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RECESSION
AND
INNOVATION
Munish Malhautra
Youtube1
LOWE LISBOA
WWW.LOWELISBOA.COMAV. CONSELHEIRO FERNANDO DE SOUSA Nº19 6º 1099-068 LISBOATEL + 0351 21 382 59 00 FAX + 0351 21 385 97 01 RACING AGAINST
THE CRISIS
Markets will select the best adapted varieties of brands to survive and to develop. This process is well known as
natural selection.
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WHAT´S THE FIRST MISTAKE BUSINESSES MAKE?
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DONT LEARN FROM PREVIOUS CRISIS :
IN TIME OF CRISIS, WHILE SOME CRY, OTHERS ARE SELLING TISSUES
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Recession kills customer loyalty.
68% of consumers are brand-switchers!!!
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1. Consumers are more rational - They go more often to the supermarket but buy less.
2. They put off major purchases3. Use social-media as a source for
making product purchasing decisions.
4. And trade down to cheaper alternatives!!!
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“Maybe, instead of cutting it is necessary to find a cheaper product”."Those who do not innovate, stagnate”.
Philip Kotler
What is Recession? In economics, the term recession generally describes the
reduction of a country's Gross Domestic Product (GDP) for at least two quarters.
GDP = C + G + I + NX1. "C" is equal to all private consumption, or consumer
spending, in a nation's economy.2. "G" is the sum of government spending.3. "I" is the sum of all the country's businesses
spending on capital.4. "NX" is the nation's total net exports, calculated as
total exports minus total imports. (NX = Exports - Imports)
RECESSION = WHEN YOUR NEIGHBOR LOSES HIS JOB
DEPRESSION= WHEN YOU LOSE YOUR JOB
27
CAUSES OF RECESSION:
Currency crisis Energy crisis War Situation Under consumption Overproduction Financial crisis
EFFECTS OF RECESSION:
Bankruptcies Credit crunches Foreclosure Fear Factor Unemployment
Example: September 11 Terrorist Attack in US ; India-Mumbai Got Attacked ; Pakistan Got Attacked ;
Series of such incidences lead into
war situation
Terrorists’ Attack on 11th September in US
Created fear in people
People cancelled their travel plans
Airlines & Hotel Industries badly hit
Resulted in low occupancy rates
Airline & Hotel Industries offered discounts, gift coupons, to attract people
But, still, no improvement in occupancy rateAirline & Hotel Industries started “Cost Reduction” activities CONTINUED
IN NEXT SLIDE
Terrorists’ Attack on 11th September in US
i] Reduce No. of flights ii] Lay off peopleiii] Salary reduction to“Not laid off people”
In flight meals reducedLow or No income to spend and buy goods
They became careful dueto the fear of loss of job
Meals supplying companygot the hit
Catering company now,lays off people
Demand for other goodscome down
Started saving moneyinstead of spending
Demand for other goodscome down
Airline & Hotel Industries started “Cost Reduction” activities
So, you can see how the hit on Airline and Hotel
industries can affect “Un-related” industries in the end;
One industry can hit many other industries when the confidence level of millions of consumers & producers drastically comes down;
32
Is your company “Chasing Its Tail” or experiencing the "Fatal Five" danger signs:
– Slowed growth– Decreased revenues– Increased costs– Lower profitability– Unpredictable cash flow
Companies facing: Uncertain times Political
uncertainty Recession Stock market down Housing market
bad No succession
planning
Companies want: To save money To make money Employees to be
more productive Succession
planning To Grow To Innovate
Recession and
our Role
You tube-2
• "Organization doesn't really accomplish anything. Plans don't accomplish anything, either. Theories of management don't much matter. Endeavors succeed or fail because of the people involved. Only by attracting the best people will you accomplish great deeds."
General Colin Powell
Training the existing human Resource and enhance their skill set to get more revenue in other fields.
Improve loyalty and moral of old employees.
Improve leadership skill by training
Motivate old employees and help them match their
individual goals with organizational goals.
41
COST EFFECTIVE METHODS OF COST EFFECTIVE METHODS OF TRAINING TO BEAT RECESSIONTRAINING TO BEAT RECESSION
The employees should be motivated so as to link their personal goals with the organizational goals.
People without personal goals tend to move towards negativity.
If Negativity is the lock, Motivation is the key
MOTIVATION
Move out of the overcrowdedmarket space.• Move into a new market spacewhere there is no competitor –wide open playing field ofpotential revenues and profits.• Forward thinkers are shifting their focus from recession to recovery… and they will be poised forgrowth when the economy turns around.
They all expanded their sales, profits and market share in a recession, and most went on to dominate their category.
They maintained or increased their advertising and promotions while their competitors were cutting back!
They focused on opportunity, not fear.
They saw a vacuum left in the market and filled it.
“The company courageous enough to stay in the fight when everybody is playing it safe can bring about a dramatic change in market position.”
During the 1920s, Fords were outselling Chevrolets by 10 to 1. In spite of the Depression, Chevrolet continued to expand its advertising budget, and by 1931 Chevrolet took the lead.
1933 Ad
1927
Models
In 1990 Nike and Reebok were virtually tied for first place in sales.
“During the 1990-91 recession, Nike tripled its advertising spending, while Reebok cut back.”
“When America emerged from the recession, Nike's profits were nine times higher than they were going in – and Reebok has been eating dust ever since.”
Wal-Martfounder SamWalton, on the1991 recession
“I’ve thoughtabout it,and decided notto participate”
Two years later,Wal-Mart’s shareprice was up200%
1. Reassurance and confidence2. Purchases that minimize
risk3. Familiar brands that reduce
uncertainty4. Extra value5. Improved service
Thank You!