As explained in the article entitled The Reasons for the Economic Crisis, the crisis is set to continue with the aggregate consumer demand falling. What does it mean for your business?
1. The demand for your products is likely to decrease unless you are offering an inferior good (e.g. McDonalds hamburgers, etc.)
2. The competition will become more intense, signalling downward pressure on prices and the need to improve attributes of the product offering
3. The continues printing of money by the central banks will result in higher commodity prices, which in turn, would put pressure on your business s costs (e.g. gasoline, raw materials)
4. Taxes are set to rise in the medium and long run as governments try to address their fiscal deficits
5. During the crisis, the measure of your business success is not a continuous increase in revenues and profits but the rise in market share. With falling demand, it is difficult to maintain sales levels; more important is how well you are performing in comparison to your competitors
6. Capital expenditures and costly innovations are risky and are likely to fail. With spare capacities worldwide, it would be difficult to recoup investments in new business facilities and innovations. Rather concentrate on small incremental continues improvements to your products.
7. Growth in market share can be achieved by the means of purchasing rival businesses in distress. If you have the spare cash, perhaps it is the time to take over one your competitors.
8. Small businesses must stay lean and flexible to succeed. Large are likely to survive due to the economies of scale, their market power and support from the governments. Medium businesses are in trouble because they are neither flexible, nor big enough to hold their fort. It may be a good time for medium enterprises to look for a potential buyer of the business.
The economic crisis will result in industries shrinking, while having fewer powerful companies and a number of smaller niche players. In a simple scenario, the market, which is worth $1,000 with 20 players before the crisis, holding $50 each, will shrink to $500 with 5 players remaining, each holding $100 share.
The key message is: the crisis is here to stay, the competition will become more intense and you must be ready to respond quickly.