Weather can have a massive affect on business, whether local or global. In such a global economy where production chains stretch half way around the world, many international companies are now even investing in software to predict and monitor the weather worldwide.
The precise effect of the weather often depends on the nature of the company. The sale of seasonal goods, for example skiing equipment, have quite obvious trends in sale. Yet, customer purchasing habits are as dependant on weather in other industries too: hot weather leads to the purchase of iced drinks and cold sandwiches and salads from company’s such as Starbucks or Costa, where as cold weather sees an increase in warm food and hot drinks.
The weather is unpredictable all over the world – just because a particular product sells well at a certain time this year, doesn’t mean it will do the same next year. Managing and financial directors need to be aware of the difference between real business growth and weather conditional performance.
But what if the weather in a different location to the main business is extreme? Again this depends on the nature of the industry. Severe weather, whether in the form of a storm, flood, drought, hurricane or even blizzard can be disastrous. With much of our clothing, food and other goods all imported from abroad, the global weather system is just as important as our local weather. Severe weather could destroy crops, prevent employees from working, damage property or machines and break the logistics chain. For example, the US winter of 2014, hindered sales and production of vehicles for Ford, General Motors and Toyota.
It’s important to remember though that weather has different impacts on different industries. An extended period of no rainfall can damage crops, but it could allow construction projects to continue with no problems or even holiday tourism to increase. Similarly snowstorms could cause the closure roads and an increase in heating costs, but increase the revenue from ski resorts. The weather is vastly important to the fluctuations of our global economy and it’s important that companies factor this into their business strategies, especially since it’s a factor well out of our control.