Learn something new every day
More Info... by email
Economic sustainability is an actionable strategy companies engage in to ensure they remain a going concern. Different strategies include lean accounting or management, competitive market analysis, product differentiation, concentrated growth, or similar strategies. A company's economic operating environment will rarely remain static; external forces will pressure the company to make changes to business practices that will help the company maintain economic sustainability. Using one or more of these strategies can ensure the company remains competitive and stable in all economies.
A company's economic sustainability comes from its ownership or management team. These groups will often develop a written statement of how the company will react and engage in operations that add value to the firm, sometimes called the company manifesto. Such a document helps define the company's strategy.
Using lean accounting or management principles are often the starting point to a company's sustainability. These principles focus on waste reduction in the company. Any activity or operation that does not result in added value is subject to removal. This process can help to streamline the company's operations and can result in lower operating costs, increasing the company's economic sustainability.
Two other strategies for economic sustainability include market analysis and product differentiation. Using a market analysis, a company can determine where gaps exist in an economy. This allows the firm to focus their actions on filling the unmet consumer needs in these gaps. Companies that focus on these areas often find new industries that allow for maximum profits when selling goods or services. The ability to control the market is possible since competitors are absent in the industry.
Product differentiation occurs when a company operates in a highly competitive environment. The best economic sustainability strategy for this market type is creating a product that cannot be easily replicated by another firm. A company can then capture market share, providing specific goods or services that meet consumer demand.
In some cases, a company may find it better to offer substitute goods. These products fill consumer demand in lieu of the preferred product. As the preferred product increases in price, sales will typically increase for substitute goods as consumers look for cheaper options for similar products.
Concentrated growth strategies allow for a company to grow slower through its own capital. This avoids the use of outside financing and decreases financial risk to the company. During sluggish economic periods, companies often find it difficult to maintain current business production. High payments to outside lenders will reduce the company's economic sustainability. Slow growth using only the cash earned from normal business operations can help ensure that the company has sufficient funds during slow economic growth.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!