Introduction
Economic, political, and social processes in society can have a significant impact on how the financial and business sphere develops in the country. With various major shocks, crises, or vice versa, great discoveries can become a significant test for the country’s economy. Their influence can have a negative effect on some areas of activity, which will further lead to their decline and recession. In addition, historical events have a significant impact on the scope of business and must be taken into account. Thus, studying all factors influencing economic activities on business and the economy is necessary to understand how risks can be predicted in the future.
Economic Events & Activity Analysis
The Oil Embargo of 1973
Some events may have an impact on the economic balance in the United States, thus shaking the stability of the financial system and the well-being of citizens. One of the significant events that can be considered in this context is the oil embargo of 1973, provoked by a substantial rise in prices (Ortiz, 2020). This geopolitical event has affected many sectors, but supply chains have been one of the most brutal hits.
Many enterprises were significantly dependent on regular supplies of oil. Accordingly, their functioning was directly affected by an adequate level of supply of this resource. Restricted access to oil has meant an increase in production costs for many businesses, affecting their ability to ship and manufacture their goods. The transport sector was particularly affected in this situation, as fuel played a significant role in its operation.
As a result of rising oil prices, production costs have risen significantly. To profit, enterprises began to raise prices, thus passing on these higher production costs to consumers. Such actions led to a decreased ability to buy a product from people, followed by a natural decrease in demand for the services and goods provided (Ortiz, 2020). This decrease in demand impacted the economy and subsequently led to a slowdown in economic activity.
The economic situation was subject to fluctuations due to sharp jumps in oil prices. According to Chart 1, such developments have caused a number of declines in the ability of people to maintain their well-being and economic efficiency. This was due to the fact that the balance between supply and demand has shifted sharply towards the latter (Perifanis, 2019). This situation led to a clear imbalance between supply and demand, which in turn caused a period of stagflation. It is characterized by a combination of rising unemployment and extremely high inflation.
Sharp Employment Drops in 2007-2008
Another event that led to a significant decline in the financial sector’s capacity was a sharp drop in employment. This was due to the bursting of the housing bubble in 2006. This event led to the Great Recession of 2007 and 2008 (Perifanis, 2019). This event heavily impacted supply and demand as the housing market suffered significant shock.
Unsustainable growth in the housing market affected prices that many could not pay due to declining economic stability. When the bubble burst, housing prices fell significantly, which led to a loss of investor interest in this sector. The associated construction industry has also been hit hard by being closely associated with housing. This, in turn, has led to a series of budget cuts and layoffs of many employees in these areas.
The economic imbalance developed due to the reduction in employment and the previous reasons for the decrease in demand. Consumers have been forced to cut back on their spending, partly because of windfall losses in income. Further continuation of the crisis trend contributed to reduced hiring and investment, which led to a negative feedback loop that upset the balance.
Because of this, a recession began, forcing the government to intervene in the situation to make several economic decisions (Perifanis, 2019). They were subject to policy measures that loosened monetary policy and helped stimulate fiscal aspects to stabilize the economy. Recovery in this sector started slowly. However, it led to an improvement in the general condition, which began due to the housing crisis.
Economic Concentration Evaluation
Key Drivers in the Development of Silicon Valley
The economic concentration of the development of the Silicon Valley Technology hub was determined by some factors that contributed to the improvement of this area. One of the driving forces behind the development of Silicon Valley has been competition and pricing. Many technology companies have begun active recruitment to start a more active phase of evolution in this direction.
Competition has contributed to higher pricing in the technology segment. However, with the development of many companies in Silicon Valley, pricing has changed significantly as firms need to remain competitive (Gordon & Kourtit, 2020). Their products and services had to become much more accessible to begin to develop the cultural development of the technology sector.
Impact of Economic Concentration on the Supply Chain
The economic concentration in the chosen area affected the supply chain significantly. Technology companies in the same region have begun actively developing many new, unique products and services. The emergence of new products led to new requirements for delivery and logistics, for which it was necessary to begin developing and improving supply chains (Jones & Sudlow, 2022).
Global partnership networks among several companies have led to the development and further improvement of complex relationships across industries. The complex technological inventions in Silicon Valley have necessitated the development of an extensive supply chain without which companies could not operate. Components such as microchips, batteries, transistors, and microcircuits were essential for firms operating in the valley. Accordingly, due to their development, a significant modernization of supply chains in the region began, which lasted throughout the world (Jones & Sudlow, 2022). This is explained by the fact that spare parts for microelectronics were manufactured in different countries and required the fastest possible delivery to the United States.
Critical Factors in Economic Concentration
Entrepreneurship
Entrepreneurship became the most critical factor of production in determining the economic concentration of the chosen area. This value determined the entire economic concept of Silicon Valley, explaining that all companies needed to strengthen their positions. The visionary decisions of various entrepreneurs such as Steve Jobs and Bill Gates significantly impacted how the technology industry developed in Silicon Valley (Jones & Sudlow, 2022).
The technological advantage was as significant as good leadership was essential. It could ensure that companies accept the most advantageous offers and act in such a way as to gain as much profit as possible. Risk management and practical assessment of the future position of companies have helped many to thrive over several decades.
Labor
Labor is the second most crucial factor of production. The constant hard work of many designers, engineers, and architects began to turn Silicon Valley into the technology hub it is today. The concentration of graduates from the country’s leading universities contributed to the fact that in the region under consideration, the intensive development of all areas of innovation and trade began (Gordon & Kourtit, 2020). Thus, labor is the second most crucial aspect of production, and it was established in Silicon Valley during its active formation.
Capital
The third factor, less significant than the previous two, is capital, which has led to a more rapid improvement in existing technologies. In addition, the active involvement of investors played an essential role in obtaining the necessary resources to support the projects that Silicon Valley specialists planned to implement. With this aspect, all the efforts made by corporate and scientific figures could achieve that success due to the rawness of technology (Stephens et al., 2019). Financial flows helped in the production of those that were used to attract qualified specialists and purchase the necessary equipment for technological developments.
Location
The last factor in value was the location, which justified many offices and development centers. Space is essential for gathering a large number of people in one place and setting goals for them to achieve (Stephens et al., 2019). Due to rising real estate prices and the region’s expansion for more efficient communication, land has played the least significant role in the success of industrial development.
Potential Future Changes in the Area of Economic Concentration
For the selected area of economic concentration, some relevant changes may occur in the future. One of them is the diversification of sectors, which will allow technology integration in different areas of business and entrepreneurship. Global collaboration is also a change that could significantly impact Silicon Valley (Jones & Sudlow, 2022). Interaction with companies around the world can lead to more significant successes in terms of technological development in the future. Regulation from the legal side can also intervene in the field of microelectronics to innovate to varying degrees of usefulness.
Conclusion
Analyzing the various developments that have taken place in the business sector at different times can help to determine which direction development will take in the future. Thus, by studying what factors played a decisive role in the formation of certain areas of business, one can understand what needs to be done to make the same rapid development possible in the future. Learning some entrepreneurial patterns can help companies grow successfully if they adapt their strategies to changing conditions.
References
Gordon, P., & Kourtit, K. (2020). Agglomeration and clusters near and far for regional development: A critical assessment. Regional Science Policy & Practice, 12(3), 387-396. Web.
Jones, H., & Sudlow, B. (2022). A contemporary history of Silicon Valley as global heterotopia: Silicon Valley metaphors in the French news media. Globalizations, 19(7), 1122-1136. Web.
Ortiz, R. J. (2020). Oil-fueled accumulation in late capitalism: Energy, uneven development, and climate crisis. Critical Historical Studies, 7(2), 205-240. Web.
Perifanis, T. (2019). Detecting west Texas intermediate (WTI) prices’ bubble periods. Energies, 12(14), 2649. Web.
Stephens, B., Butler, J. S., Garg, R., & Gibson, D. V. (2019). Austin, Boston, Silicon Valley, and New York: Case studies in the location choices of entrepreneurs in maintaining the Technopolis. Technological Forecasting and Social Change, 146, 267-280. Web.