Predicting Corporate Behavior: Why Companies Relocate or Expand

by Dean Whittaker, CEcD, President, Whittaker Associates, Inc.

What do Greenville, Michigan; Morganton, North Carolina; Tipton, Indiana; Dublin, Georgia; and Lawton, Oklahoma have in common? Through their leaders’ vision and positive attitude, these communities are transforming their local economies after a significant economic dislocation by working to retain local companies that might otherwise move and by attracting outside companies willing to relocate to their areas.

How does one go about predicting what companies are going to do? A few core principles seem to apply. The first is that company leaders behave in a semi-logical manner and respond predictably to changes in their internal or external environments. By that, I mean that we human corporate decision-makers are creatures of habit and respond to certain stimuli in predictable ways.

The second core principle is that many business events are cyclical. If one knows the pattern, one can predict what will occur next. For example, we believe that the seasons will follow each other: summer into fall, fall into winter, winter into spring and spring into summer (unless of course you live in the tropics – then all bets are off). The third core principle is that company leaders are event-driven. Their decisions are the product of their internal and external environments. The events taking place in their business environment and within their organizations shape their behavior.

Companies go through the same cycle as most living things. Each one sprouts as an early start-up, grows (expands/relocates), becomes mature, and eventually ceases to exist through acquisition, merger or bankruptcy. Products and services are also cyclical in nature. A new, innovative product captures our attention, gets adopted or applied, becomes a commodity (grows old), and eventually is replaced by new and better technology.

Predicting corporate behavior is about understanding where a company is operating within its cycle. It is important to look at both the company and its product or service. Companies can and do reinvent themselves and also create new products or services. In fact, the level and degree of innovation is one of the few sustainable competitive advantages companies have in the global marketplace.

Tools for research

What events lead up to a company’s decision to relocate or expand? We can predict the answer by taking a look at companies that have already made that move. By analyzing the events that have taken place in firms that have recently expanded or relocated, we find an interesting chain of events. All are based around the concept of change – some things have changed in a company’s external business environment, and some within the company. External events include changes in regulations, actions by competitors, shifts in technology, movement of key customers or suppliers, new competitors appearing on the scene, and many others. Internal predictive events include changes in ownership (merger and acquisition) and changes in leadership, especially a new chief executive officer. Other internal events include changes in employment and changes in sales.

Assuming that you are interested in predicting corporate behavior, where do you go to find out what events are taking place in a company’s business environment or inside the company? The answer depends to a degree on the company’s ownership. Information on publicly traded companies is much more readily available. Some of the free places to look include finance.google.com/finance or finance.yahoo.com.

I have found Google Alerts (www.google.com/alerts) to be a good tool to alert me when a company is undergoing a significant event. For example, I use the following search string to alert me to companies undergoing a change in leadership: new “chief financial officer” merger, acquisition. This algorithm can be modified to become increasingly accurate at generating the results I want by “notting out” the things I don’t want, using a “-” in front of the words that are contained in the false hits. I can also improve my results using a “~” in front of keywords to have Google search their synonyms.

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