Corporate Strategy in a Recession: Winners and Losers

Goodbye 2009, it’s been real.  With a year full of layoffs, bankruptcies, and downsizing I hope everyone was able to make it out alive.  Now as the new year begins, it looks as if we just “might” be able to see the light at the end of the tunnel, but if there’s one thing I’ve learned this year it’s that you never want to put a prediction in writing.  So I’m just going to leave it at that…”might”.

This year we were able to witness an economic crunch that we haven’t seen in quite a while.  And along with that we were able to see how companies respond to such pressure.  We saw startups and small businesses crumble under the strain, unable to compete in such a dim economy.  In big business, we saw people who had been employed for years tossed aside in order to balance the bottom line.  Jobs were cut across the board in order to trim the fat and eliminate any unnecessary expenditures.  Aaahh, good times. 

This was their strategy, but was it the right one?  There have been a lot of studies on the topic of what exactly it is that makes a company stand out from the rest, what makes it thrive while others fail.  One major attribute that has been recognized as being essential is the entrepreneurial spirit that some employees possess.  This, they are finding is what really drives the success of an organization.  However, when times are tough and the bottom line is in question, most organizations tend to tighten the reins a bit and micromanage.  This is the very thing that, while cutting costs, will drive away their top talent.  Those very people who provided the greatest benefit to the organization, end up moving on to greener pastures (if those pastures exist).  This is their Catch 22. 

I recently spoke with a senior partner at Deloitte (a big four financial services firm) who told me that companies in times of distress typically move toward “response policies” rather than “reaction policies”, meaning that they tend to focus on surviving the crisis rather than strategizing for the days ahead.  Instead what they should do is adopt a policy of “one foot in today, one foot in tomorrow” in order to not stray too far from what made them so successful in the first place.  Although, admittedly this is easier said than done. 

Now, here we sit staring into a new decade with hope that things will get better but with fear as to how long it might take.  How much longer can the economy keep contracting?

Luckily, there are industries and areas that are better off than others.  Places like Detroit and Miami have been hit the hardest as well as the entire state of California.  Although, you might be surprised to know that despite the entire economy being down, the San Francisco Bay Area has about half the unemployment rate as the greater Los Angeles area.  Places like Washington D.C and Baltimore have some of the lowest unemployment rates in the country (for most populous metro areas).  Why?

Well, it basically comes down to what you can offer.  The auto industry has definitely had their problems and as a result Detroit and other “old-industry” cities (Cleveland and Lansing) have had to suffer.  San Francisco and Silicon Valley can stay afloat (barely) due to their high competence in technology, and Washington D.C survives on government spending initiatives.  Other states (Wyoming, Texas, North & South Dakota) have managed to survive the storm by doing what they do best…having oil (or coal).  But as for the rest of us without oil or sweet computer hacking skills, we’ll have to deal with the decisions of the “higher ups” and ride out the storm as best we can.  My recommendation…book a flight to somewhere warm and cheap.  Bali, perhaps. 

Daniel Royse Written by:

Daniel Royse is the founder and editor in chief of the online travel publication, This Boundless World. He has written numerous articles on travel, business and politics and has recently completed his first full-length novel titled The Watermelon King. Daniel is an obsessive writer and explorer who has backpacked to over 50 countries, spanning five continents. To the disbelief of many, he still enjoys long, hot bus rides through chaotic places. More information about The Watermelon King can be found at Contact: danroyse(to)