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How to survive a recession

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Title: How to survive a recession


1
How to survive a recession
Banishing Bad Thoughts (1958)In Kankakee,
Illinois, USA, members of the Chamber of
Commerce staged a mock execution of "Old Man
Gloom", as part of an effort to rally local
spirits.
2
  • Dig the well before you are thirsty.
  • Chinese proverb
  • Dig the well before you are thirsty.
  • Chinese proverb
  • Dig the well before you are thirsty.
  • Chinese proverb
  • Dig the well before you are thirsty.
  • Chinese proverb

Dig the well before you are thirsty Chinese
proverb
3
Workshop Objective
  • What it is
  • Provide key learning on Recessions, case studies,
    research, examples and practical tips
  • How to survive difficult economic climate while
    optimizing the business
  • USA focused because of historical data
  • Walk out with few ideas
  • Interactive
  • Optimistic
  • What its not
  • Economist view
  • Bankers view (BNR)
  • Not recent as of yesterday
  • Recession experts view
  • Predictive

4
Table of Contents
  • Step 1 Stop talking about it !
  • Recession 101
  • Historical data
  • Trends to consider
  • Romania survey and findings
  • Recession 101 Key Learning
  • Step 2 Businesses that do well
  • Industries in high demand through a
    recession
  • Jobs in high demand through a recession
  • Step 3 Cut costs with a scalpel, not a chainsaw
  • Other cost cutting strategies
  • Step 4 Perfect time to plan
  • Segment Management
  • Ideas and trends for your customers
  • Step 5 Over communicate
  • End in sight - Significant events, milestones
  • Outlook

5
Bank institutions searching for return on
investments
World liquidity excess
Relaxation of loan terms
Outburst of debt assignment by banks
Abundant credit
Quick development of subprime credit
Accumulation of financial market risks
Resale with profit possible in case of loan
default
Real estate market turns around for the worst
More and more subprime loans default
Market recognizes presence of loans being assigned
Confidence void
Liquidity crisis, banks are no longer giving
loans between them
6
Quick development of subprime credit
Accumulation of financial market risks
Real estate market turns around for the worst
More and more subprime loans default
Market recognizes presence of loans being assigned
Confidence void
Liquidity crisis, banks are no longer giving
loans between them
Banks ailing
Assets depreciation
Bank losses
Financial Crisis
7
Financial Crisis
Economy slowing down
Increasing of liquidity problems
Households having payment difficulties
United States stimulus
Interest rate fall
Refining problems
Expansionist budget policy
Household payments guarantee
Liquidities injection
More flexible monetary policy
Improved (attractive) fiscal policy
Increasing losses for banks
8
Increasing losses for banks
Interbank loan guarantees, Paulson Plan
Confidence being further eroded
Stock market collapse
Households are more and more worried
Bankruptcy or near- bankruptcy of financial
institutions
Speculation
Stopping stock market collapse
Capital injection, nationalizations
Deposit guarantee
Coordinated monetary policy
State intervention
Recession
9
Step 1 Stop talking about it !Recession 101
  • USA Vs. Romania
  • Definition
  • Recession is loosely defined as two consecutive
  • quarters of decline in GDP output.
  • National Bureau of Economic Research(NBER, USA)
  • extensive definition four main
  • factors as the most important for determining
  • the state of the economy
  • Employment
  • Personal income
  • Sales volume in manufacturing and retail sectors
  • Industrial production
  • Q. Is USA in a recession? A. Yes
  • Q. Is Romania in a recession?
  • Not yet technically, but discussion of
  • Criza has stifled everything since
  • BNR reduced debt /income ratio from 70 to 30
  • Purchase of homes added VAT
  • Banks changing policies on loans
  • Sub Prime effect in USA affecting global banks
    and world markets

10
Recession 101
Business cycle is made up of four different
periods of activity extended over several years.
These phases can differ substantially in
duration, but are all closely intertwined in the
overall economy
Peak At its peak, the economy is running at full
steam. Employment is at or near maximum levels,
gross domestic product (GDP) at its upper limit,
income levels are increasing. prices tend to
increase due to inflation Businesses investors
are enjoying prosperous time
Recession What goes up must come down"
applies. After experiencing great deal of growth
success, income and employment begin to decline.
As wages, prices of goods in the economy are
inflexible to change, they likely remain near the
same level as in the peak period unless the
recession is prolonged. The result is negative
growth in the economy.
11
Recession 101
Expansion/Recovery - In a recovery, economy is
growing once again, moving away from bottoms
experienced at the trough. Employment,
production and income all undergo a period of
growth, overall climate is good.
Trough - sometimes referred to as a depression,
depending upon the duration of the trough, this
is the section of the business cycle when output
and employment bottom out and remain in waiting
for the next phase of the cycle to begin
So where are we?
Romania
USA
12
Historical data
Current recession is one of longest downturns
since the Great Depression of 1930's. Last two
recessions (1990-1991 and 2001) lasted eight
months.
13
Trends to consider
  • U.S. Recession
  • As chart indicates, the U.S. budget deficit is
    expanding at its fastest rate in the post-war
    era. Obamas proposed fiscal stimulus will add to
    this deficit. This aggressive fiscal response is
    meant to offset a sharp contraction in GDP.

14
Trends to consider
Source 2009 Outlook Council on Foreign
Relations, November 2008
  • The unemployment rate initially increased at a
    rate consistent with past recessions.
  • However the latest data suggest a worse than
    typical environment for employment.
  • 2009 will start to reveal how much worse the
    employment situation will be.
  • Unemployment, now at 4.9, is just 0.9 higher
    than the 4 level that economists consider "full
    employment" (meaning that everyone who wants a
    job has one).

15
  • Auto sales typically fall by 20 in a recession
  • This time around they have fallen 30.

Source 2009 Outlook Council on Foreign
Relations, November 2008
  • Consumer sentiment starts falling before the
    recession begins, but turns around soon after.
  • However, pessimism seems particularly strong this
    time around.

Source 2009 Outlook Council on Foreign
Relations, November 2008
16
B2B payments Payment delays lasted between 18
and 24 months


First oil crisis
USA Recession
Internet bubbleand 9/11
Subprime crisis
Second oil crisis

8
200
180
7
160
6
140
5
120
4
100
80
3
60
2
40
1
20
0
0
1971
1974
1975
1979
1980
1982
1983
1986
1988
1989
1991
1994
1995
1997
1998
2001
2003
2004
2006
1970
1972
1973
1976
1977
1978
1981
1984
1985
1987
1990
1992
1993
1996
1999
2000
2002
2005
2007
2008 (e)
2009 (p)
World economic growth
Payment incidences index (base100 world average
1995-2000)
Source Loan Risk Administration, Coface Romania
17
Payment difficulty index
2008 evolution
First 11 months. yoy
United States
66
64
Great Britain
Spain
131
70
Ireland
World level
47
0
50
100
150
Western Europe
North America
Source Loan Risk Administration, Coface Romania
18
Financial crisis in Romania
  • High ticket consumer goods sales fell 10-30 in
    Nov/Dec 2008 vs 2007
  • Dacia sales fell 16,7 in 2008 and 55 in Dec
    2008 compared with Dec 2007
  • Real estate transactions fell 70 in 2008 vs 2007
  • Exports fell 17 in December 2008 Vs. Dec 2007
  • Large dismissals forecast for H109. Dismissed
    employees at end of 2008 will lead to a possible
    8 unemployment rate in 2009
  • Most affected industries construction,
    metallurgie, automobile,, petrochimie Detail
    (Electronique et biens durables)

Source Loan Risk Administration, Coface Romania
18
19
Loan risk new vision
  • Client credit can no longer be overlooked
  • Vital to have most recent information about each
    client
  • Accounts receivables becomes priority over sales
    growth
  • Any negative information about a client must be
    analyzed carefully
  • Quick reactions imperative regarding any payment
    delays or negative information
  • Companys financial health no longer enough to
    grant commercial credit
  • Traditional business relationship no longer a
    security element
  • In times of crisis no company can be considered a
    good payer

Source Loan Risk Administration, Coface Romania
20
What needs to be done?
  • Restrict credit limits
  • Previous credit limits need to be adjusted with
    todays market situation
  • Focus on most recent data about your clients
  • Seek additional quality information for new
    customers industry trends, receipts and
    payments, lines of credit, guarantees and assets.
  • Exchange information between industry players
    (Vodafone/Orange)
  • Be attentive to negative information slow or no
    payment incidences, payment ultimatums, State
    dues.
  • Good financial standing no longer a guarantee,
    industry wide risks need to be considered.
  • Coface suggests companies to not rely on one two
    major clients. Suggests smaller, frequent sales
    amounts, shorter credit terms, portfolio
    diversification .

Source Loan Risk Administration, Coface Romania
21
Romania Survey and Findings
  • Successful organizations Increased marketing
    expenses during recessions!
  • Do this effectively, taking into account
    customer needs, expectations and market
    information. The Financial CrisisMeter (Mercury
    Research) enables Romanian companies to
    anticipate effects of crisis.
  • Research Findings issued on 14th of January
    2009 (continued during February July 2009)
  • 1) Romanians are highly exposed to mass media
    information about the crisis 63 declared they
    watched either occasionally, or constantly
    information about the crisis and only 4 did not
    hear about a financial crisis. Bucharest
    residents and higher educated people pay more
    attention to crisis related news than other
    categories investigated.
  • 2) Survey confirms a strong pessimism during this
    time more than half of respondents (53)
    slightly more concerned about current personal
    financial situation compared with six months ago.
  • 3) There is lot of uncertainty about what it
    might happen. Romanians show high concerns for
    income decrease, making debts, not being able to
    pay them, not able to maintain same life style
    (34).
  • Continuous tracking (17 November 10 December
    2008 18 31 January 2009 18 31 March 2009
    17 - 30 June 2009) of two categories of
    indicators Personal money management and
    potential concerns and Trust in the Romanian
    financial industry. Find out what adults from
    Romania people aged 18 - feel and plan during
    the current economic context from a national
    representative sample of 1100 respondents (high
    accuracy level max sampling error 2.9),
    interviewed through face-to-face methodology in
    Mercury Omnibus.

22
Romania Survey and Findings
  • Research Findings issued on 14th of January
    2009 (Continued during February July 2009)
  • 4) However, direct effects of crisis are better
    acknowledged by more informed respondents. Higher
    degree of information, the higher the concerns
    about
  • Are Romanians going to adjust family budget? If
    economical situation worsens, people probably
    reduce expenses for main categories in family
    budget food (Retailers should pay attention to
    merchandising to weather the recession), clothing
    and shoes (higher demand for used clothing?),
    house expenses. Also, level of income and
    education are important differentiators when it
    comes to budget adjustment strategies.

Losing the job
Being unable to save/ invest as much as usual
Being unable to pay the loan installments
23
Recession 101 Key Learning
Can we compare to great depression??
  • Ben Bernanke, Chairman of the Board of Governors
    US Federal Reserve, a scholar on the Great
    Depression, said the Fed has learned from errors
    policymakers made in that era.
  • Fed made two critical mistakes in 1930s -
    maintaining overly tight monetary policy and
    allowing financial system to collapse. Fed
    proactively reduced rates from 5.25 in September
    2007 to its current historic low and injected
    unprecedented amounts of liquidity into the
    financial system.
  • Absence of bank deposit insurance at time caused
    catastrophic erosion to household wealth and
    consumption. Today, FDIC insurance ( recently
    elevated limit to 250,000) provides significant
    cushion Response of economic policymakers is
    immeasurably faster and more aggressive now
  • Average length of ten recessions since World War
    II 10.4 months, with range of 6 months in 1980
    recession to 16 months in 1981-82,.Ntural
    "placeholder" time frame for the end of this
    recession would appear to be mid 2009.
  • However, given that recession is now 15 months
    old, not approaching its trough yet, raises
    distinct prospect that it will exceed the length
    of the 1973-75 and 1981-82 recessions (both at 16
    months),
  • Critical question What kind of recovery is
    likely to follow? Answer probably a gradual one,
    unlike the more typical pattern of past
    recessions roaring ahead, propelled by pent-up
    consumer demand

24
Recession 101 Key Learning
  • Romanians are
  • Consumers
  • Have traditionally been savers
  • Relatively debt free vs. West Europeans and North
    Americans
  • Can more easily persevere the effects of a
    recession
  • The ultimate cure of a recession is letting it
    run its course."
  • The financial media often takes on a "sky is
    falling" mentality when it comes to recession.
    Bottom line is that recession is a normal part of
    the business cycle

Weekly good news stories
  • Foreign investors stakes in companies operating
    on the Romanian financial market tripled in
    October 2008, foreign capital flow on financial
    market reaching EUR 4 bln.
  • Pirelli Assemblies plant Bumbesti Jiu,
    estimated to open Q1 of 2009. In Q408, Pirelli
    announced it would add EUR 250 million to
    current investments in Romania, develop
    industrial hub in automotive industry. By 2011,
    the total investments will reach EUR 500 million.
  • Financial chain Millennium Bank started planned
    expansion in Romania for 2009 with new branch
    opened in Suceava. Bank plans to open branches in
    9 cities H109.
  • Carrefour exceeded the EUR 1 billion threshold
    in sales in Romania in 08, 37.4 more sales over
    previous year, to EUR 1.19 billion.
  • Axa Group has put EUR 6.2 million into a
    residential compound of 33 luxury apartments in
    the Baneasa area, planned to start March 09.
  • Jan. 03, 2009 ProcterGamble will invest 100
    million in second factory in Romania (hair care
    products) in Urlati, Prahova County. One few
    Greenfield projects in Romania.

25
Personal approach to the Recession
  • In a downsizing economy, the best return on
    investment for your career may be to focus on
    your current
  • job. How?
  • Think of ways to generate revenues or cut costs.
    Concentrate on finding places to pinch pennies,
    or identifying cheap new sources of revenue. Or
    both.
  • Be visible. This isn't the moment to take an
    extended vacation. Your position could be
    eliminated while you're gone. Do not come
    rolling in at ten o'clock. Figure a way to
    stand out and distinguish yourself. If you're in
    sales, get your numbers up. Nobody will be laying
    off star salespeople.
  • Talk up your contributions. Make sure you're
    adding value at work by going above and beyond
    your basic job responsibilities..
  • Keep a broad perspective. Don't get a reputation
    as someone who only does what he or she is told
    to do. Pick your head up, look around, and get in
    on the action. Volunteer for crucial
    responsibilities, including tasks for which your
    boss is responsible.
  • Get your skills up to date. Companies get rid of
    people whose skills are obsolete and replace them
    with people who are already trained. Join trade
    organizations and prove you're plugged in.
    Consider going back to school, show your employer
    you're serious about your career and performance.
  • No whining allowed. Attitude does count a lot.
    Management wants people who can boost morale
    during tough times. Happy workers are less likely
    to get laid off than people who dislike what they
    do. If you grumble about your job all the time,
    then maybe giving you the sack would really be
    doing you a favor.

26
Step 2 Businesses that do well
  • Contrary to popular belief, some companies do
    well and even better during a recession

27
Industries in high demand during a recession
  • Food retailers. The Food industry less affected
    in recessions because people have to eat i.e.
    Maslows fundamental
  • need 2. Consumers may cut back on luxury food
    items but in times of continuous financial
  • pressure, people might spoil themselves by
    buying food items little more expensive to
    forget about life for
  • a while Wal-Mart whose sales rose 3.4 percent
    in November 08, is a big beneficiary of
    consumers' downscaling..
  • Wal-Mart drives for more Mass. grocery business,
    The Boston Globe, February 10, 2009

2) Entertainment. One axiom that grew out of the
Depression was that, in bad times, people go to
the movies Box office data from more recent
downturns show conflicting signs on ticket
sales rose in the recession in the early 1980s.
3) Chocolate Recession-proof. "In volume terms,
growth in the premium chocolate segment has
slowed somewhat in recent months as a result of
the global economic crisis. However, in value
terms, this category is still growing," said
Josiane Kremer of Switzerland-based Barry
Callebaut. Brands that have the highest quality
and offer superior taste that are backed by
strong brands already will probably have an
advantage,"
4) Many US lotteries across the USA are
experiencing record sales, driven by intense
marketing, people who trying to turn a lottery
ticket into a ticket out of hard times. When
people view themselves as doing worse
financially, they purchase lottery tickets,
Emily Haisley, Yale School of Management who
published research paper on lotteries in The
Journal of Behavioral Decision Making. The
Gambling industry (casinos, sports betting etc)
might be resilient to the current crisis in
Romania despite some well known casinos have
announced important losses lately.
28
Industries in high demand during a recession
5) Video Games Goldman Sachs forecast report
predicted unlikely winner among media
choices.Video game sales are in the home and,
frankly, video games are perhaps the cheapest
forms of entertainment on a dollar per hour basis
Nintendo seems to have bucked the recession.
Japanese video game manufacturer doubled November
sales of the Wii in the U.S. from a year ago,
according to latest release on gaming sales. Wii
over a latte. Solid middle class going to make
substitutions to buy games. Now its buy a Wii
and dont eat out for a month, or dont take that
ski trip, Or cut out Starbucks.. Regardless
of downturns, consumers pursue something fun,"
Mineo Koda , Nintendo said in an interview with
The Korea Herald.
6) Buyer and Seller of Used Office Computer
Equipment, ( see ITLiquidators.com)
cartridge refill companies
7) Alcohol sellers.
8) Auto Repair and Recycling
9) Office Liquidators
29
Industries in high demand during a recession
10) Used Clothing
11) Bankruptcy Attorneys
12) Jewelry re-sale. Virginia-based company
Goldrush has kiosks in malls asking customers to
sell them gold and silver at a fraction of its
value so they can melt it down and resell it.
13) The Concert Business grossed under 4 billion
worldwide in 2008, most ever for a year up
almost 13 percent over last year, according to
Billboard magazine. "Overall, it's been a pretty
good year for touring," said Ray Waddell, who
covers industry Billboard. "I'd never say it's
recession-proof, but it's resilient."
14) Indoor sports facilities. Developers say a
number of factors make them confident . When
families cut back on vacations, they're likely to
keep their children busy during school breaks
with activities like indoor soccer camps . People
cut back on luxury trips and going to a fancy
restaurant, but as far as youth sports, it's
something people want to do for as long as
possible,"
15) Big-ticket luxury items will suffer,
especially in the consumer electronics space.
The exception will be so-called "smart phones.
16) Notebooks. Computer industry ships more
portable computers than desktops, and part of
the mix will be mini-notebook computers, known as
notebooks. Computer makers will sell more than
11 million notebooks worldwide in 2008, up from
one million in 07. Stripped-down portables (no
DVD drive, less processing power) have
stripped-down price. Market leaders ASUS and
Acer offer sub-300 notebooks, and well as Dell
and HP .Affordability of notebooks makes them an
ideal solution in emerging markets,.
17) Cloud services/computing. Software-as-a-servic
e (SaaS) companies have long promoted themselves
as more capital-efficient alternatives to
installed software solutions. Instead of
financing big software purchases and
installation, companies can "pay as they go"
under the cloud services model. Ex.
Salesforce.com
30
Industries in high demand during a recession
18) Virtualization. Helps companies reduce cost
of operating machines such as servers.
Technology allows single piece of hardware to run
systems or applications that previously had run
on multiple machines essentially allowing
companies to squeeze more out of existing
hardware and even defer new purchases.
19) Broadband. American consumers are unlikely
to part with their broadband connections, an
Accenture study found. They are more likely to
get rid of cable television channels (once
considered practically a utility) or their
mobile phones than their high-speed Internet
connections. "It is absolutely recession-proof,"
20) Residential trade contractors

21) Medicinal biological
products22) Medical equipment23) Pet and pet
supply stores24) Passenger transportation25)
Consumer lending26) Financial transaction
processing and clearing27) Portfolio management
Services28) Investment advice29) Direct
health and medical insurance 30) Self-storage
centers 31) Tax preparation services
32) Process and logistics consulting
services 33) Veterinary services34) Security
guards and armored car services35) Elementary
and secondary schools, Universities 36)
Ambulatory health care services37) Physicians,
Dentists, Specialty therapists 38) Outpatient
care centers and Medical laboratories 39) Blood
Banks 40) Homes for the elderly / Child
care 41) Sports agents 42) Zoos and natural
parks 43) Nail salons 44) Local government
administration
31
More industries in high demand
  • Property companies Buying good-quality assets at
    distressed prices. Kept powder dry by staying in
    cash last year and now out to exploit
    opportunities thrown by current downturn.
  • Pawnbrokers (Amanet). Hard-up consumers are
    selling jewellery for cash and pawnbrokers act as
    alternative credit source in absence of bank
    lending. Well-placed to benefit from tight credit
    conditions and economic contraction pawnbrokers
    continue to report strong trading and customer
    growth.
  • Funeral director is one type of company that
    will definitely not run out of customers in hard
    times like the ones that we are facing.
  • Specialist health and social care recruiter
    supplies nurses, pharmacists and specialist
    medical staff to the NHS and other health care
    organizations doing well during a recession -
    health care sector naturally resistant to
    recession people still get ill in a downturn.
  • Restaurant Group. This type of company could
    benefit from consumers' tendency to "trade down"
    in a recession. The outlets tend to be in retail
    parks, which are popular with families at
    weekends. Many people cut down on trips to
    expensive restaurants in lean times but will take
    their family out to see a film and a meal.

32
More industries in high demand
  • Companies which supplies individuals' credit
    histories to lenders are doing well because
    knowing what your credit rating is has never been
    so important (coming soon in Romania).
  • Door-to-door credit company. More borrowers are
    being turned down by mainstream lenders and
    forced to look further afield (Provident
    Financial Romania).
  • Insurance companies. Global shortage of capital
    in the insurance industry, as a result of the
    credit crunch. Absence of new competitors puts
    established players with access to reliable pools
    of capital .
  • Company specialized in online trading services
    for retail, professional and institutional
    customers. Market volatility creates more
    interest in such a market, so demand is high.

33
Industries in high demand through a recession
34
Product /services revenue growth, last 12 months Product /services revenue growth, last 12 months Product /services revenue growth, last 12 months
No. Industry Sales Growth
1 Farm Product Raw Material Wholesalers 21.70
2 Support Activities for Mining 17.76
3 Remediation and Other Waste Management Services 14.85
4 Navigational, Measuring, Electromedical and Control Instrumesnts Manufacutring 14.80
5 Software Publisher 14.18
6 Beverage Manufacturing 13.69
7 Other Telecommunications 13.46
8 Support Activities for Agriculture and Forestry 13.44
9 Waste Collection 13.34
10 Direct Selling Establishments 13.33
11 Medical and Diagnostic Laboratories 13.12
12 Other Food Manufacturing 12.41
13 Medical Equipments and Supplies Manufacturing 12.26
14 Accounting, Tax Preparation, Bookkeeping, and Payroll Services 11.87
15 Employment Services 11.54
16 Security Services 11.23
17 Outpatient Care Centers 11.08
18 Electrical and Electronic Goods Wholesalers 11.04
19 Bakeries 10.84
20 Business Support Services 10.81
21 Management of Companies and Enterprises 10.78
22 Computer Systems Design and Related Services 10.77
23 Special Food Services 10.18
24 Metal and Mineral (except Petroleum) Wholesalers 10.18
Industries from US that have experienced
significant sales growth in the last 12 months
(2008) - privately owned companies only.
Source Sageworks, Inc. Sageworks, Inc.
35
Local Headlines Industries in high demand
Food retailers Carrefour, Metro have made
investment commitments in last few months to
build more stores in Romania. Selgros
CashCarry chain, plans to invest some 30-40
million this year in two new stores, create 600
jobs. Business Standard, February 10,
2009 Trident hypermarket, supermarket networks
will recruit 550 persons in 09 part of expansion
plan, including Bucharest market. Business
Standard, February 4, 2009 Mega Image
supermarket chain, continue expansion strategy,
speed up the introduction of own branded products
in stores, create 360 new jobs in 2009 Business
Standard, February 6, 2009 The Profi discount
retailer, posted a 49 annual rise in sales in
January, most significant increase on first-price
product segment, surged 150 percent year-on-year.
Business Standard, January 24, 2009 Carrefour
posted a 12 percent annual increase in sales of
own brand products in January, considering
orientation of clients towards less expensive
products, own brands, and promotions. Business
Standard, February 27, 2009
Travel industry Happy Tour Romania, the largest
local travel agency, focus its strategy on
maintaining its corporate client portfolio. For
2009, we will focus on large, corporate clients,
on maintaining and consolidating our client
portfolio, and even expanding this. This is a
year of crisis, and now, more than ever, people
will want to get away from the stress and
pressure of their jobs and day-to-day problems
36
Jobs in demand through a recession
The folks at Cisco want to hear from you. A
survey commissioned by Cisco in July 2008 shows
there will be a shortage of 60,000 of these
workers through 2011
1) Networking and Systems Administration.
Movement towards online systems integration has
trended upwards over time. As hackers continue to
create new ways to compromise integrity of
systems they attack, increasingly important for
networks to be iron-clad-secure,maintain user
trust and apositive public image.
2) Business Analysis, Software Implementation.
Professionals work with companies to figure out
which software best suits their needs. install
the software and teach staff.
3) Accounting and audit jobs Tax work, auditing,
preparing company's quarterly reports still goes
on, tough economy or not.
4) Health care. Half of the 30 fastest growing
jobs over the next 8 years will be in the medical
field
5) Administrative Assistant
6) Tracking Accounts Receivable
7) Business Analysis, Research
8) Software Design and Development
9) Nursing
10) Finance Staff
37
Jobs in demand through a recession (2)
11) Helping Commercial Borrowers companies help
buyers of commercial real estate multifamily
apartments, office buildings and shopping centers
who want to take over the sellers mortgages,
rather than get new loans. Buyers may now have
no other financing choice than to assume or take
over the sellers mortgages.
12) Liquidating Machinery and Inventory Banks
dealing with troubled companies, need to
liquidate business property acquired through
foreclosures. Monitoring declining asset values
of companies that had pledged their inventories
and accounts receivable as security for loans.
Auctioneers who travel the country, get 12
percent commission for selling off business
assets. Even in a soft market, there is always a
buyer.
13) Advising Troubled Companies, restructuring
advisers, are directly countercyclical to
economy. Financial distress, both before and
after bankruptcy, ex. liquidity problems,
expenses outpacing revenues exhausting credit
at financial institutions or creditors, once
lenient in a tight cycle, may now be demanding
payment. Maintaining liquidity is probably the
most important thing you can do.
14) Green Energy/Global Warming. Specifically,
battery technicians, wind, solar, CO2 emissions
technology, nanotechnology, materials sciences,
natural gas exploration and infrastructure, and
nuclear.
15) Sales representatives and account/customer
support. Companies view current economic
slowdown as opportunity to steal market share as
competitors cut back, when the economy emerges to
come out stronger than ever. To do this, they
need right talent to interact with external world.
16) Actuaries As pension funds are hit by the
volatile markets, trustees are turning to their
actuaries and pension advisers to maintain the
stability of their schemes.
38
Startups in a Downturn
  • Q. What does Cisco, Oracle and Google have in
    common?
  • They were started in the worse possible
    economical times.
  • Lessons learned
  • 1) Makes sense to do research and development
    counter-cyclically.
  • 2) Recessions can be really useful strategic
    opportunities.
  • 3) Everything is cheaper during downturn,
    including cost of labor, materials, office space.
  • 4) Theres less competition, both from incumbents
    putting out their own fires and startups finding
    it harder to raise money.
  • 5) Tough times force entrepreneurs to work on
    business models earlier, end up reaching
    profitability more quickly than when money comes
    cheap. The companies are tougher because they
    were tested during a tougher time.
  • 6) Lotus software - another survivor. Owner said
    If a product meets an unmet need, it doesnt
    matter if the economy is bad.

39
Case Studies - HP Hewlett-Packard
Summary. HP born in a Palo Alto garage at end of
Great Depression, January 1, 1939. Electronic
company, initially supported by a mere 538
investment, has grown into first technology
business exceeding 104 billion in revenue in
2007. 1939 - Revenue 5369. Employees 2
What they did during Recession. After resisting
global recession for most of 2008,
Hewlett-Packard reported profit dropped 13
percent for the first quarter of 2009. New
cost-cutting measures, including trims in
employee benefits, salary reductions range from
2.5 percent for hourly workers to 20 percent of
CEO's base pay. Some of money could be returned
in bonuses for all employees, depending on the
company's performance. CEO vowed to keep profits
up by continuing to cut costs. September cut
nearly 25,000 jobs, or 6 percent of its work
force, over the next three years, to eliminate
redundant positions from EDS. Expects to save 1
billion in operating costs through layoffs, other
expense reductions in 2009. however, number of
engineers working in RD increased. "We're not
cutting the critical innovation or sales
resources," .Company would continue to invest in
"so we emerge from this recession in a more
powerful position.
  • Results Today
  • One billion customers in more than 170
    countries on six continents.
  • HP has 321,000 employees worldwide.
  • HP's 2008 Fortune 500 ranking No. 14
  • 1.9 billion in profit.

40
Case Studies - Vlasic
Summary. Vlasic Pickles grew out of Detroit
creamery, fresh pickle business begun by Croatian
immigrant Franko Vlasic in 1920s. Vlasic's
primary product, pickles packaged in glass jars,
began production in 1942, during World War II,
and the business rapidly expanded in the post-war
years, corresponding with growth in per capita
pickle consumption. Official website claims
Vlasic was inventor of glass-packed, shelf
stable pickle.
What they did During Recession. Slashed the price
of its products, it loaded them up into gallon
jars and sold the oversized products at Wal-mart
for 2.97 - less than the price of a quart of
Vlasic sliced pickles found at grocery stores.
Product worked for Wal-mart, garnered attention
of consumers. Big jar-o-pickles screamed value to
Walmarts customers. Although, the fact that it
was a jar of pickles didnt really matter. What
mattered was that it was a big, cheap jar of
pickles! Vlasic was nothing more than in-store
advertisement for Wal-marts Everyday Low Prices.
Gallon jar helped company find its way to
bankruptcy much more quickly. Its earnings
evaporated. Price reductions do more than
compromise earnings. They compromise customers
perceived value of your products and services
your brand which ultimately affects the
long-term equity of the franchise.
3 Dollar pickle jarThank you Walmart!
  • Results Today
  • Today, Vlasic is owned by Pinnacle Foods since
    its name change in 2001

41
Case Studies - Kraft
Summary. Weve come along way since J.L.Kraft
started selling cheese from a horse drawn wagon
in 1903. Hard work, imagination and a commitment
to bring the world its favorite foods
What they did During Recession. 1933, Kraft
launched its iconic salad dressing/sandwich
spread Miracle Whip - again, not in spite of the
Depression, but because of it. This new miracle
mayonnaise spread had instant appeal to
Depression-weary consumers grown tired of the
boring taste of vegetables, salads, and
sandwiches. Kraft Miracle Whip soon launched one
of biggest food advertising campaigns to ever
grace the U.S. media -- from print to TV. Initial
effort led to 22 weeks of almost non-stop
advertising, including weekly two hour radio
show. Not only was Miracle Whip a one-of-a-kind
new product, it was relevant. Innovation is not a
good times only exercise. Innovation always
matters. It must, however, be relevant to needs
of the market. Within six months after initial
launch, this uniquely relevant new idea outsold
all other brands of dressing and mayonnaise,went
on to become a mainstay in refrigerators across
America.
  • Results Today. With revenues of 37 billion,
    Kraft Foods Inc. is one of the worlds largest
    food and beverage companies.
  • Kraft products are present in more than 99 of
    U.S. households.
  • Kraft markets many of the worlds leading food
    brands. Nine brands with revenues exceeding 1
    billion and more than 50 additional brands with
    revenues greater than 100 million. More than 40
    of brands are 100 years old.
  • Bllion dollar brands include Kraft, Jacobs, LU,
    Maxwell House, Milka, Nabisco, Oreo brand,
    Philadelphia, and Oscar Mayer.
  • 103,000 employees worldwide, more than 180
    manufacturing and processing facilities worldwide.

42
Case Studies - Apple
Summary. Apple Inc. Designs and manufactures
consumer electronics and software products,
best-known products include Macintosh computers,
the iPod and iPhone. Apple has established a
unique reputation in the consumer electronics
industry.
What they did During Recession. In 2003, Dow at
historical lows over a 10-year period, Apple
continued to invest. When asked why he hadnt
reduced research and development spending when
others in industry had experienced slow down,
Steve Jobs recalls What has happened in
technology over the last few years has been about
the downturn, not the future of technology. A lot
of companies have chosen to downsize, and maybe
that was the right thing for them. We chose a
different path. Our belief was that if we kept
putting great products in front of customers,
they would continue to open their wallets.
Thats what weve done. Weve been turning out
more new products than ever before, and Apple is
one of the only two companies making money in the
PC business. Were not making a lot, but other
than Dell, were the only one. Others are losing
money a lot of money. Apple has history of
remaining relevant during most difficult of
times. Through innovation, Apple kept its
pipeline robust, but more importantly has
remained in front of customers. Apple tells its
story through new products. New products are not
only required to remain relevant, they are signs
of hope to employees and to customers that your
company and your brand are valuable in their
lives.
  • Results Today.
  • 250 retail stores in nine countries and an online
    store where hardware and software products are
    sold.
  • 35,000 employees worldwide and annual sales of
    US32.48 billion in its fiscal year ending Sept.
    29, 2008.
  • In 2008, Fortune magazine named Apple the most
    admired company in the United States.
  • iPhone sales from that quarter surpassed RIM's
    BlackBerry sales of 5.2 million units. Up to
    September 30, 2008, the iPhone represented 39
    percent (US4.6 billion) of the company's total
    quarterly revenues,

43
Case Studies - Gillette
Summary. Gillette is a brand of Procter Gamble
currently used for safety razors among other
personal hygiene products. Gillette Company
founded by King C. Gillette in 1901 as a safety
razor manufacturer. In 1999 Gillette as a company
was worth US43 billion and it was estimated that
the brand value of Gillette was worth US16
billion. This equated to 37 of the companys
value, the same as DaimlerChrysler.
What they did During Recession. Innovation is a
good cost. Gillettes 1990 introduction of its
Gillette Sensor brand of shaving products.
Launched in a recession, more than 8 billion
Sensor razor blade cartridges and 400 million
Sensors razors have been sold. By 1997, 49 of
Gillettes sales came from new products launched
in the previous five years and RD spending had
reached 212 million.
Results Today. PG enhance its product
performance and brand equity between these
disruptive innovations with meaningful product
and design initiatives every 12 to 18 months. In
addition, they maintain a steady pace of
commercial innovation.
44
Case Studies Paper products manufacturer
What they did During Recession Bad costs
involve investing in things such as fixed and
working capital, manufacturing, and general and
administrative expenses. Investing in such assets
during recession - even though their presence is
intended to yield cost competitiveness or improve
productivity often do just the opposite. A
paper products manufacturer in UK invested in
building a state-of-the-art facility during the
1990s. The prevailing logic of the investment was
that new automation could replace employees
working in their warehouses and improve the
efficiency in how they managed orders. In
reality, profits actually fell not only because
of high depreciation charges, but because of need
to retain expensive consultants to de-bug the
process, software, and systems. Customer
service fell off dramatically as new system did
not allow for flexibility in prioritizing and
re-prioritizing customer orders based on
immediate needs which led to a loss of business
and a reduction in market share. To compensate,
the company reduced its prices in an attempt to
win back business only to see its margins erode
even further.
45
So what
  • Your clients may have opportunities that you can
    discover/explore with them.
  • Consider targeting some of these companies if
    you were not doing so in the past.
  • Be creative by exploring different payment
    mechanisms instead of the typical supplier-client
    relationship, ex. pay for success, pay in 3
    months, bonus on cost cutting.
  • Change the way you sell products. Developer who
    sells new homes is offering ability to rent to
    own which is a fairly new concept in Romania.
    For a small deposit and reasonable monthly
    payments, you can own your new home. At any time
    you can apply for a mortgage and pay the
    developer. Some conditions apply
  • Barter If you cant pay for something you can
    probably barter your services for other services
    and products.
  • Re-sale of products. Some fashion shops in New
    York are buying used brand name clothing and
    re-selling after it was used only a few times.
    The Profit margins are good and customers get a
    sizeable discount off designer clothes

46
Coffee break
47
Step 3 Cut costs with a scalpel, not a chainsaw.
  • Fortune magazine 3 experts on how to cut costs
  • An executive of low cost airline, SVP at
    medical supply
  • manufacturer and consultant at Bain co
  • Q1) How do I know where I am spending too much?
  • Our team regularly goes each budget line by
    line. However cuts are made where there is the
    least impact on customers. We dont take a
    chainsaw to cut costs we prefer to be more
    surgical.
  • Bring in third party groups that specialize in
    benchmarking. We compare our supply chain with
    companies like Wall-Mart. We look at our systems
    to see if we have redundancies.
  • Create a dedicated (cost cutting) team and have
    each person spends 50 of their time on it.

48
Step 3 Cut costs with a scalpel, not a chainsaw.
  • Q2. Are there cuts that are worth making?
  • Some will never be cut since it reinforces our
    corporate culture like bringing in customers into
    our head office to tell us how our products are
    doing.
  • Prioritize. Take on cuts that are large, easy to
    implement like consolidating suppliers. Be
    careful with changes that bring small savings but
    come at a big cost like cutting off coffee for
    staff which may lower morale.
  • Q3) What are some of the reductions that
    companies often overlook?
  • Some companies dont look at creative ideas to
    avoid layoffs. To prevent overstaffing consider
    voluntary leave program without pay or flex time
    - keep their benefits and you get a reduced
    payroll while having access to trained, on demand
    staff.
  • 50 of costs for most are associated with
    purchases. If you aim at your supply chain and
    those costs, you can avoid layoffs. Its free
    money and easy to implement. Layoffs will cost
    you more in the long term when the market picks
    up again, and it will pick up again.

49
Other cost cutting strategies
1) Cash is King - liquidate assets and get rid of
dead of stock. Start keeping some money aside in
case the economy does indeed get worse.
2) Good records - keep business records up to
date to always know how you are faring. The more
robust your records the easier it will be to move
faster in the case of a slump.
3) Batten down the hatches - When business is
slow you have more time on your hands to look at
ways of cutting costs. Cut down on wastage and
examine all your outgoings to Remove/ reduce all
unnecessary expenses.
4) Speak to your lenders - Keep communication
lines open with banks Discuss skipping payments
(new in Romania.) You are asking to capitalize
interest to later date. This extends term of
contract but cash flow will help you temporarily
Most Romanian banks are foreign owned, well known
option in their home markets. Open talks with
another lender just in case your bank pulls the
plug.
5) Examine your loans - in recession interest
rates fall as government try harder to stimulate
the economy - ideal time to collate all your
loans, possibly switch to longer payment terms
and / or fixed rate loans. The European Central
Bank (ECB) has dropped interest rates by .5 to
2 and you could re-negotiate your Euribor loans
to get better rates.
6) Negotiate harder with your suppliers - Ask for
longer payment terms, demand quicker delivery
times to require less money tied up in stock.
McKesson (generic drugs manufacturer) customers
include big retailers under pressure to cut costs
as consumers grow stingier. For those retailers,
negotiating significant cost reductions from
suppliers of generic drugs is tough, so McKesson
offers them this proposition Buy all your
generics from us and redeploy your purchasing
team to projects where it can achieve bigger
savings.
50
Other cost cutting strategies
7) Improve your credit control - cash flow is
king in recession so meet all customers
especially delinquent. ones Send regular
reminders and statements followed by a phone
call the minute an invoice is overdue. Beware of
clients faking payment problems. If you insist
with the proper follow up you will be first in
line to get paid.
8) Reduce the amount of credit extended to
customers," says Scott Shane, professor of
entrepreneurial studies at Case Western Reserve
University and author of Illusions of
Entrepreneurship. "Get the money fast by offering
a discount" to those who pay up immediately.
9) Videoconference instead of travel. Costco
reduced in-person meeting costs with
videoconferencing - 59 Managers that typically
traveled began meeting virtually every other
month. Savings 750,000 US in 2008, 3-5
million when they roll out nationwide. Consider
using Skype.
10) Increase your Marketing Yes increase! This
is worst time to reduce your marketing budget.
Goal Keep, hopefully increase your market share
and the best time is in a recession. Best time
to continually communicate to your customers
inexpensively (email and newsletter,
appreciation letters, sending a brochure, loyalty
program updates) and a perfect time for you to
get out of the office and talk to customers .
McDonalds has posted the best financial results
in its history. The stock price has climbed
handsomely in recent years it reached its
highest point ever in August 67 a share. It
closed last week at 60.07.
Despite the slow down BCR has consistently
maintained their heavy TV advertising weight
51
Other cost cutting strategies
  • Cut across the board instead of cutting critical
    staff
  • More benefits by cutting across the board on
    expenses rather than shedding critical staff. You
    can reduce salaries, pay no vacation and even cut
    back on expenses such as travel and mobiles
    phones.
  • Examples
  • Hewlett-Packard, cut 25,000 jobs following big
    acquisition, cut salaries by 2.5 to 20 and
    reduced contributions to employee 401(k) plans
    (i.e. pension plans). HP asked employees to take
    unpaid vacation days and extended a planned
    holiday shutdown to two weeks.
  • Test equipment maker Agilent Technologies taking
    similar approach. Linked portion of employees
    base pay to financial results, so costs fall
    automatically when profit declines. In December,
    2008 Agilent trimmed salaries an additional 10,
    eliminated 500 full-time positions, freeze
    hiring, limit travel, cut temporary workers and
    mandate unpaid vacation.
  • Ask employees where to cut! Executives at
    Commercial Vehicle Group in US asked four
    employees to devise plan to save additional
    50,000 USD. The group identified 600,000 in
    potential savings, including office supplies and
    cell phones, which it presented to CEO. They
    went after everything, the CEO said.

52
Substitute to marketing cost cutting
Creative marketing Case 1) Romanian large
national retailer. Low volume of customers
visiting stores, approach was not to cut
Marketing expenses but rather re-direct them and
try something different Localized marketing
that is, communicate more effectively to stores
catchment area or customers residing in vicinity
(ex. flyers delivered through mail, Meshes or
Poster Boards, Promoters, etc) .
Case 2) French car Manufacturer with low market
presence cannot afford NOT to advertize. They
understand that you must keep advertising
otherwise people will forget about us.
Online shoppers defy recession! In UK, Capgemini
e-Retail Sales Index showed online spending
increased 19 in January 2009,predicting monthly
growth of 15 for online sales throughout 2009.
People go online for choice, price transparency
and ability to research prices. These advantages
are even more acute in environment where people
are watching spending." Message. Romania online
shopping is exploding. Even conventional
products can now be acquired online in Romania.
Inexpensive distribution channel and market
timing could not be better!
53
  • Most respondents are still coping with the
    crisis by cutting costs, many are making more use
    of long-term tactics suggesting that see global
    economic turmoil as new normal.
  • 40 of respondents expect upturn to begin by
    end of this year. Many executives are betting on
    the United States to lead that upturn..
  • Companies sticking to tactics they identified
    last fall as helping them manage global economic
    turmoil.
  • Higher proportion of companies taking
    longer-term actions such as restructuring, hiring
    talent, leaving markets altogether, indicating
    that more see turmoil as creating long-term
    structural changes.
  • Only a fifth of respondents say their companies
    are reducing philanthropic spending as result of
    global economic turmoil.

McKinsey Global Survey Results
Economic conditions snapshot February 2009
Survey, Jan. 27, 2009, to Feb. 2, 2009,1,820
executives from around the world and represented
full range of industries and functional
specialties.
Source McKinsey Global Survey Results Economic
conditions snapshot February 2009, February 2009
54
Workshop What has your company done to cut
costs or reduce expenses?
55
Step 4 Perfect time to plan
  • These difficult times forces us to become more
    creative. Take a step back and realize that there
    are a lot of areas that
  • need improvement and the time could not be
    better
  • 1. People planning
  • Consider contingency plan for your key staff?
  • Who are critical?
  • Good time to test out future leaders ( new
    function, new department)
  • Shift to other departments? How many would accept
    flex time, layoffs keeping them on the payroll
    long enough to qualify for retirement, medical or
    stock benefits.
  • Critical part of core is continual development of
    employees. Yet remarkable how many businesses cut
    training and development in a downturn. The best
    never do.
  • Just as most investment managers look like
    geniuses in a bull market, most employees can
    look like excellent performers in booming
    economy. Identify the impostors. Working hard at
    that task is important, because if you need to
    lay people off, as you well may, it's critical
    that you choose wisely.
  • Subtler danger When salaries, bonuses are
    reduced, you may be tempted to reduce them
    equally. Wrong message sent to best performers,
    who will feel they're being punished rather than
    rewarded for great work. Hay Group consulting
    survey of World's Most Admired Companies as
    ranked by Fortune, best companies take extra
    pains to reassure "most driven and focused
    employees," - ones most important to keep.
    Instead of spreading the pain, reward your best
    workers well, even in a recession.
  • Make sure that pay arrangements don't encourage
    too much (or too little) risk. Deere incentives
    are based on economic profit, including capital
    costs, bonuses earned in any given year are paid
    out over four years if performance falters, part
    of the bonuses can be canceled. The system
    encourages long-term thinking and seeing the
    recession as part of a larger cycle.

56
Step 4 Perfect time to plan
  • 2. Product and service planning
  • When this Recession is over, will your business
    be more competitive or less? Most successful
    companies never stop funding their most critical
    competencies - product innovation, customer
    service, or anything else. We're protecting the
    innovation pipeline so we come out of this
    strong
  • Everyone would like to pay less, especially in
    recession dangers of price chopping are greater
    than you may realize. McKinsey research finds
    that in a typical SP 1500 company, a price cut
    of 5 would have to generate increased sales
    volume of 19 in order to pay for itself - and
    that almost never happens..
  • Reduce inventories, accelerate payments from
    customers, and delay payments to suppliers, all
    while making sure to keep cash on hand most
    bankruptcies are caused by firms running out of
    cash, not because of a hit to earnings.
  • Companies should also take a good hard look at
    inefficiencies, restructure if necessary, says
    SVP at Booz Allen Hamilton. A recession gives
    you good excuse for doing what you need to do
    anyway,". End of the day, recession can turn out
    to be useful for firms well-positioned to
    withstand it.

57
One page marketing plan
  • Complete Marketing plan requires weeks to
    prepare. In absence of time and
  • urgency to get results consider preparing a one
    page marketing plan.
  • Why?
  • Drafting a plan implies setting a vision and
    direction.
  • Weather competition and grim market news Stick
    to the plan.
  • You are the expert in your field.
  • Forcing yourself to put on one page forces you to
    concentrate on priorities.
  • Easier to remember when you wish to recall
    actions.
  • Easier to communicate to staff and company.
  • Best part of having a plan...is that you can
    always change it...
  • A company without a plan is like a ship without
    a rudder

58
One page marketing plan - format
Market review, regulatory framework,
Competition. Market projections 05-10 ex.
960M Euros Internal environmental analysis
  • Vision and Mission
  • Vision That ABC company will be recognised in
    Romania as a re-energised brand and renowned
    for its progressiveness, value and service.
  • Mission To create and fulfil demand for
    leading-edge data and voices services to all of
    Romania.
  • Approach Reinforce family values
  • Seek new niches for products/promote new
    brands
  • Launch products faster .
  • Assumptions Minimum company wide
    execution speed will take at least 2 years
  • Mobile penetration increase will erode ABCs
    revenue/image and will
    create mass churn. Re-balancing will further
    increase churn.
  •  
  • Objectives Gain strong position in
    Business segments, 1) SME, 2) LA, 3) KA
  • Reduce churn. Launch New ADSL faster than
    competition.

59
One page marketing plan - format
Market Segmentation SME Short term focus.
Develop strategy for KA/LA   Products and
Services ADSL ADSL in a box for massive
indirect channel take-up, VOIP.   Tariffs 5
premium over closest competitor for voice and
data products. Distribution Direct Implement
ABC Look and Feel (shops). Improve product
offering, POSM Indirect Encourage early
adopters, reward well and communicate frequently.
Provide COOP and single out new players with
major awareness campaigns.   Marcomms plan
Brand values exercise. Implement next Big idea
for image.   PR, sponsorship 1 major event every
6 months. Optimise COR relationship, find
significant sponsorship (football, Tennis)
steal from competitors   Marketing budget 7.3
M Euros Marketing Organisation Find Subject
Matter Experts for Trade Mktg, Segments, ADSL
and Program Management. Train, substitute,
provide opportunities, push or relieve staff.
Action Plans 1) Launch ADSL with huge
campaign 2) Improve top of mind awareness of ABC
and ADSL Brand by 20 3) Plan bundling upon
immediate billing system launch 4) Plan for
wireless access and voice (mobile partner) 5)
Improve all customer points of contact. Offer
money Back guarantee 6) Steal staff from
competitors
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