Recession and Opportunities

How Recession Can Be Blessing in Disguise, How Does It Provide Opportunities?

In an earlier article titled "Recession" (http://recession-global.blogspot.in/), we dealt with the fundamental reasons for recession, the fundamental remedies to avert recession and who should take the initiatives to tackle recession. In this article now, we are looking at the brighter or positive side of recession as to how it may provide the opportunities for those who wish to use them.

Recession and Opportunities

Does the recession provide opportunities? The poser sounds a bit unfamiliar to start with, particularly when we hear everyone around cursing the recession and its negative impacts. So, can there really be any opportunity at these difficult times of downtrend in the economy? Business world has reasons to be concerned and worried as recession is having adverse impact on their business. It’s obvious because recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. Recession is also preceded by several quarters of slowing down of economy. But the moot question is: does the recession have a bright side to it? Can’t this period be used as an opportunity?

Genesis of Recession and its Manifestations

An economy which grows over a period of time tends to slow down the growth as a part of the normal economic cycle. An economy typically expands for six to ten years and then, tends to go into a recession for about six months to two years. A recession normally takes place when consumers lose confidence in the growth of the economy and are not able to spend or want to spend less. The consumers are not ready to spend as there is a strong apprehension regarding security. Businesses have slow growth or less sales and business which are not “need” based but are “want” based definitely have problems as consumers focus on need based purchasing.

This leads to a decreased demand for goods and services, particularly the “want “based goods and services. Even the “needs” are curtailed. This in turn leads to a decrease in market consumption and so there is decrease in production. The outcome of this is the lay-offs and downsizing and a sharp rise in unemployment. Again this further reduces the ability to purchase and so the demands in market reduce further, leading to vicious cycle, creating global slowdown and the crisis in many businesses. As the globalization has taken place, most of the businesses are connected to each other and so the impact is felt by most of the businesses all over the world in some measures.

Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment. The economy and the stock markets are always closely related. The stock markets reflect the health of the economy in a significant way.

During recession, normally the government increases it’s spending to create more jobs in many areas like building of infrastructure. Government also takes steps to help the private sector come out of the crisis.

Opportunities

Prima facie, disadvantages of recession far outweigh advantages if any. True. But why not explore if there exists any opportunity in this kind of scenario for the business world?
There are definitely some opportunities to be looked around during recession- doing that will be good for businesses. With some stretch of imagination and channeling of creativity, we can work out few things to our advantage during recession.

Decisions

During this slow down of the business, an organization should review its business goals; this is the time to take many important decisions. Business decisions regarding make or buy and externalizing the employment through outsourcing certain functions can be taken. This may enable the organization to reduce overhead and administrative costs, leading to enhanced flexibility of the organization.

Organization can scrutinize and develop short term and long term goals, get its vision and mission clarified. It can identify business cross unit synergies, partnerships and alignments. The objectives can be reviewed and redefined so that they align with the emerging business environment. Policies and practices which are misaligned can be altered and aligned.

This is the time to restructure the organization. Better and new processes and systems can be formulated and redesigned. Decisions on redesigning jobs and roles can be taken. Organizations can decide to keep training and development initiatives to help maintain morale. It increases long term productivity and also gives necessary skills to the redesigned roles.

Cost Management

Managing cost or saving is a very good habit. It is a traditional wisdom. During the growth of the economy, it helps the organization to become cash rich. At the time of recession, cost management helps to release much needed funds.

This is the time when organizations should have cost management under focus and implement the fundamentally established principles and practices of cost reduction. Management techniques like cost control, seven wastes of shop floor, inventory control (just-in-time management), lead time control, productivity improvement, resource utilization, zero defects (quality management), zero breakdowns (total productive maintenance management) etc are required to be implemented successfully. This will minimize all kind of waste and release the much needed cash (working capital). Cost of production of goods and services will reduce and selling prices can be lowered so that organization can gain advantage in the market and people/organizations can start buying again creating demand in the market.

Learning

When business growth is slow, smart organizations look for opportunities to improve flexibility and innovation to improve ability of managers and employees to tackle many business challenges. Creativity and innovation are necessary to manage the problems faced by the organization. Organizations also need to develop resilience so that they can take advantage of new opportunities that arise during periods of economic down trend.

To adapt the workforce to the emerging scenario, necessary emphasis, knowledge and skills through training can and should be imparted, so that they can be deployed in a more flexible way during recession time.

This also helps to retain the talented core employees and gives boost to their morale.

If the culture necessary for innovation is fostered and nurtured in the organization during growth time as well, then the benefits can be reaped now during the challenging economic scenario. Long term learning should therefore need not be stopped just because the organization has come across the recession; rather it should be continued during this crisis when it is required the most.

This kind of well thought out and well designed continuous training and learning also prepares a large number of employees as the new generation leaders at different hierarchical levels- the kind of leaders that are required to face the challenges of the white water conditions that get generated in the recessionary times.

And mind it; this white water condition is almost a permanent white water condition in the businesses of today.

Conclusion

While cash rich organizations have an advantage with slow down of economy; many strategic mergers and acquisitions can take place thus helping to expand their business. By adopting the opportunities mentioned above, other organizations also can manage to survive and grow when they take up the challenges of the downtrend of the economy and learn to manage the change swiftly and successfully.

Every environmental condition has threats as well as opportunities. When the threats suddenly create challenges, then, organization is likely to go in the defensive mode and may overlook the opportunities. If the organization is proactive and is scanning the horizons, then it can perceive the emerging threats and can take care to protect itself. Even if the change happens too suddenly for the organization, it can manage the drastic change if it harnesses the opportunities in the environment and can emerge as winner.

For More Guidance, Assistance, Training and Consultation

Contact: prodcons@prodcons.com

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Recession and Opportunities

Saturday, April 21, 2012

How Recession Can Be Blessing in Disguise?