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AMERICAN EXPRESS: MID-SIZED COMPANIES ARE POSITIONED FOR SUCCESS IN THE 1990s

 AMERICAN EXPRESS: MID-SIZED COMPANIES ARE POSITIONED
 FOR SUCCESS IN THE 1990s
 NEW YORK, Jan. 29 /PRNewswire/ -- With large corporations still in a cut-back mode and smaller companies stalled by expensive and restricted financing, America's mid-sized companies will be the primary contributors to new job growth and economic recovery in the early 1990's according to the latest American Express Outlook for Mid-Sized Companies. To prosper in the coming years, however, mid-sized companies must aggressively adapt to several emerging trends in the business environment and in the short-term, operate conservatively until economic recovery is in sight.
 "Corporations of every size will be playing by a whole new set of rules in the 1990s, and it's the dynamic middle market that is best prepared to prosper," according to James A. Firestone, executive vice president at American Express. "With cautious short-term growth strategies and a forward-thinking view on emerging business opportunities, mid-sized firms can become the engine that drives economic recovery in America."
 The American Express Outlook for Mid-sized Companies is a semi-annual report on the economic conditions facing companies with annual sales ranging from $2 million to $100 million and with 50 to 500 employees. These firms are typically in manufacturing, retail or wholesale trade, and business or personal services.
 National Economic Recovery Has Vanished
 Mid-sized firms, like all companies in the U.S., are facing a difficult economic climate. During the spring and summer of 1991, euphoria from the quick end to the war spurred a gradual but weak recovery for the nation's economy. But now, at the start of 1992, that economic recovery has stalled.
 Many economists predict at least modest growth by spring, with real Gross Domestic Product (GDP) growing by two to three percent by the second quarter.
 The forecast, however, contains significant risks. In contrast to the baseline scenario of a slow recovery, the Outlook predicts a one-in- four chance of a further decline in the economy in the coming months.
 "Because of the uncertainty about the economy, middle market firms should tread carefully until a recovery is clearly in sight," Firestone said.
 Middle Market Positioned To Prosper
 Despite widespread uncertainty about the economy, mid-sized companies are well-positioned for continued growth -- better positioned than either large or small companies in general.
 Large companies in the U.S., particularly the Fortune 500, are in a restructuring mode that is cutting jobs, not creating new ones -- a trend that is likely to continue throughout the decade, Firestone said. In addition, the small business sector, which contributed strongly to job growth in the 1980s, may be restricted by limited financing in the short-term and by shifting demographics through the mid-1990s.
 "The smallest end of the small business sector -- those independent retailers and service providers that feed off local populations -- will be relatively hard-hit as aging baby boomers begin to save more and spend less," Firestone said.
 With such fundamental problems plaguing both large corporations and small businesses, the dynamism for new job growth will most likely come from the middle market, according to the Outlook. Many of America's mid-sized firms invested wisely in new technology and equipment during the 1980s, and can aggressively apply those investments toward growing markets and new products once the economy begins its recovery.
 "Mid-sized companies aren't facing many of the fundamental economic hurdles that confront small and large companies," Firestone said. "Middle market firms with the foresight to adapt to change can prosper in the 1990s and become the cornerstone for economic revitalization."
 A Short-term Game Plan For The Middle Market
 In the near-term business climate, mid-sized companies must prepare for the possibility of a prolonged economic downturn by focusing their efforts on a set of six business objectives:
 -- Make every attempt to maintain and strengthen existing client relationships. Don't sacrifice customer satisfaction in an effort to cut costs.
 -- Play it safe and prepare for a stalled economy by developing a strategic plan for sales declines that includes discount pricing, inventory liquidation, employee cutbacks, and control and reduction of expenses.
 -- Tightly control production and inventory levels throughout 1992, unless your company manufactures products for one of the few expanding product niches.
 -- Closely monitor accounts receivable and think twice before extending credit. Avoid borrowing in anticipation of a sales upturn.
 -- Renegotiate rental and lease agreements if possible to help control fixed costs. Given excess real estate capacity, bargaining leverage may be at its strongest in 1992.
 -- Keep morale high. If workforce cuts are necessary, work creatively to maintain a strong employer-employee relationship with those employees who remain on the job.
 "With the economic picture still so cloudy, mid-sized firms should work to keep their current clients happy and avoid taking inordinate risks to add customers or introduce new products," Firestone said.
 Long-term Opportunities For The Middle Market
 There are several emerging business trends that mid-sized companies could capitalize on to ensure future growth. They represent long-term opportunities and concerns that will remain once economic recovery comes into view, Firestone said.
 Domestic economic growth during the coming years will be weaker than most of the balance of the world, indicating that the best opportunities will be in the trade sector. The fastest growing region will continue to be the Pacific Rim. Latin America will post the largest gains relative to growth in the 1980s. And, Mexico's closeness to the U.S., plus the pending Free Trade Pact, will provide significant trade opportunities for many American businesses.
 As part of the widespread cost-cutting trend, more Fortune 500 companies will rein in expenses by "outsourcing" appropriate in-house business services -- many of which are provided by mid-sized firms.
 And, on the environmental front, rising emission regulation and taxes will make cheap energy a thing of the past by the second half of the 1990s. Electricity-intensive firms should begin now to take advantage of utility programs designed to subsidize conservation. In addition, middle market firms currently producing environmental waste or emissions must begin planning now to deal with their direct pollution.
 Summary
 Economic uncertainty in the business community will remain high at least through the middle of 1992, with a more severe downturn still a possibility. This means that middle market companies must remain cautious until the recovery begins.
 For the U.S. to begin to approach its past successes, the entrepreneurial spirit that drives the middle market must lead the way in job growth during the 1990s. The management of mid-sized firms must focus on controlling production and inventory levels, monitoring accounts receivable, keeping morale high, controlling costs and strengthening client relationships. In addition, mid-sized firms should plan for the pending recovery by considering emerging business trends such as international trade opportunities, outsourcing and rising environmental costs.
 The Outlook for Mid-sized Companies is produced by American Express Corporate Services to provide an accurate and timely indicator of current and future economic conditions. Research was conducted by DRI/McGraw-Hill, a provider of business, financial, government and business-to-business information.
 Corporate Services, a unit of American Express Travel Related Services Company, Inc. (TRS), provides business and financial management and travel-related services through the Corporate Card for Mid-sized companies. American Express TRS is a wholly owned subsidiary of the American Express Company.
 -0- 1/29/92
 /CONTACT: Cory Shields of American Express Travel Related Services Company, 212-640-4868/
 (AXP) CO: American Express Travel Related Services Company Inc. ST: New York IN: FIN SU: ECO


TS-OS -- NY011 -- 4627 01/29/92 10:08 EST
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Date:Jan 29, 1992
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