As with every downturn, there are going to be advantages for someone – just make sure you position your business now to give it a good shot. COLIN BENJAMIN
By Colin Benjamin
In the US, it used to be said that what is good for GM is good for the country. Now that has reversed, with talk of General Motors going into “chapter 11” bankruptcy as it (and Ford) find that the combination of the energy crisis and the credit crunch have finally convinced consumers to downshift their vehicles and move back to small energy-efficient cars.
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While the academics and economists continue to argue that the US economy is only on the verge of a recession, the loss of thousands more jobs across the nation, cutbacks of staff from all of the big financial behemoths, and the continuing risk of collapse of hundreds of regional banks, make it hard to believe that things can still get much worse.
Bill Gross, chief investment officer of Pacific Investment Management Company (in Investment Outlook) believes that the US Fed is going to have to bail out the economy from the unintended consequences of bad domestic and foreign policy decisions along the lines of the flood of funds that are just starting to reach the hip pocket nerve of US voters. Gross advises Obama that his administration (if elected) will produce the nation’s first trillion-dollar deficit.
Consumers around the world have dropped their level of consumer confidence like a stone (see Morgan Research Consumer Confidence reports for the past year) and have decided that it doesn’t matter whether the oil price is the result of hedge fund speculation or greedy oil producers, the impact on their mobility is dramatic. Only in China and India do we see signs of business optimism as companies are being forced to lay off hundreds of key personnel that they kept on the payroll in the vain hope that things were going to get better in the second half of the year.
What this means for Australian smart companies is that it would be advisable to make a fast move towards any options for unsustainable productivity and not sit around hoping that things will get a lot better anytime soon. The market will not only be looking for discounts, Harvey Norman style deferred payments into the next decade and no-name brands, they will be looking for more service, gifts-with-purchase and real sales staff support before considering major purchase items.
Now is a good time to adopt a triage principle from the emergency rooms of our public hospitals:
- Identify current customers into those that have a long record of good payments and reasonable contributions to profit and approach them to lock in forward orders for the rest of the year.
- Sort out customers who tend to look for deals and give them clear, precise and tight terms of trade in return for meeting their special needs by taking on parts of their value chain that will reduce their overall coasts of doing business while maintaining your price points.
- Terminate with prejudice any customers that have “cheques in the mail” and who are clearly using your firm as a lender of last resort without contributing to your long term business health and growth.
At the same time, take your top team away for a day and develop a strategic plan to move into business areas that are looking for energy efficient, personal service and community based enterprises that previously relied heavily on overseas connections.
Now is the time to fast track efforts to link up with overseas suppliers that can deliver cost-effective solutions to local production bottlenecks and shortages of skilled personnel.
Until the change in Washington brings an end to the military adventurism and Halliburton style of cronyism around the world, the hedge funds will continue to move out of manufacturing and production into commodities like oil, gas and food stocks.
Assuming an Obama presidency, there will be a global pressure for protectionist policies that will be the perfect market for Australian companies able to move quickly to fill the vacuum in the Asia Pacific basin.
There are good reasons to expect that this will be a period of longer term sustained economic development for any business that has moved into sustainable production and cross-cultural supply chains.
Dr Colin Benjamin is Entrepreneurship and Strategic Thinking Consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Contact: CEO Dr Jane Shelton.
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