Monday, February 16, 2009

Taking It On The Street

The old saying is that in every crisis there's an opportunity. In that's definitely true for companies in down economic times. While some fight for their very survival, others are able to use the tough times to increase their market share and gain long term competitive advantages which pay rich rewards when the inevitable recovery takes place. This is what savvy firms are doing right now. If they are able to.

Thinking about just this sort of opportunity the other day, I realized how constrained most publicly held companies are in down times. When your overriding concern is about what Wall Street analysts think about your company's actions today, it can be difficult to envision, much less implement, strategies that are more focused on the long term. This is a challenge that public held firms must always face, but in tough economic times it becomes even more daunting.

While there might be a glowing opportunity to invest in new resources and enter new markets right now, it's going to be a tough sell for a public company to make. Wall Street wants to know what you're doing to cut costs, trim inventories, and cling to profits. They're not much interested in what could be a brilliant strategic move today that would allow you to dominate your markets in three to five years. So you see most of the publicly held companies making the same moves; across the board layoffs and cost-cutting, cutbacks in marketing campaigns, abandoning markets with potential but yet unrealized profits, shelving expansion and investment plans, and pulling back from acquisitions. These actions are easy to defend as necessary survival steps and they are what the Street is expecting companies to do.

Given those circumstances, I would imagine that the real opportunity to make hay during these down times lies with privately held firms. Assuming that they have the money (or financing) to suffer a couple of years of losses, this would seem like a chance for them to act more aggressively while their publicly held competitors are hunkering down. Introduce new products and services. Expand the scope and depth of your market penetration efforts. Hire the best and brightest talent out there (including plucking key people from your competitors). Make strategic acquisitions when the price is low.

These are just some the actions that could be taken today that could change the competitive dynamics for years to come. Actions that truly well-run companies are at least considering. Especially those that don't have to dance to the tune of the Street.

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