Companies told to stick to basics during slowdowns

November 13th, 2008 - 8:11 pm ICT by IANS  

Chennai, Nov 13 (IANS) During an economic slowdown, companies should stick to basics, quickly grab market share, cut costs, conserve cash, go in for acquisitions financed by long-term borrowings and bring down output prices to boost demand, a management meet attended by top managers concluded here Thursday.”The economic slowdown in India is driven by liquidity crisis. In this situation, corporates should first stick to fundamentals and manage what they can control. While taking care of their spending, they should not lose focus on delivering quality to customers,” said R. Ramraj, advisor, Sequoia Capital, a venture capital company.

Addressing a seminar on `Management in Challenging Times’ organised by Loyola Institute of Business Administration here Thursday, he added, “The mantra for corporates should be `survival of the quickest’ and they should be quick to grab market share while ensuring sufficient cash in hand.”

Not expecting the government to take any decisive action as it is a coalition government and also because elections will be upon us soon, Saint Gobain India’s managing director B. Santhanam advised corporate head honchos to sit up and comprehend what is happening.

He said corporates should map their supplier base and their vulnerability so as to be sure of supplies.

“The second most important action is to communicate with the employees as to what the company will and will not do. Failing to do this will result in negative rumours spreading which in turn will affect employee morale,” he said.

Stressing the importance of cutting down strategic costs, he said, “With crude oil prices going down we will look at our suppliers who will be benefited immensely by that and ask for cost reductions,” he said by way of an example.

While he said the time is ripe for going in for acquisitions, he warned that companies should finance these acquisitions only by long term borrowings.

On the customer side, he said companies should segment their market. They should try to satisfy the unmet needs of customers to expand their market share.

Speaking about the real estate and construction sectors, K.E. Ranganathan, managing director, Parry Infrastructure Limited said, “Real estate developers should try to bring back costs to the levels that were prevalent in 2003 for demand to boom.”

Citing his company’s experience of changing a thirty floor residential apartment project to smaller apartments, Prakash Chella, managing director, Srinivasa Shipping & Property Development Limited said: “Developers who went into new formats - townships, malls - are now exiting or altering the projects.”

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