Behavior of a life cycle of business systems under recession.
How difficult is to follow how the recession wave is affecting business systems, and consequently, many national economies, we can see best from reactions of leaders from the most influential countries of the world. Thousands of billions of $ and [euro] have been spent on looking for a way out of this economic tsunami. Depth and length of the global recession impact will directly influence its time scope and duration in different regions. Since a unit of measurement of success or failure in economy is a business system, we will try, through analysis of a business system life cycle, to point at its sensitivity to recession and behavior through different phases,
2. THE MAIN FEATURES OF THE GLOBAL RECESSION
A continuous economic underdevelopment is called recession. It rarely occurs in proportions in which we can see it today, only a couple of times in one century. It is normal to have different recession forms in different world regions. Macroeconomic indicators prove that there are growing differences between the richest world regions and all others. On the other hand, new technologies give a global dimension to any economy, which basically force business systems to review recession effects on a daily basis, in both rich and developing countries, but also, and specifically, in underdeveloped countries. One dollar in three or four economic regions has very different values. This is a key reason of economic migrations observable in the last 20 years. Showing the main characteristics of ten most powerful world countries (Figure 1.) can help with observing levels of economic underdevelopment during the last year. Of course that this is only one review of macroeconomic parameters that reflect key elements of the global recession, important for analysis of its impact on business systems in some countries--regions.
When we know that recession activity, measured in its depth and length is accompanied with a noticeable time parameter, then, in addition to the main macroeconomic indicators, we should observe many other factors that influence in many different ways possible downsizing, reduced consumption, limited loan possibilities, and cause big differences or huge gaps within a social structure of population.
A domino effect is a significant feature of recession. Interrelatedness of business systems, interdependence among each other through various, financial, technological, production and other factors become fatal in a domino effect.
3. BEHAVIOR OF A LIFE CYCLE OF BUSINESS
SYSTEMS UNDER RECESSION
Recession conditions destabilize relations among business system, user of services and a customer. Naturally, this relation affects directly "stability" of certain phases of a business system life cycle. Regardless of how we analyze a life cycle, its individual phases, under recession conditions we have a classic "gravity" pressure on a life cycle curve, a pressure downwards. A standard analysis approach enables division of a business system life cycle into several separable phases. Figure 2. shows a very detailed division of a life cycle into ten possible phases. Each of these phases has clearly determined behavior rules that enable detailed analyses and open new ways of coping with a gravity pressure of recession on a business system. A life cycle of a business system is, on the other hand, very dependable on a life cycle of products, technology, that is a market. Different patterns existing among these values make behavior of a business system even more complex (Figure 3.). Thus a recession impact on a certain system should be seen though a product, technology and the market. Which of these values will be affected by recession in a more negative way, depends on one hand on a specific life cycle phase of the values existing at the beginning of recession, and on the other hand on its exposure in a domino effect in relation toward other business systems.
[FIGURE 2 OMITTED]
[FIGURE 3 OMITTED]
This paper will give a simplified life cycle of a business system, through its three observable phases: growth, top form and getting older. This is due to the need for easier understanding of recession impact on a business system. A recession pressure is caused by a depth, scope and time of the impact. Combination of these three recession characteristics and their impact on a life cycle of a product or technology or a market, provides a number of possible, various influences on a life cycle of a business system, in other words its simplified phases. We will observe extreme recession features: considerable depth and scope of a recession impact, together with a very long duration of its influence on phases of a business system life cycle. (Figure 4.)
Growth phase of a business system life cycle is the most sensitive phase, and in this phase, under extreme recession pressure a business system can hardly maintain its stability. Regardless of how vital it is, due to the duration of recession, it will become exhausted in the course of time and a recovery phase will be long and uncertain. A top form phase is the most favorable state in which you face recession. In the top form phase, whether it is early or late one, a huge number of variables is at our disposal for survival of a life cycle, even under the most extreme recession conditions. There is a great possibility to survive recession with only minor destabilization. The third observable phase of a life cycle--getting older, does not offer many possibilities to your system when it comes to recession. However, since this phase is also a phase of a mature business system, such a system doesn't oppose the recession directly.
[FIGURE 4 OMITTED]
This is a phase in which we rely on ourselves, when other systems' influence is no longer strong, so you have many different techniques at disposal to amortize the recession wave.
Evidently, the best analysis of the global recession--an economic slowdown, and its impact on business systems can be recognized through analysis of a business system life cycle. Since a life cycle is observed through relations between money flows and time, and it comprises all relevant elements of organizational behavior, this gives us an opportunity to analyze thoroughly a recession impact on a business system. Since a structure of a business system life cycle is directly dependable on a structure of product life cycle, technology life cycle, that is a market life cycle, only a gravity impact can be more easily observed through influence of recession on these three factors. Following exposure of a certain phases of a life cycle to recession, we can notice different threat levels for individual phases, which require a wide selection of strategies to be used against recession. And all this depends on a phase in which the recession found us. Also, a domino effect has a completely different impact on different phases of a life cycle, which makes us to analyze continuously internal and external environment of our business system before deciding on our anti-recession strategy.
Adizes, I. (2004). Upravljanje zivotnim ciklusima poduzeca, ISBN 86-7668-099-4, "Adizes"Novi Sad
Graeme K.Deaus, Fritz Kroeger. (2009).Rastegni se, kako velike kompanije mogu rasti u dobrim i losim uvjetima, ISBN 978-953-246-072-8, "Mate" Zagreb
Weissman J., (2007). Na vatrenoj liniji, ISBN 978-953-246-037-7,,, Mate" Zagreb
The Economist, Issue 8646, London, August 29th-September 4th 2009
Fig. 1. The main characteristics of ten most powerful world countries GDP INDUSTRIAL GROSS DOMESTIC PRODUCTION UNEMPLOYMENT PRODUCT latest, july RATE % 2009 2010 UNITED STATES -2,6 +2,0 -13,1 9,4 JAPAN -6,4 +1,1 -22,9 5,7 CHINA +8,1 +8,5 +10,8 9,0 BRITAIN -4,2 +1,0 -11,0 7,8 CANADA -2,2 +1,0 -12,7 8,6 EURO AREA -4,4 +0,6 -17,0 9,5 FRANCE -2,8 +0,8 -12,8 9,8 GERMANY -5,9 +0,4 -18,0 8,3 ITALY -5,1 +0,4 -21,9 7,3 SPAIN -3,9 -0,6 -14,5 18,5 RUSSIA -7,0 +2,5 -10,8 8,3
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|Author:||Covic, Dragan; Covic-Primorac, Daniela|
|Publication:||Annals of DAAAM & Proceedings|
|Date:||Jan 1, 2009|
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