"The risk was the obstacle, not the price and they addressed the risk. It is really about understanding how the consumer mind-set has changed and repositioning the products.”
MARK THOMAS, STRATEGY EXPERT,
PA CONSULTING GROUP
Mark ThomasBBC World Service - Business Daily6 January 2012
PA’s Mark Thomas, strategy expert, is interviewed on the BBC World Service, Business Daily programme. With Europe’s banks in trouble, Mark talks about the effect this will have on business and what new opportunities are opening up to them. Mark draws on PA’s Managing Uncertainty survey in his interview.
Mark talks about the issues facing small companies: “By definition the recession is a difficult time to sell things, but the implication of that is that it’s quite a good time to buy things. For small companies that’s a particular problem because small companies really don’t have the ability to tap the capital markets at all, they are dependent on bank lending so for them managing cash flow is a real challenge. For bigger companies there are many more levers that they can pull.”
Mark goes on to explain how bigger companies have more leeway when it comes to conducting business during a recession: “Bigger companies tend to be international which means that some of your business is down and some of it’s up, and as long as you reallocate your resources in the right direction that’s not too bad. If you’re capital rich you are absolutely able to pick up all sorts of trophy assets at fire sale prices. Now it doesn’t sound very nice, but that’s the reality of it.”
Mark talks about what assets people should be looking to buy and: “You can have a good business that has a bad balance sheet. And if you are financially strong then you are in a very good position to take advantage of that. Apart from their financial status, they are actually good businesses in good markets.”
Mark goes on to give an example of how a company succeeded from the recession following the changes their competitors made. Mark explains how the change of a mind-set can help organisations address risks head on and come out stronger than their competitors: “One of the consumer goods companies we were talking to went into the last one and said ‘we know what our competitors will do – they will cut marketing, training, travel – we aren’t going to do that. We will keep the marketing budget the same but we will get double web presence, more air time and more column inches. So, even though the market is down we are going to come out very very strongly’ and that worked very well for them. The risk was the obstacle, not the price and they addressed the risk. It is really about understanding how the consumer mind-set has changed and repositioning the products.”
Mark concluded with advice on how to deal with the coming year and the importance of making plans to ensure business is one step ahead of the recession: “Every company should have a scenario plan for a Eurozone fragmentation, for the bubble bursting in China and for a wider double dip recession. Those plans should describe how they would know when the time has come to act and what action they are going to take defensively. This will include cost cutting in a focussed way and what steps they can take to try to derive advantage. If they don’t do that third step, you can guarantee they won’t be one of those winners.”
PA’s Managing Uncertainty survey asked more than 200 senior business leaders from across the world how they had responded to the financial crisis and what management strategies had proved most effective. Our analysis establishes which actions added value and which did not.
You can listen to the interview in full here. Mark's interview starts 1 minute 20 seconds in.