In times of crisis, wealth is created, how it is exploited

“In times of crisis, you make fortunes,” a popular saying that people repeat in difficult times and constantly remind themselves that even in the darkest crises, opportunities arise. Although the overall picture of the global economy does not seem clear, companies can find their way to opportunities that will help them resist. Rather, he paved the way to excellence.

World markets suffered heavy losses in the first half of this year; Due to sharp inflation, which rose to the highest level on both sides of the Atlantic in four decades, prompted central banks around the world to tighten monetary policy to tackle it, threatening the economy in to push a recession.

The US S&P 500 index closed the first half of this year with a loss of 20.6 percent, in light of a highly volatile performance that pushed the market’s losses to $ 8.5 trillion, with the main index in the US capital market which reached its lowest level in the first half of any year since 1970. The same European equities have suffered their worst quarterly loss since the sales they saw at the start of the Corona pandemic in early 2020, and the European “ The Stoxx 600 ”index fell by 10.7% in the second quarter. the year.

Retreat .. crises and opportunities

There is no doubt that the recent decline in markets and share prices poses a threat to all companies in various sectors, especially technology companies which have suffered a severe blow during the current crisis due to the sharp fall in their share prices, but at the same time creating separate opportunities.

History shows us time and time again that the decline is temporary and is followed by long periods of growth, and the winners usually emerge in challenging times by seizing opportunities and acquiring assets, customers, talents and competencies at the right prices, and the decline represents an opportunity for industrial companies to improve their digital transformation efforts, given the need This is due to the fact that the available resources are not currently in the best condition.

The traditional response of companies in a market downturn is usually predictable, starting with cost cutting in all sectors by postponing new projects, reducing R&D, marketing and sales expenses, training employees, freezing new appointments and even reduce employee numbers, and freeze acquisitions and assets. purchases.

Because technology stocks were hit the hardest; Due to the recent market downturn, some may mistakenly conclude that this is the end of the digital revolution, and some companies may start to scale down their digital transformation efforts, but this is not necessarily the best strategy at the moment, on the contrary, current developments can provide unique opportunities for prudent investment.

To approach the idea, experts say companies should consider the slack as a sharp curve on a racetrack, which may be the best place to overtake competitors, but it requires more skill than direct roads, skilled drivers usually hit the apply brakes just before the curve. (reduces excess costs), while accelerating near the top of the curve (by shortlisting the projects that will form the next business model), while releasing their cars when they go out of the curve (by increasing expenses and rents before markets recover ).

In the beginning, periods of recession are usually short and usually followed by long periods of growth and prosperity. The period after World War II, for example, is considered the greatest stage of growth in modern history. The same goes for the years that follow. the oil crisis in the period from 1973 to 1975, as well as the recessions caused by the 1981-’82 energy crisis, the 1990-’91 Gulf War stagnation, the 2000-2002 dotcom bubble, and the 2008-2009 Great Recession. Each slump was followed by a longer period of growth.

But the most important thing is that the recession represents an opportunity, because it shows the true metal of companies, and determines with the sword who the winners are and who the losers are.

Remember, the dotcom crash was a reflection of the widespread listing of new companies that only had promising business ideas like Bits.com, eToys and WebFan, all of which did not generate revenue or had limited revenue, and this companies were wasted. Lots of money while testing ideas that were not ready for implementation, and their number increased sharply during the early 1990s, leading to a peak in the number of companies listed in 1997, to about 7,400 companies.

The bursts of the dot-com bubble led to the bankruptcy and write-off of many companies backed by the boom in the markets, and the technology companies that survived that crisis and the Great Recession could become the biggest source of wealth for investors throughout history, including for example “Facebook”, “Apple” and “Amazon, Netflix, Nvidia, Google and Microsoft.

Therefore, it is important during crises that company managers do not rely on the policy to surrender to the accomplished fact, but rather that they plan for the next phase of expansion, so you need to start studying what the rest of the remaining companies have done differently during previous recessions, and most importantly, that your study is not limited to companies that not only passed It, but to those who emerged victorious from the recession.

For example, some companies are restructuring costs rather than reducing them before the recession, in addition to seeking more control over the balance sheet while pursuing commercial growth strategies and doing proactive mergers and acquisitions.

Of course, all companies turn to cost management in times of recession, but some do so by reducing spending on low-value operations and reducing the size and complexity of work.

Costco, a discount retailer, has applied this strategic approach; Early in the financial crisis, the company simplified its business model and reduced the range of products in each category, especially branded products, to obtain larger discounts for bulk purchases, and the company shifted its sales mix of durable goods to more basic consumers. goods.

The company also took advantage of improving supply chains by merging and centralizing some activities to cut costs in half in some cases, and relied more on merchandise distribution centers to reduce shipping time to less than 24 hours, thus reducing the cost of reduce storage. steps made it possible to achieve growth Stable in income and profits during and after the recession.

Samsung .. a clear experience

The South Korean giant “Samsung” is also a very shiny model. During the Great Recession of 2008 and 2009, Samsung reorganized its business to focus on profitability and efficiency, as most other companies did, with a view to becoming a global leader in a limited range of products, while expecting that Consumers are turning to high-quality products for fear that companies with low-quality products will not last long in a recession.

Samsung has targeted semiconductors, liquid crystal displays (LCDs) and mobile phones and increased its investment in R&D. As its competitors reduced their budgets, the company doubled patents filed in the United States and built four types of R&D centers, each focusing on a specific product. with a clear investment horizon.

Samsung has also retained its investment in marketing, attracting even senior operating executives from major consumer companies, including L’Oreal. launched, In direct competition with Apple’s iPhone.

In addition, Samsung has left some subsidiaries operating outside its core business to reinvest capital in its core business.

At the start of the last recession, Samsung ranked 21st in terms of brand value on the global “Interband” list, and now it ranks sixth.

talent vang

Recession is the best time to get resources for the next expansion, while competitors are reducing their capabilities, talent is the biggest and most important resource and is much more available during crises than during stages of growth. We have started to see retrenchments, for example, in the technology sector; Tesla, the electric car giant, has decided to lay off about ten percent of its employees.

As companies downsize R&D and new projects, cut staff, cut salaries and bonuses, while stock prices fall, making it difficult to give employees shares in bonus programs, talented people who have previously joined start-ups or fintech companies and with big bonuses got. and stock options, they are now looking for more stable jobs.

The crisis period is also a good time to take over companies and buy assets at low prices, for example, some biotechnology companies are now available for sale at a price even under their possession of cash due to the decline in the market value of their shares.

As a result, large pharmaceutical companies are increasing their acquisitions of digital healthcare technologies such as applications and portable devices. Between 2008 and 2010, for example, technology giants acquired hundreds of companies and new patents, and in addition to more talented employees and new assets, now is the time. , reduced.

Accelerate digital transformation

Almost all companies have a digital strategy, which has enabled companies to run their operations as naturally as possible during the Corona pandemic, and digital strategy has many advantages; These include a clearer view and better management of resources, improved flexibility and organizational capabilities, reduced costs, smoother supply chain management, better customer experiences, improved productivity and faster product development, and better human resource planning.

The collapse of technology stocks does not mean that these benefits will not be enhanced, and it is certainly not the time to slow down the digital transformation. On the contrary, it may be time to move on. The volatile environment poses more challenges that can be better addressed through digital transformation, which can also provide opportunities.

Traditional retail companies are perhaps the best example, as they now face complex supply chain problems that have weakened their revenues and increased costs. Digital transformation may not solve all of these companies’ problems, but it can alleviate it, as machine learning can help retailers identify shopping patterns, understand buying behavior, customize promotions and special offers, make product recommendations more personal, price fast adapt and balance rapidly changing demand and supply and customer preferences.

The shift in the marketing paradigm from traditional media to digital channels allows for more precise and private reach to target customers, and the next generation of data analytics offers a wider arsenal of pricing at different levels and moves quickly to adapt to ground of how categories are evaluated. Different customers for the company’s products and services.

One of the bright spots is that these companies can now hire engineering and IT professionals who have been retrenched by some technology companies when they start looking for more stable jobs.

For example, in the field of financial technology, FedEx has embarked on the automated transformation of tax, payroll, credit card settlement and other financial operations, and Honeywell, a multi-business company that includes the oil and gas sector, has expanded real estate instruments to offshore maintenance costs reduce oil and gas mining platforms by up to 50 percent and reduce the number of workers to be transferred to these platforms.

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