• Free for qualified executives and consultants to industry

  • Receive quarterly issues of Area Development Magazine and special market report and directory issues


Business Strategies for Uncertain Economic Times

Although these uncertain economic times make expansion and growth difficult, there are some strategies available to help companies weather the storm - and even gain a competitive edge.

Dec/Jan 09
(page 2 of 2)
Industry Response
Few industries are well positioned for high growth in the near term. Those industries that are doing best include the energy materials industry, the space and defense industries, health services, and government sectors. Some industries that just a few months ago were considered the hottest prospects for future investment have suddenly taken an immediate turn for the worse.

A good example is the solar/photovoltaics sector, which has been hit particularly hard by the sudden drop in oil prices; this sets its goal of meeting "grid parity" a step back. Also experiencing this sudden downturn are commodity-based exporters who are suddenly feeling the impact of a global slowdown in world demand, the subsequent drop in commodity pricing, and a rising dollar.

Of course, the financial services, construction, and the automotive industries have suffered the most so far, and they are expected to suffer significantly more losses going forward.

What Does It All Mean?
At least well into 2009, the capital investment picture does not look good as companies and countries deal with falling demand, scarce project financing, rising costs, and growing inventories. We may be on the back end of the financial crisis, but just beginning a longer period of economic slowdown. How long the recovery will take depends largely on four key factors:

1. The price of oil - Prices stabilization at around $70 per barrel would be realistic from a sustainability standpoint, whereas prices above $125 would impede a recovery.

2. The Obama administration - The new president must work with global policymakers to make smart decisions in resolving the financial and economic crises by managing mortgage write-downs wisely and implementing the stimulus package fairly. Success will depend on fixing the causes.

3. The role of emerging countries - Emerging economies must cooperate with the OECD nations and work together to make new, modern repairs to this very complex network of international finance, trade, and investment. Only then will consumer demand and smart, long-term vision drive the global economy toward more sustainable economic growth.

4. Engaged businesspeople - Much will depend on the resilience and ingenuity of businesses to survive. As we have already seen in such dramatic fashion over the past few weeks, even globally known businesses are constantly required to make sound business decisions in today's ultra-competitive marketplace - or they will not be around for long.

In sum, capital investment is experiencing many hurdles these days, and these will remain difficult to overcome in the short term. However, there is every reason to believe that the mid-term to long-term outlook is quite positive, as such downturns tend to be periods of intense fine-tuning and improvement of the investment environment as a whole and of businesses bent on success. Hopefully, more successful policies and oversight will be put in place to improve the environment, and smarter companies will emerge as leading enterprises embracing global best practices.

Follow Area Development