How To Thrive During The Recession.
The impact of a recession can be devastating for businesses, regardless of size. As interest rates rise, the cost of borrowing increases, and the shortage of skilled labour combined with rising wages and raw material prices can place an enormous strain on companies. While big businesses may have the financial resources to weather the storm by selling off assets, small businesses may not have that luxury. However, with the right strategy in place, small and big businesses can not only survive but also thrive during a recession.
In this article, we will discuss what small and big business owners need to do to thrive during a recession. We will provide real case studies from past recessions to demonstrate how these strategies can work in practice.
1. Focus on your core competencies
During a recession, businesses should focus on their core competencies to remain profitable. This means identifying the areas of your business that generate the most revenue and focusing your efforts on those areas. For small businesses, this may mean cutting back on products or services that aren't generating significant revenue. For big businesses, this may mean divesting non-core assets.
A good example of this strategy in practice is Apple during the 2008-09 recession. Rather than diversifying its product line, Apple focused on its core competency of design and innovation, releasing the iPhone 3GS, which became its best-selling phone at the time.
2. Invest in marketing
Investing in marketing during a recession can help businesses stay visible and maintain their customer base. However, it's important to be strategic with your marketing spend, focusing on channels that generate the highest ROI.
A great example of this is McDonald's during the 1990-91 recession. McDonald's invested heavily in advertising, specifically targeting value menus and promotions. This strategy worked, and McDonald's sales increased during the recession, while other fast-food chains struggled.
3. Cut costs without sacrificing quality
Cutting costs during a recession is essential for businesses to survive, but it's important not to sacrifice quality. Cutting corners can lead to long-term damage to your brand and customer base. Instead, look for ways to reduce costs while maintaining quality. This may involve renegotiating contracts, reducing staff hours or finding more efficient suppliers.
A good example of this is the UK clothing brand Superdry during the 2008-09 recession. Rather than cutting quality, Superdry reduced production costs by moving manufacturing to cheaper locations without sacrificing quality.
4. Diversify your customer base
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During a recession, it's important to diversify your customer base to reduce the impact of economic fluctuations. This means identifying new markets or customer segments that your business can serve.
A great example of this is FedEx during the 2001 recession. FedEx diversified its customer base by offering its services to e-commerce businesses. This allowed FedEx to offset the decline in traditional business-to-business shipments and maintain revenue growth.
I have listed a few more examples for you to understand what can be achived during difficult times.
1. Ford Motor Company during the 2008-09 recession
During the global financial crisis, Ford Motor Company took a bold step to restructure its business. The company sold off non-core assets, including its luxury brands, and invested heavily in its core brands. Ford also negotiated concessions from its unions, reducing labour costs and improving productivity. These efforts paid off, and Ford emerged from the recession as a stronger, more efficient company.
2. Starbucks during the 2001 recession
In response to the 2001 recession, Starbucks introduced a new line of lower-priced coffee drinks, including its popular Frappuccino. This strategy helped the company maintain customer loyalty and offset the impact of the recession on its premium-priced products. Starbucks also invested in its online ordering system, allowing customers to place orders from their smartphones. These efforts helped Starbucks weather the recession and set the stage for future growth.
3. The Cheesecake Factory during the 2008-09 recession
During the global financial crisis, The Cheesecake Factory took steps to reduce its operating costs while maintaining the quality of its food and service. The company renegotiated contracts with suppliers, reducing its food costs, and implemented energy-saving measures to reduce its utility bills. The Cheesecake Factory also introduced a new line of lower-priced menu items, including its popular SkinnyLicious menu, which helped to attract budget-conscious diners.
4. Trader Joe's during the 1990-91 recession
In response to the 1990-91 recession, Trader Joe's introduced a range of lower-priced products, including its popular "Two Buck Chuck" wine. The company also invested in its private label products, which offered customers high-quality products at lower prices. Trader Joe's also focused on customer service, offering a friendly and welcoming atmosphere that helped to differentiate the brand from its competitors.
These examples demonstrate that small and big businesses can successfully navigate recessions by focusing on their core competencies, investing in marketing, cutting costs without sacrificing quality, and diversifying their customer base. By taking these steps, businesses can emerge from a recession as stronger and more efficient companies.