Banks have collapsed, stocks have plummeted, companies have closed, and workers have lost their jobs. The economic crisis has cast a dark shadow over the world. Most countries and businesses are affected by this sad reality. But if you just stand by and watch, you will only sink deeper into the “quagmire”. Take action now to survive and weather the storm.
Rethink priorities to suit reality
In good times, a company may prioritize market development, hiring employees, setting growth targets of 15%… But when the market changes, the company’s vision must also change. Changing direction suddenly may affect the company’s operations, but it is a must. If you just sit quietly watching the economy go downhill and worry about the strategies outlined in 2009, you will be “left behind” because nothing is guaranteed in such volatile times. This is the time to be more frugal, consider every expense, invest and cancel all unnecessary things such as conferences, seminars, travel to focus on dealing with the crisis.
Continue to invest in your strengths
Tough times are also an opportunity for companies to demonstrate their capabilities and improve their competitiveness, and they will benefit greatly from it when the crisis passes. The most successful brands are those that never stop investing in their strengths such as product innovation, customer service, etc. While many companies are cutting back, Kohls, the leading US retailer, spent more on marketing during the holiday season than it did at this time last year. “We have no plans to cut product innovation because that is the factor that has helped the company survive and grow for the past 25 years. We are improving the delivery of goods, which is our strength.” Cutting employee training and development activities is also applied by many companies during the economic downturn. However, businesses are best not to do this because this is one of the main factors to maintain the development of the company.
Enhance communication, balance between reality and optimism about the future
When companies enter a period of “turbulence,” they often choose to remain silent until the market returns to a stable state. That is the opposite of what they need to do. In a crisis, all partners of a business become stressed: Employees worry about losing their jobs, suppliers fear not being paid, customers fear price increases or the quality of products and services decreases, investors fear that their stocks will fall… Silence only makes them more anxious. Direct dialogue about these issues will make the situation better. You don’t have to answer all their questions, but you need to say what you think and reflect the situation honestly. Make your employees more confident by letting them know the company’s vision, understand what you care about, and feel your frankness and honesty. They just want to know the truth. Even if the truth is not good, good leaders will find a way to maintain hope.
Facing difficulties with customers
In tough economic times, customers are also facing new problems, so provide them with new solutions. This is the best way to show your understanding and care for customers and also respond wisely. In prosperous times, customers always want high-end, luxury products regardless of price, but in "hot water" like this, that is no longer the case. Diversifying products, cutting costs to create product lines with reasonable prices is what customers want most in this difficult time. Therefore, even if you sell products at lower prices, you can still maintain the same revenue as before. In any industry, the common principle is to help customers maximize their benefits.
Don't discount too quickly
Everyone wants to pay less, especially in times of crisis, but sudden price changes can be more dangerous than you think. According to McKinsey research, for a 1,500-employee S&P company, cutting prices by 5% would require increasing sales by 19% to cover the cost, which almost never happens. Keeping prices the same may result in a drop in sales to some extent, but it can be a wise move. It all depends on how dynamic your company’s pricing policies are and how quickly you can adapt to the market. For example, when oil prices were at $4 a gallon, many American consumers cut back on discretionary spending, but when oil returned to its current $2 a gallon level and they had more disposable income, they didn’t spend much more because they were too worried about their jobs and futures. Now is the time to learn more about price sensitivity in the market than ever before.
Considerations when investing
It’s easy for companies to lose control of their investments and forget the basic rule of business: the profit must be greater than the cost. This is dangerous when investment budgets are getting tighter. The famous food and beverage franchise chain Dunkin once planned to become the largest franchisor by developing a series of new stores, but now they find that reputable local banks are a better source of investment. Or instead of spending $350 million to $400 million to develop a new engine, truck manufacturer Navistar only spends a symbolic $30 to $40 million on software control and fuel management systems to make the current engines work best in their trucks… This is a cost-effective and efficient way to invest.
Review staff and select a good team
When the economy is booming and the company is doing well, every employee seems to be excellent. But this is the time to re-evaluate your team and find the “impostors”. If the company needs to cut staff, it is very important to maintain hard-working people with a high sense of responsibility. Besides, when it is inevitable to cut salaries and benefits for all employees, you must communicate this decision to the core employees in a tactful way so that they do not feel that they are being punished instead of being rewarded with good results at work. However, instead of adding to the “pain”, it is best to reward the best employees even in the crisis. At the same time, listen to competitors and find ways to attract their best employees.
Have a long term vision
The biggest criticism of Wall Street in the financial crisis was that it encouraged too much risk. Make sure your investments are not too risky (or too low). For example, Deere, the leading US farm equipment and machinery manufacturer, encourages investment based on returns, measured by capital invested and profits earned in any of the previous four years. If the business does not perform well, it can cancel a portion of the profits. In times of crisis, encourage long-term thinking and vision as part of the business cycle.
Considering the foreign market, the pressure on costs may make companies think of developing countries or emerging markets, but in fact, the economies in these countries have also changed strongly. Labor costs in factories in China or Malaysia have continuously increased like a wave as these countries have made economic leaps. Meanwhile, in the US, the number of unemployed workers has continuously increased, and the wage gap between these countries has been increasingly narrowed. Oil prices, even after reaching their peak, are still much higher than they were five years ago and according to many experts, there are no signs of going down. Therefore, transportation costs may also be one of the factors contributing to the end of the wave of foreign investment. Not only that, the investment costs for headquarters, machinery, rent, customs, time, production speed ... can form a large amount. In times when all costs are skyrocketing like this, don't think investing abroad is a good idea.
Be Smart About Mergers and Acquisitions (M&A)
Economic crises are also the best times to buy assets at bargain prices. Merger activity tends to peak as most companies use the crisis as a time to hoard resources until the market recovers. This is a great opportunity to acquire smaller companies and their talent. Companies should consider the needs of their core segments during both economic ups and downs, not just their gut feeling. When the crisis is over, the race is wide open with the promise of a brighter future, and your position relative to your competitors depends on your management skills now.
Vietnam Marketing Magazine
