When the Lehmans and Merrill Lynches of this world crumble under economic pressure, what happens to smaller enterprises? Can they survive in these turbulent times? Is there a way out? These are some of the questions that India Inc. has recently had to deal with. When financial stalwarts like AIG are faced with uncertainty, it is time for CEOs to put on their thinking caps and wonder if their organizations might meet the same fate. Although, Indian companies have been relatively well-protected so far from the vagaries of the world economy, the future admittedly looks bleak with a falling rupee and sky-high inflation.
The magnitude and effect of this global slowdown is unprecedented in recent corporate history. At a time when margins and profits are reducing on a daily basis, it becomes important for organizations to employ all cost-cutting measures that they possibly can. This, however, does not necessarily mean that companies have to undergo lay-offs. According to a recent report in Business Today, policy think-tanks in organizations are coming up with creative ways to cope with soaring prices and market instability. Since, the impact of the financial crisis is varied across different industries and sectors, organizations have had to come up with innovative and novel solutions to their problems.
Some organizations have developed more successful strategies than others in this process. For instance, in the aviation sector, companies that had used hedging options as a tool against inflation have been able to beat their competitors by procuring aviation fuel at relatively cheap rates. In the banking sector, Morgan Stanley has predicted that ICICI and Bank of Baroda have better chances of survival than the rest as a result of their well-planned long-term strategies. ICICI has focused on improvised risk management. This ensures that loans are not given to individuals, who might be incapable of repaying them. Instead of loan growth, the bank is targeting deposit growth.
Even in the automobile industry, companies like Maruti Udyog Limited have tried to reduce their cost structure by decreasing the weight of auto components by one gram each. The company has also developed innovative advertising strategies using social networking sites and online video-sharing services that cost lesser than conventional advertising methods. It is also launching new brands like Maruti Swift DZire regularly to generate consumer interest. A similar game-plan is being followed by Samsung India, which has reportedly launched more than a hundred variants of its products in the current year. This ensures that the brand automatically gets publicized. In the real estate sector, DLF has managed to import steel and cement at lower prices from China to increase its margins. Construction companies are even trying to modify designs of doors and other accessories to reduce the usage of raw materials.
It cannot be denied that the current crisis is a challenging phase for companies. However, successful brands have proved that there are ways to deal with it. The lesson that companies need to learn is that, in a globalised world, financial slowdowns are inevitable. All organizations have, to some extent, been adversely affected by the downturn. But, some brands have been less affected than others. Ultimately, a company’s fortunes are decided by its ability to deal with disaster.