Economic downturn is a time for change

An economic downturn is a time of radical change in an economy which especially affects business - its very core. Usually such a period is associated with restructuring which is generally no longer considered to be the most state of the art solution. Times have changed and in most cases the call for restructuring is the attempt to apply a remedy from the beginning of the last decade. Today, adjustment processes in companies need to be engineered much more subtly than before which is why some businesses succeed while others lose their market position. Most striking during a downturn is that companies look around for new sources of finance because borrowing has become both more expensive and more difficult. During such times the emission of corporate bonds becomes the most popular form of raising money while some companies resort to financing investments from future income. This process requires a total change in mind set which means a switch to a completely different approach to financing which in turn requires time and preparation. The other standard challenge during a downturn is the lack of liquidity often in the form of payment bottlenecks which in the past have often led to a company having to fold. This is often the first time that the management of a company actually tackles the issue of optimising the conditions governing the signing of contracts, not to mention other measures such as the introduction of implementing procedures or "soft" payment collection methods or discounts for early payment. A downturn is therefore a moment in which such actions are taken which could have been taken a lot earlier but the pressure to do so was simply lacking.

But now that credit or just cash is more difficult to obtain, it's time to put things in order. This is more difficult with unpredictable factors like exchange rates or the price of raw materials. Exchange rate fluctuations make it difficult for companies to plan and this increases uncertainty. Hence the search for solutions with built in insurance or which minimise the impact of interest rate fluctuations. With our southern partners, in matters of billing many Polish companies have opted to invoice in zloty in order to reduce the impact of exchange rate fluctuations. Another way of minimising the negative influence of the unpredictability of exchange rates is by creating a flexible base of suppliers from various currency zones. This makes possible a change in supply sources based on exchange rates. In addition, changes in raw material prices are minimised thanks to the creation of so called buying consortia.

Thanks to collective purchases made by a company as a member of a buying consortium, a business is able to negotiate lower prices. All these methods would have also lead to an improvement in company results during prosperous times, but firms are only applying them now that they have their backs to the wall. Nowadays firms mostly fear a drop in demand especially in countries which are the largest importers of our goods and services. A drop in the need for our products will mean they will be difficult to sell which in turn will lead to bloated stocks and the search for ways to rapidly restructure.

But before shedding jobs, companies should examine softer solutions like changes to pay in such a way that not only offers greater sales incentives, but also faster and more efficient ways of obtaining payment owed. Increased competition and pressure to lower costs will force companies to restructure which in many cases will come months too late. More flexible forms of employment are now being introduced, reserves are being reduced and management is being made more efficient. Forced restructuring by Polish companies does not always have to be especially innovative. These businesses are falling back on traditional solutions which could have been applied earlier but the motivation was lacking.

Finally one should not overlook the opportunities which arise when the outlook for growth is bad. Share prices fall thus presenting a buying opportunity. Shareholders may add to their portfolio while some companies may present an attractive takeover opportunity. Only a crisis or a downturn offers such possibilities. In times of prosperity no one wants to dispose of their gold egg laying chickens. In my view these are the possibilities which 2012 offers and they should be seized to the best advantage.

Tags:Louis vuitton Handbags,Louis Vuitton Monogram,Louis Vuitton Wallet