- MemberJanuary 29, 2022 at 7:53 pm
The macroeconomic discussions on unemployment, inflation, and growth often end in conflicting policy approaches and government intervention. What are the most important managerial challenges at times of crisis? How do we manage crises efficiently at times of recession / economic downturn?
First we must consider the effects of the downturn and what
it means for their business and its survival. Then they should address the key
questions – what do we need to do differently, what do we need to do better?
Often, the secret of survival will be getting the simple things right rather than
embarking on wholesale radical change in every aspect of the operation. Many
practical steps can be taken to minimise the effect of the downturn and position the business to emerge strongly when economic conditions improve.
1. Understand the true impact of the downturn on your
business. When assessing how the downturn will impact your business you should pose
these questions to yourself and your colleagues:
a. How will our customers behave – will they trade down to the cheapest
model in the range, purchase the same product less often, or seek a
substitute product or service?
b. How will our competitors react – will they work with customers to reengineer their products, seek to maintain volumes by cutting prices, or
seek alliances to reduce market competition?
c. What do we need to do well to minimize the impact of the downturn
on us – play to the strength of our existing customer base rather than
seek to expand, focus on those customers most likely to thrive in difficult
times, suspend product development in favour of supporting existing
brands, revisit our pricing policies?
You need to assess how different segments of your customer base will behave
in the downturn, how price sensitive they are and how loyal they are to your
product or service. You should also assess how strong your competitors are. Will they see the slowdown as a threat or an opportunity?
You then need to adapt your strategy to the changed conditions and assess whether the new strategy has implications in other areas such as, for example, supply chain,
production capacity or financing requirements.
Given the volatility which exists in current markets it makes
sense to subject your assessment of the impact of the
downturn on your business to stress testing and scenario
planning. Only when you have considered the potential
range of future outcomes can you determine the optimum
course of action to take. When conditions are difficult,
the most successful businesses are the ones that react
quickest – those that take the tough decisions early and
lead rather than follow. Once you have defined your new
strategy, share it with management and drive it. Make your
key people accountable for targets which are consistent
with your revised strategy.
We could and we should manage crisis positively and effectively. Take the challenge as opportunity. There is a saying “In every crisis, there is an opportunity”. In a downturn, numerous difficulties present themselves – all important, all
urgent. A natural response may be to “batten down the hatches” and focus
solely on today’s problems. Prudent management is of course necessary, but
it is important also to recognise the opportunities presented – to challenge old
ways of doing things, to take advantage of weaker competitors, to plan for the
changed marketplace that will emerge. Effective management will help ensure
your business is best placed to come through the bad times re-energised and
fit for the future.
Thriving in a downturn requires greater diligence and skill than during more
favourable economic times. However, the rewards can be greater as businesses
that adapt quickly with the right strategies can not only grow, but position
themselves strongly for the inevitable upturn that will emerge.