In a strong economy, it is easy for a businesses to enjoy greater productivity. Disposable income is high, unemployment is low and consumer confidence prompts people to pump their money back into the economy through the purchase of essential and nonessential goods and services. Everyone spends more. People tend to buy more luxury items. They buy more what they want than what they need. United States recovery from the last recession has been very slow.
In United States, over the year, average hourly earnings rose only 2.1 percent, in line with the same slow growth it’ve seen for the last six years. And wages for production/non supervisory workers rose even more slowly, at 1.8 percent over the year. The current median household income for the United States is $53,657. Real median household income peaked in 2007 at $57,936 and is now $4,279 (7.39%) lower.
The average American family makes less money than it did in 2007. That means that after expenses there is less discretionary money for spending. So there will be less money spent and less money to disperser among the companies out there. That means there will be more corporate failures and bankruptcies.
Now, according to experts there are two ways to handle this. One is short site and is a prevention mode management. You cut down on cost and expenses, you stop R & D cost and invest nothing more into the company. Sounds like a good idea during an economic slowdown. However it has proven to seldom work.
In December 2008 Sony cut cost by 2.6 billion dollars. It was part of their prevention focused approach to a slower economy. It closed plants, eliminated 16,000 jobs and delayed any investment in its electronic division. It got its payroll cost down by 11% and its R & D cost by 12% and it cut its capital investments by 23%. Now for the good news, its profit margin went up from 8% to 11%. But if you look carefully, growth in sales went down from 11% per year to 1%. It has been struggling to regain its market. Even by adding in R & D it can not rebuild its momentum.
The recession is not the time to drop out of the competition. It actually means that it takes more to stay competitive. If you are looking for the long term benefit of the company, you need to do more to keep your customers and keep the momentum going during those hard times.
Globovisión, Raúl Gorrín, Raúl Antonio Gorrín, Seguros La Vitalicia Raúl Gorrín, Medios de comunicación, Venezuela, Gobierno, Empresarios, Emprendedor,
However, people must also remember that there is less money to go around. So it is best not to be too aggressive with the investments during this time period.
Hewlett-Packard during the recession made large capital investments despite not bringing in the money to cover it and hard a hard time to recover afterwards. This has been debated as to whether it was a long term wise decision.
There is no simple answer, but it is best for each company to find the right mix between some cost cutting and some investments during the slow times. One has to look forward to the long term health of the company and stay competitive but it also has to financially survive those hard days.
Visit:
FOLLOW ME..
No hay comentarios:
Publicar un comentario