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Cyclically and Business Planning
Businesses often experience business cycles of Boom, Contraction, Recession
and then Growth.
Examples of businesses who are subject to these cycles include Airlines
and Haulage companies. Their business levels change as they go through
these business cycles.
Other businesses are not subject to such swings such as essential consumer
goods and to a degree, utilities, such as Unilever and EON.
So it's important a business has plans in place to manage optimally through
the cyles.
Key planning decisions in each part of the cycle includes,
Boom
Business leaders should recognize that previous booms have either slowed
or have ran straight into the next crisis. They should make decisions
to plan for problems ahead, so that they can take advantage of adverse
conditions when, or just before they emerge. It sounds easy, but companies
don't do this.
Indeed, RBS under Fred Goodwin's leadership purchased ABN Amro at top
dollar, and when the downturn arrived, the bank ran out of money.
However, Santander, planned forward so they had cash to buy over distressed
Assets such as Alliance and Leciester and Bradford and Bingley at rock
bottom prices.
Contraction
When contraction sets in, business's run scared, stop investing and start
downsizing. This is the time to look at increasing your competitive position.
Your competitors are stopping marketing effort and reducing front line
service. Customers are ready to switch to better service and dump their
existing contract.
Recession
This is when growth has become negative.
You should start to plan for the next phase of the cycle, when business
will improve.
Asset prices are depressed, great staff are easier to poach from competitors
or are indeed unemployed.
Growth
Back to good time. Sit back and enjoy that you are in far better competitive
position that during the last growth phase.
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