It is easy for firms to become overwhelmed by recessionary doom and gloom at times like these. The reality is that most firms survive; it’s just that some survive better than others and emerge much stronger.
This recession will almost certainly bite harder and deeper than the eighties or nineties recessions as a consequence of the dual effects of the financial (credit crunch) and economic crises. It is true that interest rates and inflation are much lower than in the nineties, but the availability of credit is being reduced by the very institutions which led us into this mess.
So what are the survival strategies? I’ve been reading around to identify why some companies do better than others in a recession. Here’s a summary of what I found:
Ambition – drive, commitment and strong leadership
Adaptability – the ability to recognise and respond to changes quickly
Distinctiveness – forget “me too”, well-researched customer value propositions really matter
Value for money – price is important and discounting is inevitable but don’t make the mistake of competing on price alone
Optimal use of resources – a few extra pounds can be carried in boom times, but you need to be fighting fit now
Finance – high gearing may be sustainable during better times but liquidity matters in a recession (of course, reducing debt is not easy at this stage of the economic cycle)
Just as banks are withdrawing established lines of credit, some organisations are allowing themselves to become over-whelmed by a siege mentality – becoming inward rather than outward looking – and not responding to evolving customer needs.
Smaller firms have a real advantage in this regard; they tend to be more adaptable than larger organisations and have the ability to respond faster to changing circumstances. This can make the difference between life and death, while the best organisations will seize the opportunities presented by the recession and emerge even stronger.
Best wishes for 2009.