New research from New Zealand Trade and Enterprise (NZTE) into survival strategies in recession has found that success comes down to balancing risk and opportunity – the ability to be grounded, but to have the confidence to take opportunities.
The research looked at multinational businesses that survived and prospered through past major recessions including the Great Depression, the Oil Crisis, the Stock Market Crash of 1987, the Asian Financial Crisis and the collapse of the dotcom bubble.
Seven key factors emerged as having the greatest impact on firms’ ability to emerge strongly from recessionary periods – four relating to dealing with the reality (focusing on the core business, improving efficiency, getting rid of non-core operations and business restructuring) and three dealing with opportunities (acquisitions, increased advertising and marketing, and more research and development).
The seven are:
• Focus on the core business – applying resources on the core business, where they are most needed. This creates opportunities to gain market share from competitors who diversify and split focus.
• Process and efficiency – speed and flexibility are very important in executing recession strategies, the faster the better.
• Strategic divestment – shedding non-core operations to improve liquidity and/or focus on the core strategy. Operating non-core business splits much needed focus and resources.
• Contingency planning – not easy to prepare for downturn but it is never too late. Planning can be formal scenario planning or careful structuring of the business to maximise resiliency.
• Acquisitions and strategic alliances – to strengthen, refocus, and position the company for increased growth and profitability. Acquisition ‘entry price’ is likely to be lower, and there may be less competition for acquisition targets. Companies also made acquisitions to access new markets, products, technologies, customers and talent at an accelerated pace.
• Increased advertising and marketing – to increase market share and take advantage of greater advertising reach, possibly at more competitive rates.
• Research and development – to create new value in core product/services that can sway recessionary consumers as trading is more competitive. New product releases can have greater impact during downturn as competitors are slower to counter with their ‘me-too’ offerings.
NZTE chief executive Tim Gibson said that while the businesses studied were large multinationals listed on the Fortune 500 index, the seven factors identified apply to businesses of any size, trading from any location.
“These are sound business ideas that help firms position themselves for recovery and that any New Zealand company can implement. Recessions are notorious for breaking companies. We’re seeing examples of that now. But our study shows that recessions also provide opportunities to reinvigorate company.”
Gibson commented that the current recession is game-changing event for businesses worldwide. “The certainties of the last few years easy credit, rising asset values and strong global demand for products and services – have gone,” he said.
“All businesses need to adjust to this reality, but the clever and courageous ones are also spotting new gaps in their opponents’ defences and making break for it.
“The companies we looked at all increased growth and profitability during the recessions or the following recovery periods because of the choices they made when times were toughest.
“Businesses should think cautiously in the short term, but be ambitious and plan for the long term. There is no doubt that times are increasingly tough, but to survive, businesses have to look to the future.”
Read the full research report at
www.nzte.govt.nz/develop-knowledge-expertise/Advanced-Exporter-Guides/Changing-the-game-recession-survival-strategies/
