In a survey conducted in March 2009, Arthur D. Little spoke to senior executives around the globe about the economic downturn. The survey focuses on what the crisis means to business and how executives can prepare for the return of better times. The results are not all gloom and doom.
In a credit crisis, one common way of finding cash is to reduce working capital. However, successfully reducing working capital within one company can damage other businesses in the supply chain, exacerbating an already difficult situation all round.
The squeeze is on for subassembly manufacturers. Sharp declines in demand for the products of their customers has left them under heavy pressure to reduce their prices, and the only way they can do that is by ensuring lower prices from their own suppliers.
Innovation is traditionally one of the first casualties of a downturn. When companies are casting around for means to retain capital just to survive, spending on developments that may or may not pay off some time in the future is an easy target for cost-cutting.
Among many companies, the knee-jerk reaction to a downturn is to pull back. Capital spending is cut, acquisitions are scaled down and marketing expenditure is slashed in a desperate effort to survive the bad times. But smart companies apply a more controlled response to difficult conditions.