Economic Advisory

What Is the Difference Between Economic Advisory and Other Types of Consulting?

At times there is confusion between economic advisory and financial, organizational and/or business consulting.
Economic advisory deals with the basis or essence of economic viability and reflects on the other domains.
Take, for example, a business that wishes to export and conducts economic viability calculations for the move assuming a certain exchange rate. Financial consulting, as distinct from the viability calculations that fall within the economic advisory category, would deal with the behavior of exchange rates and with assessing the impact on the sales or purchase amounts, as relevant.
In other words, while economic advisory arrives at the viability point under given internal or external conditions, financial consulting deals with the monetary effects of the conditions dictated by the market and how they will affect those calculations.
At times, within the same viability-assessment advisory, financial domains are also touched upon, but in a separate section.
Click here to read more about financial consulting >>

What Topics Does Economic Advisory Address?

There are no hard-and-fast rules regarding a specific field, but it is worth understanding that economic advisory deals mainly with reaching optimal points at which operational efficiency and the final bottom line can be maximized.
It is not enough to calculate from an accounting standpoint whether it is worthwhile to engage in a certain sector; rather, one must gather all the variables relevant to the assessment, such as:
The effects of competitors entering the market and how they may impact operational efficiency, the flow chart, analysis of the final bottom line, calculating flow-chart costs in terms of manpower, equipment, and optimal integration among all the variables.
Take, for example, a plant that manufactures products for the metal industry using electronic automation.
The plant managers wish to consider introducing a new, more advanced machine into the plant in order to increase the quantity produced and, as a result, sales.
In this case, the economic advisor will build the business's supply and demand curve according to product categories, and will even attempt to examine the demand and supply of the entire market.
Increasing the quantity produced will increase supply, and the question that arises is whether the improved quality will enhance the plant's positioning at the expense of an anticipated price decline resulting from the increased supply, and/or at the competitors' expense, and/or whether prices will drop, and/or whether the company's market share will rise.
This is a question that requires examining economic models at both the market and intra-organizational levels.

Finally, the relevant research questions will be answered, namely: is the plant prepared to absorb an existing machine within the current operational and organizational structure, and/or does it require changes in order to reach optimum, and does increasing supply in the new format increase sales and/or prevent a decline in the quantity of products demanded.

This is just one example, illustrating the role of the economic advisor who builds appropriate models for the questions at hand.
A financial advisor will examine the cash-flow impact of this move, whereas the business consultant, will examine at the market level what, in their estimation, the market's response to the company's move will be.
Click here for ten tips on cash flow management

Under What Circumstances Should You Hire an Economic Advisor?

For questions that require performing relatively complex calculations spanning several domains, sometimes related to engineering fields, in order to calculate operational optimum and that of the final bottom line.
In economics, a common concept is the calculation of marginal cost or marginal profit.
These variables are dynamic and include the business consultant's part so that it will be possible to draw conclusions for the financial domain, and at times organizational consultants are also enlisted in order to carry out the required organizational moves.

Not in every case does economic advisory resemble the work of an industrial and management engineer on the production floor; but, in contrast, economic advisory analyzes extra-organizational variables that are taken into account in the economic models.
There are cases in which industrial and management engineers work jointly with economic advisors and organizational consultants, for the reasons noted above.

Does the Advisor's Specialization in a Specific Sector Matter?

As a rule, it is preferable for every advisor to be familiar with the sector in which they advise for reasons of time savings; but in the case of economic advisory, since the issues discussed are more related to the world of economics, which requires a different kind of expertise, in the case of an advisor specializing in the field of economics, a greater time margin can be allowed in order to raise the quality of the conclusions.

Additional Articles