The United States is home to the largest economy in the world, and many US businesses have been able to thrive by solely serving the domestic market. Wegmans, a grocery chain in the northeastern part of the country, and In-N-Out Burger, an extremely popular fast-food chain, are both great examples of this.
While companies like this will continue to thrive in the future, the world’s economy has become increasingly interconnected, and this poses many opportunities for US businesses, as well as some threats.
Understanding Global Economic Indicators
The first thing to understand about the global economy is that there are key financial indicators that can signal financial health. Inflation rates have been very topical in recent times, and both GDP growth and unemployment rates always have a lot of focus on them.
Foreign markets often have a direct effect on US businesses, too. As a simple example, let’s consider fluctuations in European markets. If Europe experiences an economic downturn leading to decreased consumer spending, this could result in lower sales for US companies that export goods to these countries.
For an example of this playing out in real life, cast your mind back to 2009. Greece entered a severe recession due to its debt crisis, and American companies with a lot of exposure to Greek markets saw their revenues shrink considerably.
One way to pre-empt where things are heading is to look at the SP 500 futures, an instrument that offers investors the chance to speculate on the S&P 500 index’s future value. Even though the index is based on the biggest large-cap companies in the US, not the world, the interconnected nature of the world’s economy makes it relevant.
Whether investors are betting on a downturn or an uptick in the S&P 500, this information can be very useful to US business owners. The ripple effects of the US economy’s strength can impact foreign exchange rates and the flow of capital into foreign countries and touch a US business’ supply chain in many different ways.
Navigating International Trade
For those US businesses that are seeking to take advantage of the global economy, they’ll need to navigate the waters of international trade. This can be tricky, especially if you’re operating in a number of different countries rather than just one or two.
Every jurisdiction likes to do things a little bit differently, and you’ll need a strong understanding of their laws if your business is going to thrive there. How goods and services are allowed to move across the border, any relevant tariffs, taxes, and the procedures of customs can all vary from region to region.
A good way to mitigate any potential problems is to form strong relationships or partnerships with people or businesses in the markets where you’re trying to establish a foothold. They will understand the lay of the land much better than you do, and partnering up allows you to minimize some of your risks.
US businesses of all sizes are well-placed to use the connectedness of the world’s economy to their advantage. By thinking globally, building strong relationships around the world, and being aware of how to assess the strength of the economy, US businesses can make a splash on the world stage.