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Recession proofing & planning for profits.

One insidious effect of a recession is that everyone's a casualty to some extent -- manufacturers as much as the next.

There's no question that the current recession has left Canadian manufacturers at a heavy disadvantage in both the domestic and export markets. Offshore competition is tough -- and getting tougher by the minute.

Although Canada has traditionally enjoyed a strongly positive trade balance, this situation has reversed in the recent past. Fortunately all is not lost. A formula for the future of Canadian industry is not all that hard to articulate if put in the most simple general terms. The answer lies in recession proofing and planning for profits.

Canada's industry has some decided strengths -- the facilities and up-to-date equipment. But back to recession proofing. The present recession has unnerved so many in industry that most find it virtually impossible to even think about spending money, especially with today's tight credit. But this strategic thinking -- spending money -- is precisely the thing to do right now if the effects of another recession are to be avoided in the future. In other words, plan for profits -- continuous profits.

In order to recession proof your business it is necessary to develop a range of strategies to put you ahead of the competition. Determine exactly who your competition is -- then keep ahead of them in labour, management, marketing and financial resources.

This calls for affirmative action -- not knee-jerk reaction. Start by developing better relationships with your clients, meaning a longer term alliance for better planning and improved services for those clients. In short -- make yourself hard to fire.

Another key area is the development of fertile export markets. And in order to overcome stiff international competition, Canadian business must learn to innovate by being more productive, staying on the leading edge, and training and retraining employees to make sure that you do. Also, make our lower dollar work to your advantage.

Another way to recession-proof and also grow in profitability is to measure the overhead per unit of output -- like the Japanese do.

And as far as operating cost efficiency goes, businesses must rethink their costs, no matter how many times they've done this already -- and cut them again. Certain "fixed" costs will stay fixed, until you take a sharp scalpel to trim them. The same holds true for labour costs. But be careful here.

The point is when you plan for profits through strategic planning, recession proofing follows almost automatically.

Moneycare is general financial advice by Canada's chartered accountants. Murray Rumack is based in Toronto.
COPYRIGHT 1993 Canadian Institute of Management
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Author:Rumack, Murray
Publication:Canadian Manager
Date:Mar 22, 1993
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