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Business strategies in the present time of crisis

The whole world is passing through a time of crisis because of the corona virus pandemic. There are various types of crisis the countries, communities and people are facing. There are health crisis, crisis of paucity of the resources including medicines and equipments to fight against the virus, there are economic crisis with loss of businesses and employment. Businesses are struggling on many fronts like liquidity, profitability, supply chain disruptions, human resources disruptions etc. While management of cash flow and working capital take prime place in the crisis management, there are other aspects also which are strategically important for crisis management in the short, medium and long term for survival, sustenance and in some cases development. Some such trategic aspects are discussed below.

1. Crisis Management

During this difficult time, those businesses and entrepreneurs which can set up crisis management teams, lead from the front, respond and adept themselves very fast to the situations and systematically manage the situation are likely to be more successful in tiding over the situation with less difficulty. Planning should be done for short, medium and long term.

2. Impact Analysis

Try to assess the impact in the short, medium and long term on your sales, profitability, liquidity, market share, supply chain etc.

3. Value Modelling

In every business, there are one or two products which are more profitable, lucrative or have higher strategic value. During this critical time, businesses will need to boost up its profitability and surplus. Businesses may focus more on allocating more resources and selling these products or services to increase its profitability and surplus as also long term business prospects.

4. Cost Analysis

Businesses should analyse its fixed and variable costs. Those businesses which have comparatively more fixed costs will find it difficult to absorb these costs due to falling volumes and profitability. One should try to avoid unnecessary cost and control and minimise other overhead costs.

5. Critical Drivers

Identify critical drivers of your business- it may be your product or process or your quality or distribution network or your human resources. Protect and retain these critical success drivers and give them priority.

6. Communication and Relationship

Regular and transparent communication with employees, customers, suppliers and other stake holders about various aspects of the situation is of vital importance. These are testing times and care should be taken so that mutual relationship and support become stronger rather than strained.

7. Supply Chain Management

Due to lock down, transport and logistics disruptions and restrictions, the current situation has severely hit the supply chain of almost all businesses. This aspect being of utmost importance for the entrepreneurs to remain in business following major points should be taken into consideration:

  1. Make a list of critical components and its sources. Talk with suppliers reg. their supply position, estimate lead times and collaborate where necessary. Where there are risks of slowing production or increased cost, try to find alternative sources.
  2. Estimate realistic demand for both short term and long term. Be careful in meeting panic demand which may not sustain.
  3. Assess the available inventory including spare parts. Try to see if rework can make lower quality/returned inventory to be saleable. After sale inventory can also be used as bridge for production gaps. Check whether excess stock with customers can be bought back and supplied to other customers at higher margin.
  4. Identify logistics capacity, change in time and cost of logistics. Track your inward and outward goods for any bottlenecks like border closing, transport restrictions etc. Communicate with logistic partners.
  5. Optimize production and distribution while being transparent regarding safety of the employees to know the capacity level at which you can work.

8. Run stress tests

Run stress tests regarding cash and working capital requirements. Try to fast sell ready stock and optimise inventory levels, eliminating non essential supplies, seeking favourable terms from suppliers and customers.

9. Other Aspects

In this testing times values, culture, leadership and philosophy of the entrepreneurs will come to fore and will affect relationships with employees, suppliers, customers and other stake holders. Transparency, sensitivity, consistency and integrity in the polices and dealings will become important not only in the short term but also for long periods.

Scientifically managing the current situation will no doubt help businesses to see through the crisis in a much better way. Businesses should over time build stronger immunity system on various aspects like supply chain, cash flow, working capital etc. so that they can absorb such shocks and are better equipped to assess, control and mitigate various risks.

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