ECONOMIC FORCES
One of the main forces affecting an industry are economic variables, understood as key economic aspects in the industry that affect all firms on it, such as interest rates, inflation, currency values etc.
During the last 6 years Colombia has managed to maintain a stable inflation rate, Between 2% and 4%. the government controls inflation with an objective of of 3% on the long term, with a margin of +/- 1%. The government aims to maintain stable prices while allowing the maximum growth possibility and preserving jobs. Stable inflation rates allow local businesses to maintain prices as their local distributers will also maintain them, eliminating uncertainty to some extent. A negative aspect would be in the case of businesses depending on importations, if they import from a country which has higher inflation rates, the prices for their supplies will be higher. (1,28)
Unemployment in Colombia has maintained a tendency to decrease since 2006. In the last report presented, Colombia achieved an unemployement rate of 9,1%. As this tendency maintains, all businesses will be benefitted as employed individuals will generate incomes, allowing them to spend. As for the case of book shops, a job will help parents afford the necessary bibliography for their kids’ education.(26)
In their aims to maintain prices stable, the Colombian government uses monetary policies that help regulate liquidity in the market. Apart from this, the government has the right to intervene in the currency exchange market in order to stabilize it. With this policies the government manages to reduce uncertainty in the local market, benefiting all businesses. Book imports may be affected negatively or positively when the government intervenes in the currency exchange. (1)
There’s a tendency in the Colombian market to import books rather than exporting them. Nevertheless, statistics show that imported books only count for a 15% of the total sales where as local editorials control 71% of the market. Knowing this, local book sellers are less affected by the international environment as they can deal with local suppliers. Still, imported books have an important marketshare and this would bring uncertainty due to external factors such as currency fluctuations, but thanks to FTA with the US and many other countries, books can be imported with no tariff, factor that will help importers. (2,3)
Inflation Rates
Unemployement trends
Import/export factors
Monetary policies
Location of retailing manufacturing and production businesses.
There are many book sellers such as Libreria Nacional, Panamericana, Linio, Books&Books, Libranda etc. The location of these is very diverse. They have multiple stores in the biggest cities of Colombia and they also sell books online. In the case of Linio they have no physical store, they are e-commerce. And for example Libranda only exploits the market of ebooks. All of them have in common that they make strategic alliances with editorial groups in order to legally distribute their content.(Competing firms web pages)
The rate at which general prices ar rising, therefore lowering the purchasing power.
Percentage of the total labor force that is unemployed but is willing to work and serching for a job.
Actions taken by the central bank to control the size and growth of the money supply, affecting interest rates.
Related to International trade and the balance between imports and exports. In this case it is specifically analyzing imports and exports in the book industry.
Physical or digital location of companies in the industry.
Fuente: DANE
Fuente: Banco de la República
Transition towards service economy
The service or terciary sector refers to the economic activities providing intangible goods.
The global economy has been shifting to the service sector. In Colombia this sector represents 61% of the GDP and 65% of employment. Specifically e-commerce in colombia has tripled in the las years and had a growth of 30% in 2013. Online sales represent a digital service and as shown by the statistics its tendency is towards growth. This could benefit our industry as book sellers provide a tangible good by means of an intangible service. It could show a customers tendency but market may get saturated with e-commerce companies.(4,5,27)
Interest rates
The interest rate is the price of money in the financial market . Like the price of any product , when there is more money the interest rate is low and when there is shortage rises
Graphic taken from Index Mundi
The average interest rates for all types of consumer loans has dropped 2.3 % percentage points since January and the start of October, after inflation .
According to the registration fees and disbursements charged bearing the Bank of the Republic , in the first week of January , real rates for consumer loans were 17.5 percent per year is 2013, but the actual cost for those who borrow is 15.2 percent , 2014. This benefits the company because at lowering the interest rate , people can easily acquire loans and thus rise in demand on the market offered
Foreign countries economic conditions
A foreign economic conditions is an economy in which there is economic activity among local residents and foreign
Consumption patterns
Grafic taken from DANE,Colombia
Colombia specializes in a production of coffee, flowers , bananas and fruits that are are well received in international markets. It means that any any change that are present in the patterns of production and consumption in industrialized countries must not have a negative impact on developing countries .According to the report ofthe secretary-general , Colombia have to pay more attention to consumer decisions and make a call for the participation of exports of developing countries and their international standards of production and consumption
The consumption pattern is affecting the industry becouse at the char show it has been a fall in the percentage of stationery books and magazine from 3,7% to 1,8% this basically happen because of external influences in the environment
Organization of petroleum exporting countries ( OPEC) policies
The OPEC (OPEC ) is an intergovernmental organization created in response to the falling price of oil official agreed unilaterally by large distribution companies
Grafic taken from ELTIEMPO
Grafic taken from DANE,Colombia
Economies in the South American highlights include Brazil, Chile and Peru, are opposed Bolivia, Argentina and Venezuela.
This economies are conditioned for its government and monetary stability.
Venezuela in this chart could be the South American Qatar but it faces and economical crisis because of its communism system which did not provide them anything, as in Argentina who recently entered in Financial Default.
Today Colombia is a better country than 30 years ago because of its technological advance that allowed an academic and technical development as well as a better infrastructure , But inequality , poverty and violence continue unbalancing the balance and prevent achieving development that deserves its population
Propensity of people to spend
The average propensity to consume (APC) refers to the percentage of income that is spent on goods and services rather than on savings. According to Portafolio magazine the percentage of money that Colombians spend in culture at 2012 was 2,9%, but this includes movies, sports, theatre, museums, books, etc. Obviously, this variable affects our industry because depending on how much money people could spend in our market; we may or may not grow.
The newspaper El Tiempo in 2011 showed some part of a UNESCO report, when it shows that Bogota is the fifth Colombian city where more people spend in culture, with a percentage of 58% of the population; the first one, was Armenia with 74%. Also, there is a little graphic that expose that the input of culture in the gross domestic product of Colombia grows from 2,78% in 2005 to 3,21% in 2008, and that the tendency of this topic is to continue growing. With this information we can see that an important percentage of Bogota could use our services and that the amount of money that they spend in our market is growing each year. (55)
Stock market trends
Also known as the equity market, the stock market is one of the most vital components of a free-market economy, as it provides companies with access to capital in exchange for giving investors a slice of ownership in the company. The stock market makes it possible to grow small initial sums of money into large ones, and to become wealthy without taking the risk of starting a business.
Colombia’s stock market has as mission to contribute to the growth and development of the capital market and is an important tool for organizations to grow because it links them to the shareholders that can provide them the capital necessary for start to develop some strategies. However, our organization is not affected by this variable because we do not comply with all the requirements for participate. For example, we have not more than a hundred of shareholders or a capital equal or greater that $7 billion (COP). Also, there is not an enterprise in the Colombia’s stock market that handles their business just online. (57)
Price fluctuations
While it can be computed for any length of time, the most commonly cited price change in the financial media is the "daily price change", which is the change in the price of a stock or security from the previous trading day's close to the current day's close. The dollar currently has an uptrend as it shows the DATAiFX index and is around the $2385 (COP). For our market it might be bad because the imports become more expensive and probably suppliers could be affected; that, would make higher prices. (58)
Colombia is the country not including Venezuela , Ecuador and Mexico which produce more oil to reach 1.03 million bpd , 70,000 bpd more than last year.
As predicted the OPEC states that the pumping of Colombia will be driven mainly the Rubiales , Quifa and Castilla.
Oil production in the region will grow 2.3 percent over the year , so that Latin America will be the second country outside OPEC with the highest growth in oil production after North America. According OPEC oil demand from the same region at 6.5 million bpd , 3.5 percent more than last year.
This partially affects the industry because if the price of oil increased transport costs will be more expensive and therefore affect the final consumer.
European Economic Community (ECC) policies
The European Economic Community was an international organization that now makes part of the European Union. The European Union is a group of European countries that participates in the world economy as one economic unit and operates under one official currency, the euro. The EU's goal is to create a barrier-free trade zone and to enhance economic wealth by creating more efficiency within its marketplace.
This variable does not affect our organization because the principal objective of the UE is to eliminate the barriers with-in those countries in order to participate in the global economy as a one unit. May be some polices that could emerge, affect our suppliers; but, directly this variable does not affect us.
As Spain is the first place from which Colombia imports books, protectionist policies towards non EU members could represent a threat but usually countries limit imports rather than exports so its unlikely that our industry will be affected. (59)
Gross domestic product trend
Potential gross domestic product (GDP) is defined in the OECD’s Economic Outlook publication as the level of output that an economy can produce at a constant inflation rate. The trend of this variable in Colombia is very stable and had been growing slowly as we can see in a graphic of the World Development Indicators and in the 2014 the Colombia’s GDP was $641.532 millions.
This variable affects our market because it shows how is changing our economic sector and what percentage of the GDP it represents; and, knowing that we can realize the importance of our sector in a certain period of time in Colombia’s economy. For example, trade represented the 5,1% of the GDP in the last quarter of last year, according to DANE’s report. (56)
Level of disposable Income.
9The amount of money that households have available for spending and saving after income taxes have been accounted for. Disposable personal income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy (44)
Colombia has evidenced a growth of the level of disposable income. Since 2004 until now the growth of consumption has been increasing notably although the available income does not overcome the average. This variable benefits the industry due to the fact that the people are not going to have disadvantages in buying the books because this is an obligatory product inside colleges and universities, this will facilitate the consumption of the product, since it is necessary to buy them (32)
Value of The Dollar in World Markets:
The growth of the dollar from 1999 has been in a substantial way, spending for the average of 2000 thousand weight, between 2003 and 2004 the exchange rate of the currency was $2968,88 COP weight coming to the highest point of the revaluetion of the dollar opposite to the Colombian weight, Nowadays the dollar continues being the strongest currency on the market, to this comparison of the COP 0,0004 points below of the dollar doing that the weight devalúe, this devaluation of the Colombian currency us does not benefit due to the fact that the prices of import are high and of every step doing that the prices of the products like the books is increased. (29)
The Dollar is the strongest currency a Global Level As well , the currency used in the Largest Number of Transactions of a Global Level , as a runner appreciation and depreciation affects directly or indirectly economies Fashion World
Income Differences By Region and Consumer Groups
According to the EIG the region that more spends with regard to his income of the busy ones (persons who have work) is Medellin exceeding the revenue of the above mentioned region that comes even 0,55, the region that him continues is Bogota with 0,57 in his average expense of the homes, then it follows Armenia and so on. This is a variable that benefits us industry totally because we can check like in the region where the business is going to be opened, is every time in growth doing so the people spend more in his needs, on the other hand the group of consumption of books nowadays this one segmented principally by the population from 12 to 25 years with 61,3 %, whereas in the reading magazine, the major percentage the population obtained it from 26 to 40 years with 54,9 %.
As for the average of well-read books one emphasizes that of the 12-year-old population and more that it can read and write and that he read ' books in the last twelve months, the average is 4 books for person, whereas the average of books read for the total of 12-year-old persons and more it is 2 books. Doing that our industry has a good opportunity due to the fact that it is in the range of the people who more read books nowadays.(31)
Tax Rates
Exist five rules of taxes in the e-commerce:
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The competition between authorities and fiscal legislations is world, which also demands that the regulations are established worldwide. OMC
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The power happens from the administration to the citizen, who has the possibility of choosing the fiscal regime that more he likes.
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The taxes not only concern the economic wealth and only they are paid in monetary form. In fact the rates that burden the traffic in the network and were paying in the shape of time of connection.
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The annual declaration was finishing also and they were paying the taxes as it happens with the IVA.
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The new taxes will allow also the appearance of new virtual collectors.
According to the article 91 of the law 633/00 he says that all the web pages and Internet sites of Colombian origin that operate in the Internet and which economic activity should be of character commercial, financially or of provision of services, will have to register in the mercantile record and supply to the direction of taxes and national customs (DIAN) the information of economic transactions in the terms that this entity it needs.
Also the taxes that the company must fulfill obligatory for his functioning are the IVA, Taxes to the Financial Transactions, The taxes of industry and trade. Which handle a percentage of 16 %, 04%1,4 % respectively.(42)
Money market rates
Availability of credit
The availability of credit depends on the bank´s, each bank establish a “country limit”. Depending on the basic product and the total value of the garantee that an individual borrower can provide. Non promising assets are not considerated and each bank always put a limit to each individual borrower, also they should appreciate that its important for banks to gain market share.
The cost of the credit is based on the average interest rate on loans, plus the risk of the trends and the specific risks of the commerce.
According to Banco de La Republica, the general situation of the credit during the second quarter of the year the financial intermediares perceived an increase in credit demand in all fields.
To conclude, this influence directly in our organization, with a big availability of credit, we can buy more books to offer to our customers, and also, our customers could spend more in our products. Also we have to remember that we buy the books to big publishers and importers, so the more availability of credit our country got, the more merchandise the importers and the publishers can offer to us.
Fiscal policies
“Reflecting softer demand growth, the central bank had kept the policy rate constant at 3.25 percent between April 2013 and April 2014. Since then, the central bank increased the policy rate by 50 basis points in response to a pickup in growth starting during the second half of 2013, and the convergence of inflationary expectations towards the mid-point of the inflation target range. The central government fiscal deficit of 2.4 percent of GDP in 2013 was in line with the structural fiscal rule. At the same time, the reallocation of central government spending to provide targeted stimulus (e.g., through mortgage interest subsidies) and the use of royalties for investment spending by sub-national governments supported growth in 2013. The authorities have used the exchange rate as a shock absorber during the recent period of increased market volatility, while continuing to accumulate reserves despite the ensuing depreciation. “ (International Monetary Fund, IMF Country Report No. 14/172, June 2014.)
Obviously, the fiscal policies influence on all comercial organizations, because they adjust the spending levels and tax rates to monitor and influence a nation´s economy.
Demands shifts for different categories of good and services
“The demand curve is a graphical representation of an economic agent's willingness to purchase a given quantity of a good or service at a specific price based on preferences, income, and other prevailing factors at a given point in time. Demand curves in combination with supply curves, which depict the price to quantity relationship of producers, are a representation of the goods and services market. Where the two curves intersect is market equilibrium, the price to quantity relationship where demand and supply are equal."
(Boundless. “Changes in Demand and Shifts in the Demand Curve.” 2014)
This got an important impact on our organization, with this we can analyze when there is changes like the price of the product or the costumer preferences, in order that if our organization income grows, then our demand for good will also increase. (Econport. 2006)
Export of labor and capital
The labor and capital from Colombia has increased, in the year 2012 the exportation of labor and capital from Colombia had a record of 8.020 million of dollars of direct investment it is shows like and impact in the exterior . This is a good variable for each sector specially for the industrial because it increase the investment and otherwise lead a growing in the international economy. Industries must have an international strategy to be able to invest in other international markets and thus make huge profits.
Coalition in Lesser developed countries
Alliances and decisions taken by LDC
Lesser developed countries are mostly african countries. Colombia is not listed as one and colombian trade with them in terms of books and editorial content is rather insignificant, therefore, it is a factor that will not affect our industry.(47)