Tuesday, April 8, 2008


There's a lot of speculation that the US is headed for a recession . At the very least a drop in growth . There are reports of widespread layoffs already by various companies . In any country this would impact consumer sentiment and a resultant drop in purchases of discretionary products and services .  Company responses to such a scenario vary . Some would seek to reduce costs by ruthless (at times ridiculous) negotiation with suppliers on whom they can wield influence (post 9/11 there was a period of flux in US retail with sales dropping for a few months . A large clothing brand sent out a communique to their vendor base in India asking for a 2% discount with retrospective effect ostensibly to help them survive that phase .Which in itself was ridiculous considering that the company was facing a drop in profits and not the prospect of bankruptcy . It was in fact a veiled threat that vendors who did not co-operate could expect no business . When asked that would they consider a 2% hike in prices with retrospective effect when they experience good sales there was no reply) , substitute materials as a route to cost cutting , reduce volumes (sensible idea) , offer discounts etc . Within organizations often new initiatives , product , design development tend to be underfunded when recessionary fears abound . There would be a reluctance to explore new supply sources .

A few (smart) companies however will recognize that in times like these innovation , design and quality are more important than ever . And will invest their time , efforts and resources to offer a compelling reason to their customers to spend their dollars on their product / service . It will be interesting to watch the (eventual) winners of this phase .

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