Post on 02-Apr-2015
© Copyright IBM Corporation 2008
Expectations from the stakeholders during downturn
G VenkatraghavanMarch 24,2009NASSCOM, Chennai
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 2 Economic Impact of the Financial Crisis | 23rd October 2008 2
To understand the impact of the financial crisis, it is important to remember the drivers of economic growth
AD = C + I + G + X - MAggregate
Demand
Investment
Government
ExpenditureConsumption
Imports
Exports
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 3 Economic Impact of the Financial Crisis | 23rd October 2008 3
In this financial crisis, the negative impact on all drivers of growth will be more extensive and severe
Consumption
• Disposable income• Consumer confidence• Interest rates• Availability of credit• Attitudes to spending• Attitudes to saving
Investment• Business confidence• Interest rates • Availability of finance• Level of economic activity• Economic growth• Level and changes in consumer demand• Cost and efficiency of capital equipment• Rate of depreciation• Government policy
Government Expenditure
• Income (revenue)• Borrowing• Necessity for
economic stimulus
Exports• Disposable income and firm income• Consumer and business confidence• Interest rates• Availability of credit• Exchange rates• Attitudes to saving• Attitudes to spending• Economic activity in export markets
Imports• Disposable income and firm income• Consumer and business confidence• Interest rates• Availability of credit• Exchange rates• Attitudes to saving• Attitudes to spending• Economic activity in import markets
Aggregate
DemandAD = C + I + G + X - M
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 4
A different kind of downturn – Traditional responses will not suffice
Long andDifficult
Unprecedented constraints on access to credit and capital; Unwinding of over-leverage
Falling demand, increased price sensitivity as consumers and enterprises cut back
Disruptions in supply chains, partner and customer arrangements
Transformative Restructuring of industries: Firms fail, sold off overnight
New regulatory regimes Stress on global inter-
dependencies
Typical cost management willNOT be enough
Firms must examine working capital &
investment: identifying
opportunities to restructure, reduce, and preserve capital as well as streamline
operations
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 5
The 3 C pointers
Cash is King (doesn’t mean that customer is not )
Cash
Credit is hard to get
Credit
Perceptible ‘lack of confidence’ even among seasoned CEOs
Confidence
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 6
OrganizationManagement Suppliers
Customers
Employee
What are our stakeholder expectations in this scenario?
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 7
What the employees want
1.Job security
2.Facilitate up-skill/cross-skill
3. Increased communication
4.Keep me engaged
5.Focus on ‘trust’
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 8
What the suppliers want
1.Honour contracts
2.No knee jerk reactions
3.Work together towards the long term
4.No unreasonable ‘squeezing’
5.Transparency on company performance
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 9
What the customers want
1.Clarity on situation - Serve with same quality at potentially lower costs
2.Share burden 3.Flexible arrangements4. ‘Partnering’ and ‘Risk-Sharing’ arrangements5.Help in leveraging existing assets to ‘do more’
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 10
What the Management wants
1.Sustained business (even if growth is lower than usual)
2.Sweating of existing assets
3.Conservation of cash
4.Voluntary efforts to deal with current situation
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 11
Along with these demands, broader forces are at work
… And tomorrow's leaders will capitalize on the new opportunities created
Our world has become…
Smaller & Flatter
Riskier
Pervasive connections and communications Emerging markets Open trade
Systems-level complexity Viral spread of information Widening gap between information available,
and information effectively managed.
Smarter Instrumented Interconnected Intelligent
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 12
Companies need to do three things:
Focus on ValueExploit
OpportunitiesAct with Speed
Do more with less
Focus on the core
Re-align relationships
Capture share
Build future capabilities
Change industry dynamics
Manage change
Leadership
Risk &
Transparency
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 13
The 3 C pointers
Cash is King (doesn’t mean that customer is not )
Cash
Credit is hard to get
Credit
Perceptible ‘lack of confidence’ even among seasoned CEOs
Confidence
© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 14
In summary .. Answers to the 3 C lies in 3 A
Create agility to incrementally expand or contract, build key capabilities by spending on a vision to leverage investment and reshape the industry
Agility
improve productivity and conserve capital, cut spending and redeploy to products and markets that generate growth, margins, and true differentiation
Adaptability
Creates an environment to anticipate changes before they occur and the ability to use fast, sustainable decision-making
Alignment