Profiting From the Wreckage
It shouldn’t be a surprise to anyone to learn that although this global economic recession which took the destruction of the world economy, has officially ended, the effects are being felt all over the world. There are entire nations that are towards economic collapse. We have many stocks that have seen their value plummet over the last three years, and we’ve added to the list of distressed those living in poverty across the globe. In a nutshell, the situation is still dire, and the most challenging truth is that there’s no way to fix this. The only option available is the time. If we make the right choices (from an economic or social perspective), we can begin to rebuild what we’ve lost.
This saying is also applicable to business; the devastating effects of the financial crisis have made once-successful companies unable to halt the devastation, and, in some instances, the crisis has produced a broad impact on industries that were severely affected.
However, it is crucial to realize that in business, we typically notice that the worst times are the best to seize opportunities for growth. Like the recession that struck this region of the United States in 2001, this recession in the world has left promising businesses lacking the funds to survive, which makes an excellent opportunity to acquire. Additionally, this global recession has caused a variety of industries (such as healthcare, automotive and environmental services, utilities and agriculture, etc.) to consolidate, which has meant that numerous businesses have had to shut down. The advantage is that the assets, resources as well as infrastructures of these businesses remain in use and available to purchase.
For those companies still operating, this is a crucial moment from both an opportunity as well as a competitive point of view. In terms of opportunities, this recession has created as well as will continue to present opportunities to acquire resources and assets that are in need of repair and integrate them into companies with lower costs than before the recession. In terms of the competitive landscape of a variety of industries, the recession has resulted in consolidation. This implies that not only do you have more competitors, but the ones that remain have to be more efficient and better in the manner they conduct business. Additionally, it’s becoming increasingly important to grow from a vertical standpoint in the present, simply because your competition is. It is essential for leaders of businesses in these fields to recognize that in the current market as it is, you will either grow or you will die. Since so many businesses are becoming outdated, their customers and resources will need to be reabsorbed by the market. When it happens, SOMEBODY is likely to purchase these assets. Furthermore, since they purchase the assets for a substantial discount cost, they’re likely to grow and become more profitable as a result of the decisions they make. If companies aren’t able to profit from these opportunities, they’ll be severely limited by their inability to keep up against the companies that are expanding.
In this piece, we intend to illustrate some of the ways the global catastrophe we’ve been experiencing will provide opportunities for both you and your competitors.
1. Resources and assets that are depressed
A company might lack the inner resources to endure a time such as this, but that does not mean they’re lacking in value or aren’t highly desirable acquisition targets. It’s essential to keep in mind that many businesses took too many risks before or during the downturn regardless of their business plans; many of them simply did not (or haven’t) have the infrastructure or resources required to sustain their long-term existence on the market, particularly given that recovery is taking place at a sluggish pace. These companies are that other companies can begin to expand their operations. By absorbing the assets, products, employees as well as customers from the distressed businesses, small businesses can grow into large, and larger companies could grow into huge ones because they are taking advantage of rival companies (that often took years and plenty of money to create and grow) at a significantly reduced cost. Companies that are able to recognize the assets, assess them, and then collect these assets are those that will be most likely to reap the benefits once the market is fully recovered.
2. Improved Efficiency
Although there are some who do not believe that efficiency is linked to growth, it is one of the most efficient ways to expand horizontally. With efficiency, companies are able to boost profitability, create reserves, acquire assets and boost demand in a manner that increases the size of the company and makes it not only bigger but also more profitable to its stakeholders. The issue with efficiency improvements is that they usually require time and typically require a temporary reduction in output when the steps are put into place. However, in the event of a massive recession, this is much more straightforward due to a decrease in demand across the sector, less access to capital within the sector, and a general decrease in capital access; many businesses are forced to reduce production to remain financially sound. While some companies use this time to keep the same old routine but well-run companies use the time to put in place efficiency improvements that create a more efficient company and create an operational structure that is likely to yield higher profits when the recovery has been completed. Additionally, the capability to increase efficiency in these difficult times makes it easier to purchase assets since there are more reserves and an overall system that allows the new assets and resources to adapt to the structure of the business.
3. Research and Development
While not appropriate for all businesses or all industries, it is a good idea to consider all Research and Development may be the main result of a recession and is the most profitable horizontal growth method. Like the implementation efficiency measures, R&D measures are usually delayed in times of prosperity due to their high capital cost, as well as the reality that resources (in most cases, large quantities) need to be allocated to R&D to allow it to be successful. But, in a severe recession, when demand is declining, the majority of companies have inactive assets (generally as a result of time for staff and investment opportunities.) which could be used for R&D. The reason this is advantageous from a growth standpoint is that advancing R&D initiatives allows companies to enhance their current offerings and services, launch new services or products, and develop strategies for market deployment that will be beneficial once demand begins to pick increasing. For sectors like pharmaceuticals and healthcare and pharmaceuticals, the chance to introduce more R&D initiatives at a time when the market is thriving provides for the possibility of gaining more in the marketplace. This is the primary reason for these sectors (as in many other technology-related industries). Innovation is significantly more common immediately after an economic downturn than it was prior to the recession.
The aim of this article isn’t to minimize the devastating global economic downturn which has taken place and to explain why this is the moment that successful businesses are being created. Because of the opportunities presented by a downturn, the potential for the top companies of the future is being built and developed now. As business executives or future business leaders, it is imperative that we profit from the opportunities available today, and if we don’t, it is crucial to realize that a competitor will. When prosperity comes back, the most likely to be those companies that have the influence because they were able to explore the rubble and find the treasures.