Creating Business Advantages From Adversity

The current financial crisis has thus far lead to tougher local financial conditions, falling commodity prices, slower economic growth, pressure on government spending, reduced external surplus and lower inflation. During credit crunch like this, companies should focus on superior cash flow and sustainable growth. This may entail either a defensive survival stance, or a more aggressive acquisition of rewarding opportunities, when cash permits. Therefore, companies should focus on availability of sufficient cash on their balance sheet and cash flow generation.

Whilst the influence of the credit crunch on the majority of businesses is real and may vary in its severity, depending on business exposure, some businesses might be tempted to 'tighten the belt' and cut unnecessary investments. They may even consider downsizing their workforce, avoiding R&D expenditure, if anything, and cut on training. Such measures could be detrimental to the future growth of the business.

Lower price is anticipated to provide benefit to the region economy through lower construction costs. This would consequently take some pressure off the rental market which has been the main source of inflation in recent months. 'Cash-rich' businesses should seize the opportunity to invest in anticipation of future growth. Whilst the inflation is expected to ease in future years as the cost of commodity products continue to decline and the cost of housing is kept under control, the demand for higher salaries may ease.

As a result of down sizing activities in the US and Europe, regional companies can bridge the talents gap that businesses have to deal with during the last few years. Some organizations may opt out to down size only to struggle in the near future as business picks up again. Whilst other organizations would seize the opportunity to attract talents in order get them on board ready for the next growth cycle.

If the workload is reduced to offset lower level of demands, companies can consider more practical and useful options such as filling the lull periods with training to enhance the competencies of their workforce. In anticipation of squeezed margins, businesses need to adopt the 20/80 rule, where one should focus on the 20% of customers that contribute 80% to the bottom line. They should also think of cross selling to strategic customers or consider entering into new regional and international markets, including the export to countries where the business has a competitive advantage. Building alliances with local players can be an easy and low-risk option for growth. Equally, non core businesses that are not contributing to the bottom line should be clearly identified and measures should be taken to either develop successors or divest them in a coordinated fashion.

As material becomes cheaper, companies need to consider renegotiating their material supplies, whilst strengthening their supply chain, particularly as the end customers continuously asking for higher quality and increased product functionality at lower prices. Unless strategically important, businesses are discouraged, and should refrain themselves from, entering into loss making contracts for the sake of keeping their workforce busy.

It is anticipated that the level of international competition may be increased as they look for potential growth market opportunities, especially since regional currencies, chiefly pegged to the US Dollar, appreciate against other currencies. The dependence of some businesses on material supplies is greatly influenced by currencies fluctuation. This may hinder planning and raise the level of financial risks businesses are undertaking. Where possible, organizations should seek local suppliers. If not, preference should be given to trading with countries whose currencies are pegged to the US dollars.

Meanwhile enterprises should explore the possibility of developing a stable business environment within the region where they can develop mutual beneficial business options. It would be wise to build successful business practices, create a sound platform for robust business growth, identify pipelines of growth opportunities and take the necessary measures to earn the right for sustained growth. In order to achieve stable business-friendly environments, businesses need to streamline and optimize their existing business processes and relationships with their stakeholders.

The slow down in business activities should be viewed as an opportunity to rethink and devise a turn around growth strategy. To earn the right for growth, regional companies need to build a professional enterprise, strengthen weak areas, make sound investment in new tools and processes, build a strong strategy, acquire new talents and train existing workforce. Well-positioned companies may consider to:

(a) take advantage of the tremendous amount of talent available in the international marketplace - this is the best time to hire the people who can take the organization to the next level,
(b) when cash flow permits, make use of the buyer's market by making acquisitions of quality companies for sales and
(c) focus on company's real differentiators by sharpening marketing messages.

Dr Y Shakweh is a Vice President at Advanced Electronics Company, Saudi Arabia, with extensive management experience in Europe and the Middle East. His main interests are in executive leadership, business management and Technology. The views expressed in this article are the author's personal views and should be treated as such. He can be reached by email: yahya.shakweh@theiet.org