Firms need to take a holistic view of the macro economic environment in a recession
The global crisis has impacted the economies of most countries and the most worrisome manifestation has been the decrease in economic activity arising fundamentally from a falling demand for goods and services. Further, the situation has been aggravated by the fear that has invaded the financial sector leading to a prolongation of the crisis in the credit markets.
However, the impact on each country, each region of a country and each sector within each country may be of different degree. From the point of view of individual firms a subtle, sophisticated and nuanced analysis of their particular situation may yield superior results during this global crisis relative to a “run for the trenches” strategy.
Hence, it is rather difficult to provide a universal crisis plan. However, firms can certainly ask and answer some questions to help them draw a map for the next few stormy months.
what sector is the firm in?
If the firm produces a necessity, like milk, as opposed to television sets, the change in the demand for their goods will be relatively smaller. In that case firms may see their profit margins fall during this crisis but relative to other sectors of the economy their margins will remain attractive. Thus, there is no need to panic. To the contrary, this may be a good time to invest in cheaper land and other undervalued assets that can later be sold at a huge profit.
However, if the firm produces non-essentials the situation is certainly more complex. In this case the strategy depends on the fundamentals of the sector within which a firms works. For instance, producers of organic product may flourish during a recession by targeting an upper income niche. Moreover, firms in this situation may survive if they are able to live with lower margins while searching for different niches for the products in their lines. Further, creative and bold managers may prove to be an asset over the conservative type.
The global crisis has impacted the economies of most countries and the most worrisome manifestation has been the decrease in economic activity arising fundamentally from a falling demand for goods and services. Further, the situation has been aggravated by the fear that has invaded the financial sector leading to a prolongation of the crisis in the credit markets.
However, the impact on each country, each region of a country and each sector within each country may be of different degree. From the point of view of individual firms a subtle, sophisticated and nuanced analysis of their particular situation may yield superior results during this global crisis relative to a “run for the trenches” strategy.
Hence, it is rather difficult to provide a universal crisis plan. However, firms can certainly ask and answer some questions to help them draw a map for the next few stormy months.
what sector is the firm in?
If the firm produces a necessity, like milk, as opposed to television sets, the change in the demand for their goods will be relatively smaller. In that case firms may see their profit margins fall during this crisis but relative to other sectors of the economy their margins will remain attractive. Thus, there is no need to panic. To the contrary, this may be a good time to invest in cheaper land and other undervalued assets that can later be sold at a huge profit.
However, if the firm produces non-essentials the situation is certainly more complex. In this case the strategy depends on the fundamentals of the sector within which a firms works. For instance, producers of organic product may flourish during a recession by targeting an upper income niche. Moreover, firms in this situation may survive if they are able to live with lower margins while searching for different niches for the products in their lines. Further, creative and bold managers may prove to be an asset over the conservative type.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Ranked 6th Overall
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IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)
