Commercial Awareness: An Introduction
What is 'commercial awareness'?
Definition: Commercial awareness is an understanding of developments in the business world and why businesses behave in the way they do.
Foundational to this awareness are the following factors:
1. An understanding of how a business works, in terms of its customers/clients, supply chains, how it finances itself, how profit is made – how revenue is brought in and expenses are calculated.
2. How businesses function within their wider context: considering their sector, market trends, location (in a geo-political sense, namely in relation to issues such as taxation and legislation), and everything else that impacts businesses and the business world (such as recessions, pandemics, political instability etc).
Elaborating on the definition:
Commercial awareness is a way of thinking that relates to the knowledge of a business (their values, competitors, stakeholders – specifically customers and suppliers – challenges, strengths, and weaknesses) and its wider context.
It draws connections between current affairs (new trends, daily events, sector developments, sector setbacks), and analyses their impact from a profit-minded perspective. It is being able to analyse and understand situations from a business perspective, being aware of company, customer, and sector culture. It is being able to link your role to the wider organisation, and your organisation to its surrounding economic and political climate.
Why commercial awareness matters
Commercial awareness is an incredibly highly regarded skill by employers - possessing it will show your motivation, your interest, and your knowledge, for this awareness will display your capacity to make informed and educated decisions. The reason why commercial awareness is so valuable is because it allows employees of a business to make informed decisions that affect the organisation's value (in the form of their profitability) and success.
How you can develop your commercial awareness
This is not an exhaustive list. It covers a wide variety of methods (collated through a wide variety of sources) by which one may develop their commercial awareness. It is not necessary to cover each point; rather, a sustained combination of selected methods will better develop a sense of commercial awareness.
Work experience – internships or part-time-jobs - question actions and their motivations, thus familiarising yourself with commercial concepts - begin discussing their commercial implications.
Join university societies, as understanding their operational processes will prove useful in being able to relate with a business.
Develop your numeracy skills.
Theoretical development (listed by ascending degrees of active involvement):
For an easy and fun introduction to business principles, watch TV programmes like The Apprentice and Dragon’s Den.
Listen to relevant podcasts, such as Bright Network’s ‘Thinking Commercially’ with Chris Stoakes.
Sign up to receive news updates, such as the Lawyer Portal’s fortnightly commercial awareness e-newsletter.
Engage in sector-specific groups and discussions on LinkedIn, and reach out to other professionals in your sector.
Keeping up to date:
Follow related Twitter accounts and topics: organisational accounts, financial journalists, financial analysts, trading accounts, etc.
Follow industry news to obtain a current understanding of the global, regional, and national political and economic state: Read The Economist and the Financial Times. Look into more specific industry publications as you discover and focus your interests.
Follow market trends: Follow stock and share values of key organisations, obtaining a general sense of whether the stocks/shares of your relevant organisations are rising/falling. Large changes will be reported in the financial press. When doing analysis on a specific company you can look at both the sector specific tendency and the general market trend.
Follow sector developments: Overall awareness of the implications of larger market/economic and political trends, and new legislation. New cultural trends too, should be considered - for example – an increase in interest in renewable energy companies due to an increase in awareness of sustainable living (combined with a deregulation of electricity markets in some countries – the developments will all interact and overlap).
Knowledge of each industry is not in any way required. However, an understanding of 1-2 specific industries is valuable in any application process, as it will help you to understand the impact of market trends. This understanding can be then be demonstrated when writing a cover letter, or when answering questions such as: ‘why this firm?’; ‘what are some issues our firm is facing/could face?’; or even ‘tell us about a recent news story you are interested in’ (in which a connection between the news story mentioned and the firm’s activities is valued).
Once you have developed a general sense of commercial awareness and general knowledge of your chosen industry, alongside your current political and economic awareness, you must then conduct thorough research on an employer both preceding and during your application.
Look at recent company news and scour the website. Go beyond the website too, to look at discussion sites and opinion pieces (Financial Times, The Economist etc) to identify critiques. Understand the company’s current activities, read their recent publications, and look at their concluded, current, and upcoming projects. Additionally, take general note of corporate values, corporate goals, business strategy, organisational structure, what the company does, what sector it operates in, the issues facing and within that sector.
Analyse the company’s annual report to gain an understanding of the past financial year, use the financial data to understand its current performance and to identify the company’s objectives for the coming financial year.
Look at how the business (and its competitors) in that market are performing, note any important contracts/big transactions.
Be aware of market patterns in the past – this will help you to predict future trends.
Demonstrating your developed commercial awareness:
Demonstrating commercial awareness is not about stating facts or statistics, but about conscientiously showing how your knowledge has given you a greater understanding of the sector you are going into.
Understand that organisations are there to make money.
Be conscious of how economic and political trends can impact your sector and reflect on these influences.
Once you have read and analysed different points of view on a particular topic, develop your own. Being able to come to individual and informed conclusions will display the fact you have done your research – but beyond that – that you personally understand the industry.
Speculate about the future of the business – general and sector-specific news, competitors, current market trends, and political events/economic trends should all be taken into account.
Be able to understand how your role can affect business performance – allocate your time to the most profitable projects, and always consider how best to minimise costs and maximise profits. Adopt a business perspective and appreciate those basic (yet integral) concepts such as profit, income generation, and cost reduction.
You should demonstrate your commercial awareness when answering and asking interview questions, factoring in all of these commercial considerations. By showing you have taken the time to understand how the company functions, how it makes a profit, and how it fits into the industry, you are displaying your motivation, your interest, and with this understanding, your ability to make informed decisions.
Testing your commercial awareness:
In relation to the company: What is the current share price? What do you know about the company’s aims? What do you know about its products? How do these compare to its competitors’? Can you identify any possible challenges they may face in the future? Can you identify any solutions to these problems?
In relation to current affairs: Can you think of any recent developments that will indirectly affect this industry? What industry specific news have you read recently? What stories have interested you most? Why? How do you think that news could impact this business?
In relation to your role: How can you add value to this organisation? How can you profitably contribute to its goals? How can you best fulfil a customer’s needs?
In relation to your decision-making: What new project/product would you invest in? Why?
- Aaliyah Khan
1. Development of students' commercial awareness within the curriculum of professionally accredited courses, Joanna Poon and Micheal Bronwlow,
2015, Emerald Publishing, Education + Training vol. 57 no.4