understand and adapt to the changes

  4. The Major Trends • Less affluence, less disposable income • Significant demographic shifts • Domestic energy and transportation changes • Digital/electronic revolution continues

  5. Introductions What’s the leading indicator or most critical factor for the success of your business?

  6. The Current Economic Environment

  7. How is PA Doing? • Unemployment rate 9.3% in July vs. 9.6% for US • 200,000 jobs lost since recession started • About 7% of mortgages underwater - Much better then the national average • SERS and PSERS are large and growing issues • 2011 budget battle still underway • Stimulus funds have delayed the day of reckoning • Natural gas development is starting to help

  8. How is Chester County Doing? • #1 in PA for per capita and household income • One of the wealthiest counties in the US • 7.6% unemployment rate third lowest in PA -Lower than all surrounding counties • Real estate prices back to ~2005 levels • Signs of emerging growth

  9. C. C. Commercial Real Estate • Too much “near new” space available • Office vacancy at 20.6% is 16 yr. high - Normal rate is ~ 10% • Retail in Wayne and King of Prussia showing signs of life -Malvern, Exton and West Chester worst • Nearby I-78 & I-81 warehousing is active

  10. C.C. Residential Real Estate • Nationally >1yr. of excess inventory • 20% more homes than households! • Chester County prices at ~ 2005 levels • Chester County inventory averaged 58,381 homes in ’09 down 3% from ’08 • Prices down 5.8% ’09/’08 • Signs of life in Oxford and West Chester areas • New and used rental properties lead

  11. Some Local Projects • Uptown Worthington, West Whiteland • $700M commercial project, still delayed • Whiteland Village, Exton • 100 acre CCRC project being restarted • Turk’s Head Stadium, West Chester • $40M for Phillies Class A team announced 9/21 • Hildeburn Mews, West Chester • 12 new rental townhomes, fully occupied • Highpointe at Shanahan, West Chester • 60 townhomes under construction, many units sold • Jefferson @ West Goshen, 230 unit high end apartment complex now under construction

  12. Survey of Small Business Optimism • NFIB monthly index dropped this summer - Outlook is back to fall 2008 level - More firms to decrease than add jobs - Poor revenues #1 problem - 90% say credit is not an issue “Owners do not trust economic policies in place or proposed”, Bill Dunkleberg, Chief Economist, NFIB / Temple U.

  13. ECONOMIC TRENDS • The prime factor which will dictate the future economic climate is the national public debt • Trillions of debt added in response to the “Great Recession” • Trillions of debt will be added due to unfunded Social Security and Medicare liabilities

  14. National Debt Outlook • Debt to GDP ratio • Last 65 years ~40% average, proven to be manageable • FY 2010 ~ 65%, probably tolerable for a short term • Next 20 years , will go above 100%, unquestionably unsustainable • “US financial crisis possible as early as 2012” • Source, Mark Zandi, Chief Economist, Moody’s Analytics- 3/15 talk to Phil. World Affairs Council

  15. Probable Impact of Budget Deficits • Higher taxes • Weaker dollar • Higher commodity, energy and transportation costs • Higher inflation • Higher interest rates

  16. Higher Taxes Inevitable • End of “Bush” tax cuts? • Top marginal tax goes back to 39.5%, ~ 10% increase on 1/1/2011 • Dividend and capital gains taxes go from 15% to much higher rate ( 40%?) • New health care taxes in 2013 • 3.8% on investment income • 0.9% increase in Medicaid tax • AMT expected to hit an additional 7M people in 2011 • Higher state and local taxes • Must balance budgets so can not be delayed • Higher school taxes, pension issues • Longer term, possible VAT

  17. Impact of Higher Taxes • Lower disposal income • Lower growth for firms serving consumers • Intercity and interstate migration to low tax areas • Non taxed “perks” become important to employees • Underground and barter economies thrive • Importance of tax attorneys, accountants and financial planners

  18. Chester County School Taxes • Tax base down $7M last year on lower property valuations • School retiree’s pensions are biggest problem • Local contribution goes from 8% today to 33% in 2015, adding millions to each school system’s budget • All systems cutting costs and many raising taxes

  19. Weak Dollar/ Higher Commodity Costs • Foreign tourism increases • Outbound tourism decreases • Export businesses thrive • Imports cost more, especially commodities like oil and copper • Foreigners buy US real estate and businesses • Manufacturing with high imported material content will suffer • Domestic goods are favored

  20. Higher Energy/ Transportation Costs • Eventually expect $6-8/gallon gas cost similar to Europe and Japan • Higher cost hybrid and electric vehicles will be effectively mandated • Higher cost of electricity - PECO rates deregulated as of 1/1/2011 - 10% increase is probable for first step • Reversal of urban sprawl

  21. Higher Interest Rates • Rates increase because deficits must be monetized • US Treasury must sell bonds and buyers will demand higher rates • The yield on 10 and 30 year bonds currently indicate long term 3-4% inflation • At 4%, people on fixed income will lose 50% of their buying power in 18 yrs.

  22. Higher Interest Rates • Cost of debt increases • Depresses residential and commercial real estate • General low growth, stagflation • “Instant gratification” is suppressed

  23. Winners and Losers • Last 50 years the economy driven by the consumer via low interest rates • Real estate, communications and electronics prime beneficiaries • In 2007, 72% of GDP was driven by consumers • Currently at 67% • Removes $750B/yr from consumer market • Not expected to rebound • Industrial and government sectors benefit at the expense of consumer sector

  24. Predicted Losers by Occupation • State and local governments • Construction • Auto manufacturing • Pharmaceuticals • Big telecom • Newspapers • Airlines • Real estate agents • Bank tellers

  25. SOCIETAL TRENDS

  26. Less Affluence • People spend less and save more • Many restaurants hurt but: • Bistros, tapas bars, specialty trucks and hotel restaurants in favor • Rise of big bars that also serve food • Recent conversion of Spence and High St. Cafés to bars • Subway adds breakfast, others open on Sunday • Home remodeling thrives instead of spacious new homes • 2010 forecast of 5% growth • More “do it yourself” landscaping, cleaning, painting etc. • Especially true if VAT imposed

  27. Less Affluence • Vehicles will be used longer • Good for auto repair and used car dealers • Home care for the elderly and sick increases • Retirement and marriage delayed • Couples have fewer children and divorce less • Less costly vacations • Outward sprawl reversed • Retirees sell off suburban property to finance future • Non profits suffer from lack of funds but more volunteers available

  28. Interstate and InterRegion Migration • Population and businesses move to low cost, low tax, pro business areas • NJ, NY, Conn., Philly, NYC are already impacted • So far Chester County is “benefiting” • Diversified economy: financials, pharma, tourism, universities, agriculture, professional services • Retaining good schools, pleasant environment and skilled workers is a prerequisite • Some low cost areas will be resurrected • e.g. NE PA will grow with Marcellus shale, east coast warehousing and retiree low cost of living • Whirlpool building new plant in US not China!

  29. Working at Home • Higher transportation costs and better communication capabilities will accelerate trend to work at home • High bandwidth fiber optics and cable make videoconference and group internet use practical and inexpensive • Many at home workers will be independent contractors “free agents” • Home office products will be growing market

  30. Learning at Home • On line education is fastest growing segment of educational market • K-12, college, graduate school and specialized training impacted • Kindle, IPAD and interactive internet assist trend • On line college was 11% in 2008 up from 1% in 1998

  31. Changes in College Education • Three year degrees becoming available - Already common in Europe - Lower cost for student - Student can get a paying job earlier • Two year community colleges growing over 10% per year - Now 11M enrolled vs. 8.7M in 4 year colleges

  32. e-Care or e-Health • Control medical costs via technology • Fastest growing segment of health care • Monitor and treat patients at home • Wirelessly measure heart rate, blood pressure, oxygen in blood, glucose, EKG, falls, panics etc. • Implantable and “in clothes” sensors • Drs, nurses and EMS will be “on call” via internet • Many hospital treatments replaced by home medication

  33. Multigenerational Homes • Lower growth economy, higher educational costs and delayed marriages will lead to children staying with parents longer • Aging less affluent population will lead to elders staying with their children • 30% increase in extended family homes in last decade • Bigger, older homes in an urban environment will be favored ( good for home offices too)

  34. Demographic Changes:An Aging Population • 20% of PA residents are now > 65 • % will increase significantly • 77 million baby boomers retire in the next 15 years • Wealthiest, most active, longest living and best skilled senior segment ever • Looking for meaningful roles in the community • Fiscally conservative • Concerned about inflation and taxes • Increase in hip fractures, cancer, Alzheimer’s and traffic accidents • Segmentation of media, entertainment and services for seniors

  35. Demographic Changes:The Rise of the “Millenials” • The generation born between 1978-2000 • Completely at ease with digital life style • Not really interested in the traditional corporation, newspaper, TV or church • Their “on line” world features Twitter, texting, Facebook, You Tube, Linked In and their limitless successors • More educated, progressive and racially diverse than the baby boomers • Well suited for the “free agent” role in the economy

  36. Other Demographic Changes • Chester County ethnic mix changing • Rise in Hispanic and Asian segments • Each have distinct needs and are opportunities for service • 2010 census results may have some demographic surprises • Is the County changing more than we think? • Local banker and insurer say >50% new business is with Hispanics

  37. Digital Life Style • Ubiquitous communications • All time attachment to internet, phone and entertainment device • Home entertainment at consumer’s demand • TV delivers any program, movie, game or internet at any time • “Open Table” links customers to restaurants • You decide on time and type and Open table provides the options and confirms your selection • Expect concept to expand to other service providers (plumbers, hair salons, auto repair shops, etc.) through their web sites

  38. Digital Life Style • e books make reading and learning easier and less costly • Gradually replace newspapers, magazines, hardcovers and text books • Print size can be adjusted for seniors • $1B market now, $40B market in 2018 • IPAD may be game changer • Combines lap top, book and game player in light weight package • Salesmen and professionals adopting in lieu of lap top

  39. Energy and Technology Trends

  40. Energy/ Technology Trends • Revitalized domestic energy industry • Hybrid/Electric vehicles take the stage • Electronic revolution continues • On line computing accelerates mobility, lowers costs and enhances productivity

  41. “New Domestic Energy Age” • Natural Gas • Low cost and relative “greenness” • Nuclear Energy • Answer to CO2, complements battery power • Solar and Wind • Heavily subsidized – small role • Clean Coal • Not a near term answer • Biofuels • Possible but ethanol experience a negative

  42. Natural Gas • Plentiful and low cost • Technology breakthrough in horizontal drilling • PA will benefit enormously • Exploitation of its Marcellus shale deposit • PA 2020 impact per PSU • $25B added to state GDP • $1.4B added in state and local taxes • 176,000 new jobs • Tighter environmental controls required • Reserves sufficient for 100 years

  43. Marcellus Shale Thickness map of the Marcellus Shale. Modified after: United States Geological Survey, Open-File Report 2006-1237, Assessment of Appalachian Basin oil and gas resources: Devonian Shale-Middle and Upper Paleozoic Total Petroleum System, by Robert Milici and Christopher Swezey. [3]

  44. Natural Gas • Many coal fired power plants will be converted to NG - 43% lower CO2 emitted - Technology is well established - 57% of all new electric generation - Several states now prohibit new coal units • Use of NG for large vehicles will increase • Export of LNG may evolve over time

  45. Nuclear Energy Prospects • Worldwide, plants will double in next 20 years - China, India and Middle East lead • US today has 104 facilities, 20% of electricity - None built for 30 years - 31 applications pending - Energy Dept. loan guarantees available • Much safer Generation II plants now supply 77% of French, 46% of Swedish, 35% of Japanese power • Generation III plants to be modular, safer with less nuclear waste

  46. Hybrid and Electric Vehicles • By 2020, up to 25% of new vehicles sold • Forced by CAFE standards, higher gasoline prices and govt. subsidies • 3 types being commercialized: - Current hybrids where a small battery assists a gas engine- Prius - A “plug in “ hybrid where a large battery will power the vehicle with assistance from a small gas engine - An all battery “plug in” vehicle

  47. “Plug In” Hybrids • The real game changer • Requires home, office or service station charging • Practical range, much higher fuel economy • Cost and performance of unproven lithium ion batteries are the key to success

  48. “Plug In” Hybrids • 12 million/yr plug ins forecasted for 2020 • Higher up front costs suggest that leasing will be key to initial adoption • Chevy “Volt” due this winter - $41,000 before tax credits - 4 passenger compact - 40 mile range on battery - 12 gallon gasoline engine to extend range - 6-8 hours to recharge on 110 volt circuit - GM claims 230 mi/gal. fuel economy

  49. Full Electric Vehicles • Targeting the commuting market • Nissan “Leaf” being launched now - 5 passenger hatchback - 100 mile range, ideal conditions - $32,000 before tax credits - requires a $2200 charger (220 volt)

  50. Local Impact • Need for skilled technicians and repair shops • Need for recharging, replacement and recycling stations - Battery will be valuable • Used car and repair shops will thrive as many consumers resist the trend • Auto parts suppliers severely impacted • Insurance policies revised due to uncertainties and safety issues

More Related