International Commodities Index - Article Example

 International Commodities Index The products available to the customers in the marketplace are impacted by the events that occur in different industries during various stages of their supply chain. Some of the stages which influence the price, availability and volume of production are the manufacturing, distribution, and the point of sales location. The power tools industry follows the same basic business principles as other industries. The focus of this discussion is to analyze the different industries that impact the power tool segment and the metrics that provide insight on the trends within this industry.

The supply chain of most products in initiated in the production or manufacturing stage. During this stage engineers and managers make purchase orders to obtain key raw materials needed to create the goods or services. In the power tool industry two essential raw materials are metals and plastics. Plastics are a raw material which is considered a petroleum derivative. Crude oil and metals are categorized as commodities in the stock market. Their prices are very volatile and fluctuations in price occurred on a daily basis.

Good indicators which analyst in the power tool industry must pay close attention to are commodity price indexes. For example the Rogers International Commodity Index (RICI) aims to be an effective indicator of the price of raw material in the United States and around the world (Rogersrawmaterials, 2007). When the prices go down on these materials it is good idea to realize bulk purchases. Another strategy the can be utilize to lock the price of the commodity is to acquire future contracts. A future contract obligates a trader to sell an asset at an agreed upon price at some point in the future (Bodie & Kane & Marcus, 2002, p.982). Power pools are products which need energy in order to function.

The energy industry is another key industry with has a great impact on the power tool industry. The designers of power tools must consider what type of platform will provide energy into the system. Two possible alternatives are battery and electricity power tools. Trends in the capacity and prices of batteries must be considered since the overall cost of the unit rises after the purchase of the batteries. If the power tools depends on electricity the executives of the companies could analyze trends in the electricity market by utilizing regression analyzes in which the monthly price of electricity over the last 10-20 years in particular country or city are inputted into the equation to determine price trends.

A rising price of electricity could have an adverse effect in the total sales of power tools. There are other indicators of economic activity which can provide great insight for manager of power tools manufacturers, distributors and retailers. The overall construction activity in a region is an important indicator for this industry. The more construction that occurs within any region has a direct correlation with the amount of power tool sales. Power tools are essential equipment that constructors demand in order to complete their tasks.

Another metric which influences sales especially at the retail level is the prime rate. The interest prime rate affects the types of credit card offers retail stores can offer their customers. Lower interest will increase overall retail sales, which includes sales of power tools. Market analysts have to consider the different tendencies occurring within an economy because they impact business activity. The power tool industry is impacted by factors such as commodity prices, construction activity, interest rates, and tendencies in the energy industry.

Information about the market provide analyst with data to forecast trends within an industry.ReferencesRogersrawmaterials (2007). Rogers International Commodities Index. Retrieved August 3, 2007 from http://www.rogersrawmaterials.com/ Bodie, Z , Kane, A. , Marcus, A. (2002). Investments (5th ed.). New York: McGraw Hill Companies.