MANAGING IN AN UNCERTAIN ECONOMY
In an uncertain economy, management may decide to retrench, to maintain the status quo or to forge ahead.
The financial position of the company will influence the course chosen by management. The external challenges that face the company and the opportunities that exist in the marketplace will also play an important role.
For a weak company, survival may be the best possible outcome. For a strong company, however, an uncertain economy can represent a unique opportunity to strengthen its position.
Assessing the Effects
Management must assess the specific effects that the current economic conditions are having on its business. It must devise a plan to counter any potentially negative effects and identify the opportunities that exist.
A well-managed company should only have to adapt to those circumstances in flux. Much like the coaching staff of a football team, which creates a play book with plays for different situations and then adapts its game plan as the game progresses - management's strategic and business plan are its play book and game plan.
Management must strike a balance between being too slow to respond and too fast too react. This balance is necessary to effectively handle unanticipated situations and changing events. This is accomplished by having an understanding of the company's business and the dynamics of the industry in which it operates.
Understanding the Impact of a Changing Economy
- Learn how past changes in the economy have affected the industry.
- Assess the impact that changes in the economy are having on the company's customers.
- Be aware of competitor's actions.
- Develop and monitor key relationships and financial ratios that help track the condition of the company.
A Time of Opportunity
An uncertain economy can be a time of opportunity.
- New marketing opportunities may arise as competitors retrench
- Buying opportunities (inventory, equipment, real estate and businesses) may arise as competitors fail or need additional working capital.
- New management and employee talent may become available as competitors initiate layoffs.
This is not the time to be sitting in a board room letting negative opinions rule the day. The goal of management in an uncertain economy is to minimize the negative effects and to capitalize on the opportunities that are available.
This course of action can lay the foundation for the company's future growth and prosperity.
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