3/22/2008

Making the Most Out of a Recession

Recessions hurt. But according to this article, recessions can be a welcome opportunity to make some strategic moves to get more market share. Where most companies try to survive by tightening the reins on costs, the author of this article suggests that cutting the right costs and increasing others can help improve the company’s position when the recession ends. Particularly, he argues that companies should increase advertising expenditures during the recession. If companies continue to develop new products and advertise them heavily, those products will be fresh on consumers’ minds when the economy turns upward again, and demand for those company's products will increase.

5 comments:

Rearden said...

I agree. A recession should be viewed as an opportunity to prepare for the next growth period. Wise investors patiently wait for them so they can buy at bargain prices and sell when the market returns. I would like to add that so long as a recession does not spiral downward out of control, it should be considered healthy for the economy in the long term. It flushes out weak and inefficient companies and typically corrects prices. This redistributes capital and labor towards those areas that promise better growth and opportunity.

Isaac said...

Although no one wishes for a recession, there is opportunity in every circumstance. I believe the article is right on and I also appreciate some optimism in such pessimistic times. There are lots of opportunities to improve one’s financial status in recessions if the right things are sought after. Like Rearden said, it also corrects the economic problem we are facing.

carter said...

I also agree with this post. I know that when I get money there is a list of things that I want to buy. If companies prepare for this by creating new products and advertising, when the market corrects it is in a better position than a company that just cut as many costs as possible.

Jacques said...

I like the relatively optimistic tone of this article. An economic downturn is simply a reminder that business cycle is still in play and that there will be some positive correction that will need to take place.

Dr. Tufte said...

Hmmm.

There's a lot of wishful thinking in this article.

I think this is better advice for individuals, their proprietorships and partnerships than it is for corporations.

The reason is that a lot of this recession spending is going to require retained earnings, which don't exactly belong to the managers. Exactly how do you convince individual investors that the retained earnings need to be kept for a time horizon of business cycle length.

Without that sort of foundation, I find the source to be intellectually warm and fluffy.