Four key insights can help companies better navigate the expected COVID-19 (coronavirus) recession and be poised for growth when the economy improves, Hamza Mudassir, Visiting Fellow in Strategy and alumnus (MBA 2012) of Cambridge Judge Business School, writes in a new article for Entrepreneur magazine.
While firms are rightly fearful of the word “recession” as such downturns drive up bankruptcy and jobless rates, there is research that shows a recession doesn’t affect the long-term, eventual success of a business, the article says.
The four insights useful for businesses to help weather recession and be prepared for better times are:
1. Don’t be fooled by the news, as recession doesn’t affect all firms in the same way
While many firms will suffer a sharp fall in sales, others may see an increase in business, and it’s also not always true that small companies are the most vulnerable, the article says. One recession-navigating strategy doesn’t fit all organisations, but all organisations can benefit from acting with agility, flexibility and speed in a downturn. Another tip during a recession: keep a close tab on how your biggest customers and suppliers are doing, as this will help firms make the right decisions to prepare for an eventual upturn.
2. Cutting costs alone is not the answer
Companies should use the coronavirus crisis to seek a boost in productivity, rather than only to cut costs through job losses and other measures. Talented staff might not be readily available as conditions improve, as other companies will be fishing in the same pond at the same time. A key way to boost productivity is to figure out how to improve customer-facing operations to deliver goods and services faster and more efficiently, the article advises.
3. Beware of false bargains during a recession
Many assets, including retail or office space, may look cheap due to recessionary price cuts, but buyer beware as this can drain cash needed for the recovery. It’s often better to invest not in new capacity but in better technology or talent.
4. Careful increases in marketing and research can pay dividends
It’s usually best to selectively invest in areas where you already have a competitive advantage that can be further enhanced when the recession ends.
History shows that some very successful businesses have been formed during steep recessions, but timing is the key, so the need to take key decisions is now rather than later, Hamza writes in the article.