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Is Your Company Thinking Long Term?
- By Felix Chesterfield
- Published 01/14/2012
- Business Management
- Unrated
Felix Chesterfield
by Felix Chesterfield Other sites: MD Schools - http://www.auamed.org/medical-school Caribbean Medical Schools - http://www.auamed.org
View all articles by Felix Chesterfield
Bad economies are truly strategic separators. They show us which companies are thinking long term and which are focused on the short term. Short term thinkers will make drastic cuts cuts to improve the immediate bottom line. Their need for constant profits will cause them to overreact in search of the quick buck. Long term thinkers will (typically) see losses (or at least lower net profits than they could have), but will use this as an opportunity to build for the longer term. How does this happen? What are the opportunities available during a recession that can help for the long term?
1) Human resources availability. In a good economy, the unemployment rate is extremely low. This means that the availability of new employees is also low. Companies typically have to make some kind of compromise to build an effective workforce. Management is typically left with two options. They can go with inexperienced and unproven talent that is available at a cheaper rate. Or they can overpay for proven performers in order to get them to switch jobs. But, in a down economy, with unemployment sky high, there are many quality people that are available and willing to work for lesser rates.
2) Weed out some competitors. In a strong economy, even flawed companies can do well (and thus take market share). This may be an equivalent to fool's gold, but it still takes potential clients away from the stronger bus
inesses. But, in rougher times, these flaws are exposed and if these competitors cannot adapt they will die. Most will die which leaves the opportunity for the stronger firms to regain their markets. This is part of a bigger idea of...
3) The opportunity to gain market share. This may sound a bit like the last point, but that was more the result of external factors while this refers more to a conscious effort to build one's own market. When the economy is rolling, gaining market share is difficult. Any moves that are made can be counteracted by the competition. When so many firms are doing well, it becomes difficult to make maneuvers that are impossible to match. However, in a bad economy, this is the perfect time for a company to take a long term outlook with market share. With the competition cutting back, they are often limited as to how they can respond to strategic maneuvers. If a firm is to make a move for market share, the odds of it being matched by the competition are significantly less than they would be during good times. Obviously, this is only possible if a company has the resources to survive a down market - but that is a concept that is part of long-term thinking in and of itself.
4) You can get equipment that is practically new at used prices. Other businesses in the industry are going out of business. They need to sell their equipment to pay creditors. Demand is lower than it might be otherwise. So while this equipment may still be near mint condition, it can be bought at cut-rate prices.
1) Human resources availability. In a good economy, the unemployment rate is extremely low. This means that the availability of new employees is also low. Companies typically have to make some kind of compromise to build an effective workforce. Management is typically left with two options. They can go with inexperienced and unproven talent that is available at a cheaper rate. Or they can overpay for proven performers in order to get them to switch jobs. But, in a down economy, with unemployment sky high, there are many quality people that are available and willing to work for lesser rates.
2) Weed out some competitors. In a strong economy, even flawed companies can do well (and thus take market share). This may be an equivalent to fool's gold, but it still takes potential clients away from the stronger bus
3) The opportunity to gain market share. This may sound a bit like the last point, but that was more the result of external factors while this refers more to a conscious effort to build one's own market. When the economy is rolling, gaining market share is difficult. Any moves that are made can be counteracted by the competition. When so many firms are doing well, it becomes difficult to make maneuvers that are impossible to match. However, in a bad economy, this is the perfect time for a company to take a long term outlook with market share. With the competition cutting back, they are often limited as to how they can respond to strategic maneuvers. If a firm is to make a move for market share, the odds of it being matched by the competition are significantly less than they would be during good times. Obviously, this is only possible if a company has the resources to survive a down market - but that is a concept that is part of long-term thinking in and of itself.
4) You can get equipment that is practically new at used prices. Other businesses in the industry are going out of business. They need to sell their equipment to pay creditors. Demand is lower than it might be otherwise. So while this equipment may still be near mint condition, it can be bought at cut-rate prices.
