The Economy of Los Angeles Metropolitan Area and the Company Fuhu Inc - Case Study Example

The Economy of Los Angeles Metropolitan Area & the Company Fuhu Inc of the of the Number The Economy of Los Angeles Metropolitan Area & The Company Fuhu Inc. 1. Introduction Los Angeles is the second largest city in the United States. It is located at the southern portion of the state of California. The Los Angeles metropolitan area is considered to be the cultural center of the American entertainment industry. As per the statistics of 2014, the metropolitan area of Los Angeles is the 2nd largest in the United States and 13th largest across world. According to the census report of 2010, it is the most populated city of the United States (Hermanson 137). 2. Economy of Los Angeles Metropolitan Area The economy of the Los Angeles metropolitan area used to hold almost negligible significance in the world economy. Rapid transformation keeping at pace with the continuous innovation and technological progression has enabled the metropolitan to evolve as the third largest metropolitan economy in the world with Gross Domestic Products (GDP) as much as $700 billion (Hermanson 123). Los Angeles has always been considered as the center of newly innovative ideas and incorporation of such ideas into the business process. The inclination of the economy to give birth to the most creative and innovative brands of the world further strengthens the rationale behind entitling the economy as the global hub of creativity and innovation (“Key Industries”). The main considerations of the company can be attributed by the following factors. The GDP of the metropolitan area is greater than some of the large countries of the world such as Belgium, Saudi Arabia and Taiwan. About 40% of all the containerized goods entering the U.S. pass through metropolitan of Los Angeles, the largest seaport in the Western Hemisphere. It is the largest manufacturing center in the U.S., with more manufacturing jobs than the state of Michigan (Katz & Bradley 78). In fact, in terms of innovation and creativity, the province has shown leading initiatives in the areas of aerospace, clean technology, entertainment, fashion, healthcare and tourism. Such initiatives can be highlighted as the metropolitan’s capability of inventing Space Shuttle, Mars Rover etc. The foundation of the economy of the metropolitan area of Los Angeles is the entertainment industry. The economy aims to generate maximum revenue from television, music and motion picture related business. The Hollywood, which is the center of world entertainment industry, puts a huge influence on the city’s economy (“Key Industries”). Apart from that, the city also concentrates on shipping business and international trade in order to boost up the economic growth. The Port of Los Angeles is considered to be the busiest business port of the United States. Along with these, technology, petroleum, tourism and fashion textile industry also enriches the widely diversified economy to a great extent. The products and services produced in Los Angeles Metropolitan area contribute as much as $831 billion (“Key Industries”). Except for all these sectors, aerospace services, manufacturing of consumer products, biomedical services and most importantly, tourism, also exemplifies the inclusion of passion, innovation and expertise within the economy that has helped the metropolitan to prosper with an exponential growth rate. Such huge contribution makes the metropolitan area the third largest economic center of the world. Imports and exports constitute for a large part of aggregate revenue of the province. Based on the revenue derived from the coastal business contributes one fifth of the total revenue of the economy. Top trading partner of the city is China that accounts for $68.8 billion of international trade. Apart from China, countries such as Japan, Korea and Thailand also enriched the economy since 2004. Such long term relationship with the international trading partners has largely supported the domestic manufacturing and retail business as well as created the provision for huge employment. Steady and balanced economic condition in the Los Angeles Metropolitan has made the province responsible for 316,000 jobs in 2014 (“Key Industries”). Understanding the sound economic condition, many companies have established and expanded their business in order to capture the opportunities lying in this resourceful economy. The research paper will concentrate on investigating the reason behind a number of rising firms to start business in Los Angeles metropolitan area. For the purpose of analysis, a consumer products and services company, Fuhu Inc. will be examined. 3. Company Profile: Fuhu Inc. Fuhu Inc. has been operating in El Segundo, under Los Angeles metropolitan area since 2008. The main business of the company concentrates on designing consumer goods, especially for children. Apart from Los Angeles, US, the company has also expanded its business in various Asian countries such as Hong Kong, China, Japan and Denver etc. within the short span of time (“Learn. Play. Grow. Experiences for Life”). In fact, the emerging company aspires to grow on continuous basis and through generations depending upon the basis of its valued characteristics through nurturing the existing stipulations and complying with technological and systems changes. As the company is engaged into business that develops products and solutions for children, Fuhu Inc. concentrates on extensive research for identifying what is best for children. Therefore, accordingly design products that are relevant in terms of enhancing knowledge base and at the same time rewarding for the children as they derive extreme happiness from playing with such unique instruments. In summation, Fuhu Inc. strives to invent products that are equally entertaining, educational and secured for the children and will facilitate intellectual developments of children as well. Huge acceptance of the company and its products has enabled this newly established company to experience an enhancement in revenue from $123,000 million in 2010 to $195.6 million in 2013. The capability of Fuhu Inc. to achieve a growth of 158% in such a short period of time can be attributed to the 227 employee base of the company, whose excellent business skills and inclination towards innovation has fetched the company the award of America’s Most Promising Company in 2014 from Forbes Magazine and the title of fastest growing American company from Inc. 5000 (“Learn. Play. Grow. Experiences for Life”). Recently, the company is considered to be the most innovative as it has come up with two most interesting elements for children. Nabi is an android based tablet that facilitates the kids to enjoy a firsthand experience of hardware and software services. The tablet is not only used as a gaming instrument for the children but also aides them with an idea of using technologies and accessories associated with it. According to the contemporary parents, gazette is the best way of engaging children and at the same time it helps them in gaining knowledge on proper utilization of technologies (“Learn. Play. Grow. Experiences for Life”). Another important invention of Fuhu Inc. is an Adobe air application that enables children to access internet in an environment controlled by their parents. This has also received massive response from the consumers. The system has enabled the children to learn how to use internet effectively without getting distracted by the negative impacts of this technological consideration. Moreover, as the networking system is fully controlled by the parents of the companies, it eliminates all the possibilities of wrong utilization of the system by the children. Fuhu Inc. distributes its products through various retail channels throughout the US and abroad markets. All such efforts to ensure innovation and creativity in business as well as in products and services have made the company the fastest growing private companies in the United States (“Learn. Play. Grow. Experiences for Life”). 4. Reason behind Fuhu Inc. to Establish Business in Los Angeles Metropolitan Area From the analysis of prevailing economic condition of Los Angeles Metropolitan Area, it is evident that the strong economic considerations in this particular region have facilitated many companies to establish business and operate successfully in this region. Fuhu Inc. is not an exception. The company took advantage of the scope for research and innovation and condition of the economic boom during the period of 2000 to 2007 and capitalized the opportunity in establishing business and accelerating growth (Rieff 179). In the next segment, the reasons behind Fuhu Inc. to institute and expand business in this region will be investigated. 4.1. Taking the Advantage of Economic Boom during 2000-2007 Though according to the contemporary economics, Los Angeles metropolitan area has lost its legacy of a dominant city, during the first half of 21st century, especially between 2000 and 2007, the region was best known for its power and profoundness. Before the crisis period, the economy of Los Angeles reflected the sound economic condition of the United States as a whole. In fact, though the US economy started experiencing various thrashes in terms of terrorist attack and initiation of economic downturn, the economy of Los Angeles metropolitan area was not affected by such pre-conditions of economic crisis. This is the main reason that had attracted many companies including Fuhu Inc. to establish and expand business in this region. Initially, the industry was highly dependent on the music and entertainment industry and all other industries such as manufacturing and consumer goods started expanding, relying on this primary industry. Gradually, all such sub-industries also started growing independently and also started contributing to the metropolitan economy to provide it a proper shape. In this way, the economy accelerated its rate of progression and created huge job opportunities for the individuals in this region. Figure 1: Incrementing Employment Rate in Los Angeles Metropolitan Area during 2000-2007 (“Key Industries”) In addition to such economic expansion, the youth and educated population of the region created a favorable trend of infusing innovative into the industrial practices. This has also influenced innovative companies for consumer products and solutions such as Fuhu Inc to establish business in this region so that their business can be enriched by such innovative practices prevailing in this region and excel in business (“Key Industries”). As the industry culture started expanding in Los Angeles metropolitan area, the economy experienced a rapid decline in unemployment rate combined with housing boom. The individuals engaged in the manufacturing and other sectors got an access to cheap housing loan. As the 21st century in the US economy is characterized by housing boom, benefits of such economic boom also touched the individuals in the Los Angeles to a great extend. As the employment in the manufacturing sector and the mortgage loan boom started taking place simultaneously, naturally the standard of living of the citizen of Los Angeles metropolitan considerably increased. In such circumstances, it became easy for the companies like Fuhu Inc. to push their innovative products and services and make the solutions acceptable among the citizen (“Key Industries”). In this context, it should also be mentioned that during the period of 2000-2007, when the Los Angeles metropolitan economy has started reaping the benefits of economic boom, in other parts of the United States, the economy of most of the major provinces were suffering from various turmoil in terms of terrorist attack, stock market crash and busts in financial sectors which had created preconditions for great recession and financial crisis of 2008. The US economy lost 3.5 million jobs in the manufacturing sector between the mentioned periods of time. However, examining the economic occurrences in Los Angeles metropolitan area in the same period, the economists have revealed that rather than increasing the unemployment and depressing wage rate for unskilled workers, in this particular economy, employment created by the housing boom offset the decline caused by the loss in manufacturing sector. In such economic condition, the new establishments such as Fuhu Inc. had very less options for operating business rather than Los Angeles (“Key Industries”). In fact, the nature of the industries possessed by this regions such as software, media and communications, energy etc. were high skilled intensive and innovation oriented, rather than involving low-skilled labor force. The size of workforce tends to be small but qualitative due to high emphasis on research and innovations which is redundant in Los Angeles region. Examining all such factors, Fuhu Inc. considered establishing business in this region in 2008. 4.2. The Creative Economy Before entering the business, James Mitchell, the president of Fuhu Inc. has done considerable market research in order to confirm whether it would be profitable for him to start the company in Los Angeles metropolitan area. Since inception, the company’s mission is to evolve as the leading designer and creator of thoughtful consumer products and services for children and distribute such products through collaboration with the big and branded retailer in the world (“Learn. Play. Grow. Experiences for Life”). Therefore, it was utmost important for the company to review the scale of economy to ensure whether they could gain the scope of realizing these business objectives, if operating in this particular region. The research of Fuhu Inc. has revealed that the creative industry of Los Angeles is one of the most profound industries in the United States. Relying on this industry only, the metropolitan area of Los Angeles has strengthened its position in the regional economy. In fact, as per the statistics, the creative industry of Los Angeles metropolitan area has created 640,000 job opportunities in this region. Whereas, the rate of recent job growth is 1.18% in the United States, the region outnumbered the country with a rate of job growth of 2.50% in recent times (Rieff 145). Such huge job opportunities definitely reflect the resource and opportunities lying in the industry segment for any company to operate successfully. In fact, the ability of the industry to procure $200 billion of revenue also ensures that the industry is not capitalizing the opportunities of the economy only but returning the favor in terms of revenue generation as well. Fuhu Inc. has also recognized that creative industry of the Los Angeles metropolitan area has gone way beyond from its huge dependability on the film and entertainment segment and has diversified its channels of activities through encompassing a wide range of creative businesses including fashion, shipping, aircrafts, technologies and consumers goods. Though these industry practices are quite common in any economies, the inclination of the industry players towards including innovative ideas on continuous basis has made the region the creative capital of United States (Katz & Bradley 49). ` Considering the demographic status of the region, it has also been experienced that the Los Angeles metropolitan area is characterized by young population. The population between the age group of 21 to 45 constitutes for approximately 38.48% of inhabitants. This has proven the company the rationale behind such proclivity of the industry player towards innovation and it has also ensured Fuhu Inc. regarding steady supply of human resources from this particular region only (Hermanson 144). In addition, a trend has been noticed in the creative industry in Los Angeles metropolitan area to capture a unique business plan in a wide-practiced industry and create synergy through adding additional values to the consumer group. For example, there are a large number of internationally-renowned fashion and music houses and technological hubs in the industry. However, the evolution of merchandising Disney products and electric guitar was originated in this particular region. Considering the case of Fuhu Inc. as well, there are large number of corporate operating worldwide in the segment of manufacturing standard consumer goods and services as well as technological products. However, very few companies have shown their in designing such products and solutions for children only. Fuhu Inc. is one of such companies that have gained considerable customer response for creating such technology oriented consumer products, especially for children. Therefore, examining the economic condition of Los Angeles metropolitan area and the creative industry in which Fuhu Inc. was going to operate, it became prominent that the economic scenario is very much favorable for the company to operate in this region. In fact, both the economy and the company can be enriched themselves respectively through procuring resources and producing final solutions in exchange (“Learn. Play. Grow. Experiences for Life”). Considering all such reasonable factors, Fuhu Inc. chose to start its business operations in Los Angeles metropolitan area. 5. Summary The economy of the Los Angeles metropolitan area is one of the capital and innovation enriched region in the world. Though the economy could not strike a mark in the past, in the contemporary era, the metropolitan area of Los Angeles have shown market improvement in terms of economic expansion, rapid job creation and development of social strata. Naturally, even in the short period of time, many companies in the emerging industries have been exposed to sharp growth, taking the opportunities of superior economic conditions. Considering the economic prevalence in Los Angeles metropolitan area, when the whole US economy was experiencing gradual decline due to various economic and financial occurrences, this particular economy of Los Angeles evolved as a hub for innovative industries. Therefore, emerging companies such as Fuhu Inc. did not have much choice for establishing their business in other regions of the United States. Moreover, as the company is largely innovation oriented, it could relate to the industry practices in Los Angeles metropolitan area. All such factors influenced Fuhu Inc. to establish business in this particular region of the United States. Works Cited “ Learn. Play. Grow. Experiences for Life.” Fuhu Inc. Web. 2 June 2015. “Key Industries”. Los Angeles Country. LAEDC., 2015. Web. 2 June 2015. Hermanson, Dave. The Mobilgas Economy Run: A History of the Long Distance Fuel Efficiency Competition. California: McFarland & Company, 2014. Print. Katz, Bruce & Jennifer Bradley. The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy. Washington DC: Brookings Institution Press, 2013. Print. Rieff, David. Los Angeles. New York: Simon and Schuster, 2013. Print. Read More