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Surviving the Recession of 08-09 It WILL End… but the Recovery Will Present Its Own Challenges

Surviving the Recession of 08-09 It WILL End… but the Recovery Will Present Its Own Challenges. Chris Kuehl Economic Analyst National Association of Credit Management. How Bad and How Long. Comparable to recessions in the last three decades – not necessarily the worst but some unique issues

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Surviving the Recession of 08-09 It WILL End… but the Recovery Will Present Its Own Challenges

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  1. Surviving the Recession of 08-09It WILL End… but the Recovery Will Present Its Own Challenges Chris Kuehl Economic Analyst National Association of Credit Management

  2. How Bad and How Long • Comparable to recessions in the last three decades – not necessarily the worst but some unique issues • Still fundamentally a bank led crisis but one that will not end with a bank recovery • Most assert that the current quarter is likely to be the worst and that Q2 will not be all that much better – more hope for Q3 and Q4 • Factors that play into recovery – consumer attitude, banks, foreign trade, stimulus plans and the threat of inflation

  3. Stimulus and Bail Outs • Over $1.7 billion allocated for economic stimulus, recession relief, bank rescue and corporate bail outs • Step One – halt the decline in the economy - that appears to have happened in February/March of this year • Step Two – set up a rapid recovery with liquidity – the jury is out on this one – maybe Q3 but many are asserting Q1 of 2010 • Step Three – make long term repairs to the banking system and capital markets with new regulations and controls • Step Four – improve overall US competitiveness with export policies, currency values and import controls • Step Five – fix the deficit so that inflation doesn’t become the next major crisis

  4. Five Things to Keep You Awake at Night • Global credit crisis affected Europe and Asia differently than in the US • The collapse of global trade relations • The Fed interest rate policy – when does it go back up? • The return of the oil and commodities bubbles • The arrival of a very serious bout of inflation

  5. Coming Out of a Recession • The first few months of a recovery are often the most threatening in the whole recessionary period. • Competition is prepared to exploit any weaknesses. • Ammunition to respond to these threats is in short supply – especially this time given the problems with finance. • Consumers are highly demanding if they have money to spend – other consumers are stagnant • Precise knowledge of the recovery period is not available – how fast and how soon are the major questions. • Policy shifts by the government can provide help or can deal a death blow – depending on who the policies are designed to assist

  6. The Key Mistakes Made During a Recession • These are the mistakes that compromise the recovery period and make a company vulnerable to competitors • Reduction of consumer contact as sales and marketing efforts are curtailed. A smart competitor uses sudden absence as a means to plant doubt about your survival in a consumer’s mind • Reduction of innovation – operationally or strategically. The recovery requires swift and focused movement. If there has been a loss of momentum in strategy or operations there is nothing to respond with. • Reduction of key personnel – unless the worker is imminently replaceable the process of gearing up for the recovery means new hires and they are not up to speed in time to be effective.

  7. Things to Keep Transportation Providers Awake at Night • Commodity prices – expected to stay weak for the bulk of the year but when they move they will move quickly • Drastic differences in sector response – automotive will be catastrophic but much promise in the energy sector • Wholesale inventories are about as low as they can go – any spike in demand will require stepped up production • Imports slowing way down while exports show some resilience • Joblessness can be mixed blessing – depends on the sector and the part of the country.

  8. Transportation Trends • Excess capacity now but shortage looms when the recovery starts • Consolidation and contraction well under way • Rail expands, air contracts and trucking is mixed • Regional shift in business – more influence from import and export sector • FedEx and UPS have fought off DHL and are now turning attention to other strategies • Driver shortage not an issue today but will return • Environmental concerns and transportation

  9. Recession Strategy Exploit Weaknesses • Competitors are making mistakes. They are deciding to abandon territories and lines of business and that creates disgruntled consumers. • If your competition suddenly stops advertising or appearing at trade shows the consumer will assume they are in bad shape and your presence is therefore reassuring. • Competitors are not bringing new items or services to market and that leaves the playing field open. They are also lowering service standards . Many are letting good employees go. All of these are opportunities to play strength against weakness

  10. Chris Kuehl (816) 304-3017ckuehl@armadaci.com

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