Best Business Recession Strategies – McDonalds, Ford Examples
This article reveals best Business Recession Strategies across 4 Management Aspects:
In 2020 – Recession or not – companies were taking preparatory actions for it – they are resorting to cost reduction measures that will ultimately bolster the company through an extreme economic decline.
Is there a strategy for recession management?
What’s interesting about recession is that when it strikes – it hits everyone, the big and small, everyone gets slapped by the invisible hand.
However, not all companies disappear during recessions, there are those who seem to survive and even gain a competitive edge for the years to come. This is exactly what we explore as we study the Best Business Recession strategies.
Best Recession Strategies
Operational excellence is a change for better, bigger and faster. In essence, it’s performance boosting. However, operational excellence has a weak point – its inability to cope with reduced trade and industrial activity during recessions.
Studying the companies that performed oddly well during the 2008 recession, it becomes clear that a recession strategy was implemented.
To manage a company during a recession, the leadership needs a complete positioning strategy, not just to improve overall performance.
Recession is a major macro-economic trend and not the good kind. Companies know that and they devise various strategies to get through it. Unfortunately, most companies don’t make it or lose a significant market share which they can’t recover afterwards.
Each industry has its own specificities, but all companies – regardless of the industry they’re in – need a top-down complete re-organization across 4 dimensions: Performance, Capital, Product and Customer.
1. Performance: e.g. reducing operational costs by using different means of transport
2. Capital: e.g. laying off employees
3. Product: e.g. developing a new (cheap) product
4. Customer: e.g. focusing on a different segment
Now if you are a small business, all these strategies are still applicable to you, except on a smaller scale. There many different solutions to take to circumvent the negative effects of the recession. Aleph Website always recommends focusing your strategic resources on your website.
A successful recession strategy means re-organization of the company across all four dimensions. McDonald’s has upset the industry by devising a good recession strategy – re-organizing across all dimensions – keeping a positive balance sheet during 2008. McDonald’s came out the recession as the definite industry leader.
With a complete recession strategy that re-organizes all 4 dimensions, the company will gain competitive advantage and differentiate quickly from the rest in the industry. However, if the company doesn’t succeed at complete re-organization, it will converge with the rest in the industry, losing market shares at best. A worse scenario is filing bankruptcy.
Human Resources Management as part of Business Recession Strategies
There is no way around it. Major trade-offs will be made to cope with the recession. Trade-offs must occur across all (re)organization dimensions. A particularly painful trade-off occurs in the capital dimension. More precisely: Human Resources.
Recession management is not just about performance improvement; it’s all about strategic positioning. As the company assumes a new market position, it will no longer use some of the resources.
Employee appraisal metrics are often misleading, one common mistake HR managers make is the so called “fundamental attribution error.”
Firing might backfire!
This is a cognitive bias – where HR managers assume that the lowest performers of the year will always be the worst performers and to fire them as a result – an assumption that overlooks the impact of good or poor management, not to mention business conditions that are beyond employees’ control.
Recession-strategic companies, like McDonalds was in 2008, avoid the fundamental attribution error – by re-organizing human capital from top to bottom.
Ford, the car manufacturer, is no exclusion. The top-down HR re-organization during the 2008 recession was the right move. A new CEO came along and implemented many strategic changes. Three years later (which is a very short time in the automotive industry), Ford had made it with an amazing turnaround!
New executives and new managers bring a new energy to the game. They quickly develop a new culture with new rules to guide the company through crises. They help employees on the frontline to understand their newly formed roles and finalize tasks with maximum efficiency.
Moreover, top-down re-organizations often bring hope to employees at the bottom of the hierarchy. That drive and motivation can be leveraged in the coming recession.
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