Focused, confident businesses survive recessions

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Research shows focused, confident businesses survive recessions

April 6, 2009

Survival in a recession is all about balancing risk and opportunity according to research carried out by New Zealand Trade and Enterprise (NZTE) into successful company survival strategies in a recession.

The ability to be grounded but to have the confidence to take opportunities is highlighted in the research findings. Four of the seven factors identified as helping firms to survive recessions relate to dealing with the reality (focusing on the core business, improving efficiency, getting rid of non-core operations and business restructuring) while three deal with opportunities (acquisitions, increased advertising and marketing, and more research and development).

The research looked at multinational businesses that survived and prospered through past major recessions including the Great Depression, the Oil Crisis, the Stock Market Crash of 1987, the Asian Financial Crisis and the collapse of the dotcom bubble. Selected business leaders provided insights into the companies studied based on their own expertise and experience with business issues.

The research identified seven specific strategies that businesses can use to help them deal with recessionary periods:
1. focus on the core business
2. process and efficiency
3. strategic divestment
4. contingency planning
5. acquisitions and strategic alliances
6. increased advertising and marketing
7. increased investment in research and development.

NZTE Chief Executive Tim Gibson said that while the businesses studied were large multinationals listed on the Fortune 500 index, the seven factors identified apply to businesses of any size, trading from any location.

“These are sound business ideas that help firms position themselves for recovery and that any New Zealand company can implement.

“Recessions are notorious for breaking companies. We’re seeing examples of that now. But our study shows that recessions also provide opportunities to reinvigorate a company.”

Tim Gibson commented that the current recession is a game changing event for businesses worldwide. “The certainties of the last few years ‑ easy credit, rising asset values and strong global demand for products and services – have gone,” he said.
“All businesses need to adjust to this reality, but the clever and courageous ones are also spotting new gaps in their opponents’ defences and making a break for it.
“The companies we looked at all increased growth and profitability during the recessions or the following recovery periods because of the choices they made when times were toughest.

“Businesses should think cautiously in the short term but be ambitious and plan for the long term. There is no doubt that times are increasingly tough, but to survive, businesses have to look to the future.”

Read the full research report at www.nzte.govt.nz/develop-knowledge-expertise/Advanced-Exporter-Guides/Changing-the-game-recession-survival-strategies/

ENDS

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