Strategic solutions to current financial crisis

With devastating drop in the stock exchange markets, top banks collapsing in the United States of America and a global financial crisis spreading around the whole world, many businessmen panicked fearing bankruptcy.
There is a significant decrease in the consumer demand worldwide. “There is a general feeling of sadness and depression,” said Karim Elsharkawy, Chief Executive Officer of Egypt International Food Company. “Thirty percent of people coming to dine in my restaurant have chosen dining at home instead,” said Elsharkawy asserting that is not limited to his restaurant but rather a general trend reaching other top rated ones.
My January trip to France asserts the same idea. In spite shopping in the sales season, it was clear that around thirty percent of shopping lovers have disappeared from the shops.
Booming production rates, implementing a strong marketing action plan, turning products into cash in addition to actualizing extensive strategic planning are the grantee to passing this crisis safely.
The question repeating itself on the current businessmen is how to save their company. Some are captured by the idea of cutting budget by all sheltered means as firing employees, cutting welcoming budget, decreasing bonuses cost along with all other possible costs, while others want to decrease production is much as possible to avoid the risk of their products being unsold.
“In Egypt, Damac has got rid of ten percent of its employees,” said Professor Hussien Saoudi, Professor of corporate finance at the German University in Cairo (GUC).
“While some companies have reduced welcoming budget, some have reduced bonuses given to its employees and others have given some employees unpaid holidays,” he added admitting that such reactions will do no good in dealing with the current financial problem.
Firing employees or reducing their salaries will increase unemployment rates and decrease the demand rate in the Egyptian market which will turn the financial problem into an economic one. “The private sector should work with the public sector to stabilize the demand rates and not the other way round,” said Saoudi giving the increase of production rate per employee as the ultimate alternative to firing them.
“It’s a priceless opportunity to improve your position relative to your competitors,” says Saoudi. “That’s the opportunity that’s usually missed.” And the only way for management to take advantage of that opportunity is through extensive planning.
Opposite to many companies, “Sandos Company’s plan is to increase investment and have a larger profit margin,” said Dr. Osama Asaad, regional sales manager at Sandos Company. Sandos is a generic medicine preparation company that produces medicine cheaper than the original.
Meanwhile, Sandos’s competitors; the originators are downsizing their production and are targeting the niche segment of the society.
Moreover, advertising is another area where companies can boost spending during these times. Typically, advertising costs drop in a recession, creating an opportunity to take advantage of the reduced clutter in the marketplace. Also advertising and creating inspiring promotions could help so much in stabilizing if not increases the consumers’ demand.
Elsharkawy explained that he is making more promotions to attract consumers. “I do not decrease prices because I’ll never be willing to risk the quality of the food served,” he said. Elsharkawy gave karaoke shows along with other parties as examples of promotion tools used in his restaurant.
He added that he would never reduce the number of his employees because he is using the ultimate manpower needed, neither one person less or one person more.
Usually, in the middle of this economic bubble the price of commodities lowers. Problems come from the fact that those products are produced of raw materials bought in high prices before recession and that companies have to sell those products at a lower price. Companies who don’t have stored raw materials in the previous period have a better opportunity of reducing the price of their products.
“Companies are advised to mix the stored raw material with new raw material bought at a lower price to enable them decrease their consumer price,” said Saoudi. “Crisis come when the company has storage of 100 percent of its raw material,” he added.
Hold tight your talented employees. Money isn’t the only incentive tool to retain talent, and during a downturn, it might not be the most realistic one. Managers need to ensure their best employees understand how their work contributes to the success of the company, and take time to discuss career advancement. Recessions can bring a lot of change to an organization: roles may shift, and new career opportunities could open up, which managers should discuss with top employees. “We need to attract talented caliber to implement our plans by all possible means,” said Asaad.
As if the pressure during a downturn isn’t enough already, Michael Stern CEO of executive coaching firm Michael Stern Associates in Canada according to the Canadian Business magazine, provides another warning for managers: “Bosses don’t realize that everybody is watching their every move.” Employees will be looking to their superiors to provide leadership and instill confidence. “Breaking down into a heap of uncontrollable tears is not advisable,” says Stern. But prepare a plan to deal with a downturn now, and the only ones left crying will be your competitors.
January bonus must be paid and could be postponed to another time during the year. “Managers should explain well the situation to their employees and promise to pay it at a given time,” said Saoudi.
“Companies who would be capable of passing the next six months without crisis, should consider themselves saved already,” said Saoudi who advices businessmen to divide the profit margin achieved in year 2007-2008 among year 2008-2009 to prevent them from witnessing the sudden drop.
“Public spending” is another key solution to the current financial crisis. “In Britain thirty-six billion sterling are planned to be spent during the next five years in rebuilding schools in Britain,” said Saoudi explaining how public spending helps in nourishing economic systems. Public spending is when the government invests a lot of money in implementing effective projects that decreases unemployment rates and moves the economic wheel.
Blame the credit card culture because none of this would have happened if millions of people hadn’t come to believe that they could get something for nothing by taking on debts they couldn’t repay. That this misconception was fostered by lenders and politicians is a partial excuse but not a complete one.
The Egyptian culture is not built on the credit card culture; they buy only when there is enough cash in their pockets. They see taking loans as an inappropriate approach which had saved them from witnessing the collapse taking place in the United States of America.