How A Company Can Weather Through The Current Global Recession Essay Example

customers to purchase their products.

According to Hirsich (2004), achieving actual bottom line profits from prospects for profits requires effective distribution channels to end users and delegation in some areas previously controlled by the business owner. Based on the experience of Zion bank in USA, caution is necessary when investing to avoid the toxic sub prime mortgage related securities that caused problems in the financial industry. The impact of high oil prices and credit crunch has affected world demand and negatively impacted the bottom line of many businesses.

To survive the financial crisis, businesses must adopt a long-term perspective of the business environment. Implementing drastic cost-cutting measures, such as headcount review, redundancies, downsizing, or spending reductions, may temporarily ensure survival but pose challenges for future growth. Industry standards recommend undertaking budget freezes in extreme cases. Instead, a long-term view can be achieved by improving business practices and resources. Business process re-engineering offers a way to streamline and improve current practices through Lean and Six Sigma methodologies.

The Lean methodology focuses on removing inefficiencies in business practices while retaining valuable personnel. Its approach includes reviewing current processes for immediate cost reduction and making unnecessary resources available for alternative use. Conversely, the Six Sigma methodology aims to achieve a zero-defect situation by analyzing the root causes of high business expenditures to achieve better control and reduction.

For business improvement activities, it is important for an organization to incorporate team and teamwork. This not only enhances employee morale but also increases their intellectual abilities and transforms the organization into a learning one. It creates a firm foundation for business recovery due to the boosted morale. (Adrian, 2007) During

a recession, innovative approaches towards business processes and practices become imperative.

Beatrice D. Agostine, Chairwoman of New Jersey Saving Bank, suggests that buying during times of market-wide selling is optimal for saving banks. This is due to the fact that offer prices are typically lower than previous market prices when the business was considered to be doing well. The current recession in the US economy has resulted in layoffs, reductions in personal and household spending, and budget cuts in the public sector.

According to the New York Times (2008), surviving during a recession may involve converting unproductive assets into utilizable ones, such as transforming a golf course into parking spaces to generate extra income. The consequences of a business experiencing a recession, according to Querytime.com (2008), include layoffs, reduced profits, increased outsourcing, a decrease in expendable cash, a crashing housing market, plummeting stock prices, diminished value of retirement accounts, and company bankruptcies. Ransom (2008) suggests that merging businesses can provide increased working capital and mitigate risks. Moody's Economy.com's Director of Macroeconomics, Gus Faucher, explains that businesses reliant on consumer discretionary spending may be negatively affected by the credit crunch, as consumers are forced to cut back on luxury spending due to accumulated credit card debt. Meanwhile, Robert B. Macintosh, chief economist for Eaton Vance Management in Boston, believes the falling US dollar could benefit businesses that export products overseas. To weather the current financial storm, the best tactics are to diversify the customer base, improve cash flow, and cut costs as necessary.

The US markets will benefit from the weakened dollar by attracting visitors from other countries. According to Ransom (2008), working with the government can be profitable

for businesses, as the economic stimulus package involves spending to stimulate the economy. Bill Lenhart, the national director of business restructuring at BDO consulting in New York, suggests that merging tasks can lead to rightsizing and layoffs of underutilized personnel. The business should focus on its core market, which may involve merging products or selling off less lucrative business. It is important for the business to maintain optimum stock levels to avoid tying up capital and incurring additional costs such as storage and holding costs.

Harmonizing sales and purchasing departments is recommended for setting inventory targets (Ransom, 2008). Bradley J. Sugars, a Las Vegas business coach, advises against price cutting because it may reduce margins, dilute brand image, and lead to future customer demands for discounts. Sugars suggests offering discounts exclusively to current customers.

The small businesses may initiate economical and disastrous price wars due to the discounts offered, unable to compete with retail stores like Wal-mart. Loyalty can be developed by providing additional discounts. In order to enhance revenue without incurring costs, the business should concentrate on its services which add value for customers. (Ransom, 2008) In difficult economic conditions, employees are a valuable asset for productivity as per Lenhart. The owners should aim to increase productivity and offer incentives such as vacations or time off.

The current financial turmoil makes it critical to avoid losing valuable and highly productive personnel as it can be disastrous and disruptive for businesses. Howard Applebaum, the chief lending officer at Sterling National Bank in New York, suggests several measures to cut costs and increase revenue. One approach is to request extensions on payment deadlines from suppliers to improve cash flow,

while debtors can be urged to make prompt payments. But during a credit crunch, cash flow is particularly important for paying salaries, funding marketing campaigns, and settling other expenses that are crucial for future business growth (Ransom, 2008). Applebaum recommends renegotiating contracts or leases that are approaching renewal dates to secure lower prices.

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The office space could be downsized and expenses reduced if there are any unoccupied rooms available. Carmen Bianchi, the director of San Diego State University's Entrepreneurial Management Center, advises stable businesses to seek out weaknesses and instability in their competitors, which allows them to purchase their businesses cheaply. By doing so, they can position themselves advantageously and make substantial profits through future growth.

(Ransom, 2008) References:

• Hisrich R. D (2004) Small Business Solutions: How to Fix and Prevent the Thirteen Biggest Problems That Derail Business. McGraw-Hill Professional.
• Trian D. (2008) Bank avoided toxic loans, not pain. Retrieved on 30th October 2008 ;http://www.

usatoday.com/money/industries/banking/2008-08-27-zions-bank_N.html Ransom D (2008) Quick tips: How to Recession-Proof Your Business. Retrieved on 29th October 2008 smsmallbiz.com

The article by Ransom D titled "Quick tips: How to Recession-Proof Your Business" was obtained from usatoday.com on August 27, 2008 and can now be accessed at smsmallbiz.com as of October 29, 2008.On Thursday 30th October 2008, access Romano J's (1991) article via http://query.nytimes.com/capital/How_to_Recession-Proof_Your_Business.html. The article offers innovative approaches for businesses to survive economic downturns.On Thursday, October 30th, 2008, Adrian Tan's article titled "Surviving an Economic Recession - A Business Improvement Perspective" can be accessed at both http://ezinearticles.com/?Surviving-an-Economic-Recession---A-Business-Improvement-Perspective&id=1588045 and http://www.nytimes.com/gst/fullpage.html?res=9D0CE1D61E31F934A35754C0A9679582.