Business strategy in downtimes

Business environment has been uncertain and unsure. That was to be. Any country before the elections is naturally tentative.

Any industry before the new government is elected is careful and hesitant. Any business is bound to keep their cards close to its chest till the government in-waiting assumes the reins of power. Post-elections the businesses normally start making plans to adjust and capitalize on the policies likely to take shape.

In Pakistan, the post-election scenario has added to the uncertainty. The party with the majority is not going to form the government.

The party with lesser seats is going to join other parties with even lesser seats to cut and paste a government design. The design looks patchy. The design looks fragile. The design looks compromised. All these are signs of more turmoil. Turmoil is not what businesses want. Investments, employment, expansion are reversed in times of political disturbance.

Most businesses are down in these times. Most businesses feel frustrated and defeated. Most businesses would be withdrawing their growth plans. That is perfectly normal. However, some businesses may see otherwise. Some may see this downtime as an opportunity.

Some may see it as a time to invest. Some may see it as a time to hire. Such businesses are taking risks. Such businesses may fail. That is why many businesses just stall and play the wait-and-see game. That may be a wise strategy. But that may make the system slow and people more fearful. Let us look at what businesses do and what can they do when confronted with a deteriorating business environment:

1- Growth is the real culprit— While businesses moan and groan about recession, many believe growth is the real drug that intoxicates the business into failure oblivion. Jim Collins’ bestseller “How the mighty fall” is an example of a research on the corporate sector companies who become big and then crash. In his research, he says growth becomes irresistible and hides the flaws of the company.

He gives the example of cancer where you see a person absolutely healthy and running only to discover that he had a two year tumour growing in him. The apparent good health has made him negligent of what is going wrong inside him.

Similarly, organizations in the good times of growth and demand are too busy expanding and that too recklessly. The famous example of Toyota car recalls in the last few years due to air bags not opening and brake pedals not working is self-evident. Over one million cars were recalled in December 2023.

Analysts say Toyota’s growth was responsible for it. In recent years, Toyota has enjoyed tremendous success, with its global sales surpassing that of General Motors and Ford Motors. In a race to outpace all other cars, once a car renowned for reliability, is now a danger to lives.

Similarly, in Pakistan in the year 2021-2022 the Auto industry grew by 46% and cement industry by 20%. Due to the foreign exchange problems in 2023 the car industry experienced shutdowns as imports were restricted. Only Kia Motors that had imported auto parts in bulk was able to sustain and make profits.

The question is that when the industry was growing at such a rapid pace why was investment not done to safeguard against such downturns? The answer is they were too busy growing to have time to look at some bags or brakes that were not functioning.

For Pakistani companies this downtime should not be used to shut down machines and cut down human resources, but investing on teams to make collective and responsible improvements. A company recently put forward two options to their employees- Either we cut down our size to cut down cost or you all come up with practical ideas of cutting down costs and improving revenues that will sustain us. They did.

2- Look at overlooked markets— Easy growth also blocks diversification, both product and market wise. The demand accelerator makes companies drive on the same lane not noticing that the brakes are faulty. The mindset of why look for other markets when the local market is growing makes companies suffer from business myopia. With downtime on your hands, companies have ample opportunity to look for international markets.

Again the tendency will be to go to the usual ones like the USA and Europe. But those unfortunately are not growing markets. In this downtime, go for Central Asian and African markets. Africa is the fastest growing consumer market in the world.

Countries like Ethiopia and Rwanda, that we thought are history, are making history. The Continental Free Trade Area (CFTA) properly implemented, will be a single continental market for goods and services that would offer corporations different points of entry to the continent and a potential market of 1.7 billion people. By 2030, the largest consumer markets will include Nigeria, Egypt, and South Africa.

There will also be lucrative opportunities in Algeria, Angola, Ethiopia, Ghana, Kenya, Morocco, Sudan, Tunisia, and Tanzania, among other African countries. For example, Ethiopia has been reported to be one of the fastest-growing economies in the world over the previous decade, with an average annual GDP growth rate of 10.5 %. Pharmaceuticals, Agro machinery and textiles from Pakistan need to visit, connect, and study local laws and market trends to capture these markets.

3- Invigorate, innovate, renovate— The mood is low. The spirits are down. The energy is missing. Ideal recipe for zero productivity. That is why leadership is so important. To reinvigorate the morale the message should be of hope, of creativity, of innovation.

The first axe that befalls is on cutting skill and training budgets. They need to be realigned instead to discovering new strategic directions. We have a great example of Pakistan’s industry performance during COVID. When the whole world’s factories were shut down, Pakistan’s textile industry became invigorated.

They innovated by realigning their workers to produce COVID-related gloves, protective uniforms, etc. For the first time in the history Pakistan beat Bangladesh and India. Similarly, many other industries reaped profits like never before. The reason? The strategic intent to counter an emergency where giants like the US and Europe had fallen like ninepins.

Leadership is not a ship that sails on stable shores. It is a ship that rides over waves that are trying to submerge it. Story and history is never made of how companies grow when the economy is growing, rather when the economy is going down. That is where vision comes in. That is where courage enters. That is when the ability to see what other cannot see matters. And, that is the difference between a growth induced performance vs a downtime defiance performance.

Copyright Business Recorder, 2024