What's Next for Your Business?
Other news stories included the following: “supply of unsold homes was declining relative to demand, a precondition for recovery,” “about 74% of economists expect the recession to end in the third quarter,” “the global economy is beginning a sluggish recovery” and “manufacturers and wholesalers are starting to see positive signs for economic recovery.”
Are you seeing the common thread here? Recovery from our current downturn is on the way, but are you ready for it? What have you done to position your business for the coming recovery? What are other companies doing? What strategy can you put in place to “buy low”?
One of the reasons a turnaround is inevitable is that during a recession people avoid buying. As a result, inventories deplete. A story from Japan, which came across my desk as I was writing this editorial said, “Aluminum stockpiles in Japan dropped by 15% in June from a month earlier to the lowest level since July last year as domestic demand increased and traders reduced metal imports.” What is your company doing to prepare for the demand surge – possibly urgent – that will surely follow? The Wall Street Journal (WSJ) quotes an international bank CFO who says a V-shaped recovery – one in which the economy not only recovers but rebounds strongly – is “maybe not as far-fetched as you think.” He indicates that the steepness of the downturn means a snappier recovery.
Many news stories say that the recovery is going to be slow. My personal opinion about this is that any delay in the process is probably due to the meddling of the federal government. To top it off, some are actually saying we should have a second stimulus! It’s this type of thinking that gets people committed to institutions unless you work in government. Less than 10% of the current stimulus money has been spent. Let’s leave well enough alone and not go further into debt.
Clearly, our government debt is one thing that threatens our country’s recovery. I heard an interesting analogy recently that compared a government bailout to scooping water from the deep end of the pool, sloshing it around and allowing some to evaporate and then dumping it into the shallow end expecting the water level of the pool to rise. Obviously, a second bailout will not help in any way except to further increase our ballooning debt. Ben Franklin understood this when he said that it was better to skip supper and go to bed hungry than it is to wake up in debt.
Throughout history, individual companies have had success when leaders have been fiscally responsible. An interesting example is John D. Rockefeller. He and many other industry leaders of the time (late 1800s) lived frugally because “habits of thrift” had been ingrained in them. Rockefeller made millions and never wasted pennies. When a refinery needed new installations and repairs, Rockefeller bought pipes and joints himself rather than contracting out to a plumber, saving half the cost. He wasted nothing in his business, and his economy and efficiency had an impact on the lives of American consumers.
A soon-to-be-released history book talks about a company that “has grown tremendously in the last half century by doing things well: listening to its customers and changing as their needs changed.” One of our articles this month talks about a company that has grown as a result of the same thing (p. 59).
Another news story reported the results of a survey that gave the top four growth strategies for companies in 2009. They are: acquire new customers, increase sales in domestic markets, increase sales to current customers and increase brand recognition. The WSJ recently reported that Alcoa was doing all of the above through the expansion of a plant in Russia and acquiring IP rights on welded-aluminum products. Alcoa is “attempting to acquire market share in product lines it hopes will be among the first to come out of the recession.”
Our own Jack Marino (see The Experts Speak blog on our website) has some advice for how to manage in a recession. “The most important activity should be focusing on increasing sales. Is there an opportunity here for developing merger or acquisition plans? With business slow, some good deals can be developed.”
What will you do to emerge from this current downturn healthier than before? What’s next for your business? IH