Three strategies for enterprises to spend the winter

Just across the threshold of this year, Thailand's Siam Cement Group (SCG) found itself facing a very familiar situation - the economic crisis.

Like many companies around the world, as Thailand's largest industrial giant, SCG is also facing shrinking market demand due to the global recession. In 2008, although the company announced a 10% increase in overall sales, net profit fell 45%. With half of its profits coming from petrochemicals, SCG expects future sales to fall by 10% as petrochemical selling prices fall.

SCG is no stranger to finding success in the midst of an economic crisis. Since its founding in 1913, the company has experienced numerous economic crises that have engulfed countless businesses.

In 1997, for example, Asia experienced the worst financial crisis in the region and SCG was hit hard. However, it has survived and has shown other Asian companies a way forward, which is what then-president Chumpol Na Lamlieng called "refocusing the company on its core business" ".

In February 2001, SCG took another critical step: the Asian economic crisis prompted the company to begin focusing on strengthening its financial strength in the information technology sector. It became the first company in Thailand to outsource IT services and one of the first in Asia to do so.

At the time, Nanan Lin pointed out: "Corporate restructuring is an ongoing process." Therefore, SCG was able to cut costs while becoming a new force in the IT field in Thailand. "We're always a few steps ahead," Nananlin said.

A few steps ahead is what leading companies do. Leading companies do this when things are going well, and they do it when the economy is down and they can survive recessions and continue to thrive.

Some businesses may not survive the current economic crisis. Even without this global crisis, some companies would not have a life span of more than 15 years. According to a study by Hewitt Associates, the average life span of today's businesses is 12 to 15 years. Even some of the best businesses may not escape short life spans. A survey by Royal Dutch Shell found that the average life span that Fortune 500 companies can expect is 40 to 50 years.

So, what can businesses do to ride out the current economic crisis, continue to grow, and extend their life spans beyond 15 years? If they follow in the SCG's footsteps, they will understand what to do. While there is no guarantee that any company will survive, for the record, SCG has a high chance of surviving the crisis. Company President and CEO Kan Trakulhoon pointed out that SCG's ability to cope with the economic crisis comes from three aspects - adaptability, people and innovation.

As we'll explore in this article, other companies have found that they can also succeed by managing these three fundamental factors.

Resilience: Building a solid financial structure

Tara Valley gang told the Bangkok Post, "The ability to adapt to change is critical because competition is getting fiercer now. The remarkable ability to change has helped SCG weather the storm for nearly a hundred years."

For example, as we mentioned above, since the Asian Financial Crisis in 1997, SCG has been able to adapt to harsher environments. The company has done this by integrating a number of measures, including financial restructuring, gaining investor confidence, and business restructuring.

In a presentation titled "SCG Vision and Strategic Planning Process", the company drew the following lessons: focus more closely on core business, rely more on in-house technology, and use market as a guide in new market segments Growth-oriented growth (as opposed to production-oriented growth before), more communication with investors.

Some of these lessons have been used effectively in dealing with the current economic crisis. In a press conference, Tara Valley Group summarized four key strategies that SCG is using to deal with the current economic crisis. The first two strategies are related to achieving financial soundness during a downturn.

The first is to ensure the effective flow of funds and the effective management of cash flow. "The goal is to keep working capital at a reasonable and appropriate level," Tara Valley said. To achieve this, SCG is reducing product inventories. In the fourth quarter of last year, the company cut inventory by nearly $400 million. For non-emergency investment projects and plans that take a long time to generate income, the company has adopted a post-holding attitude.

>>[Management Resource Library] How can companies strengthen cash management?

>> The first fire for Chinese manufacturing enterprises to save themselves: "creating cash flow"

The second is to improve production efficiency and cost-effectiveness. Reducing costs while increasing productivity is a key element of this strategy. For example, all of the company's cement production plants in Thailand and Cambodia have implemented a new "cogeneration" system that is expected to cut energy bills by 44 million baht per year.

In addition to these strategies adopted by SCG, other companies also offer some strategic measures that Chinese companies can learn from.

Another strategy to reduce inventory is to work more effectively with suppliers. Efficient collaboration with key suppliers has always been important. This is especially important when markets are volatile.

A few simple actions can help you do this, such as establishing direct communication with key suppliers and working with them to forecast market trends. This can help businesses greatly reduce inventory and increase your understanding of changes in customer demand.

Finally, it's important to remember: crisis crisis, crisis opportunity.

“Manufacturing companies should see opportunities in today’s environment,” said Christoph Glatzel, Stefan Helmcke and Joshua Wine of McKinsey & Company in a report. wrote in the article. Now, these companies can begin to change, including renegotiating contracts, integrating production and distribution networks, and implementing aggressive production projects. These changes may have been very difficult to implement in the early days, and may soon become difficult to implement again.

>>Costs can be further reduced

>> Procter & Gamble's Inventory Management Change

Innovation: Managing Markets and Customers The ability to play an important role, it is innovation. "To be an innovative company, you must encourage your employees to broaden their horizons and take risks."

In particular, companies should ask themselves: "How can we keep our earnings growing when our core product is very common?"

Before, The answer people give to this question is to continuously improve the cost of production. But SCG believes that continuous improvement in production costs and production quality is not enough. "Every company does it now." SCG decided to take a different approach - to manufacture high value-added products.

To do this, the company strives to foster a culture of innovation. For SCG, this is the cornerstone of innovation.

When asked by a reporter from the "Thai Post" if he could give other companies some advice on innovation, Tara Valley replied: "Innovation is inseparable from R&D. SCG plans to become a leading company among ASEAN companies. A leader, innovation is our core strategy. We invest heavily in R&D and work with the public sector and other associations to drive R&D and innovation. R&D cannot be done without partners, we cannot do it alone.”

To support innovation, SCG has created a work environment that encourages employees to broaden their horizons and take risks. The company takes communication very seriously. Senior leaders frequently visit employees in different regions. Communication often begins with a discussion of the company's vision, but also about the employee's career path and the workflows associated with them.

In the final analysis, SCG's innovation goal is to create products with higher added value.

The third of the company's four key strategies is to focus on high value-added products and services: In order to meet customer needs and enhance its own competitiveness, SCG has innovated and launched a series of high value-added products and services.

The fourth is to consolidate domestic market network and increase overseas market expansion efforts: SCG will continue to expand overseas market network, and the company plans to further explore export opportunities in some untapped markets such as Middle East and African countries.

If creating high value-added products and services is not feasible for your company, then you can consider an opposite strategy—selling lower-end products. Taking luxury brands as an example, people may regard such products as conspicuous consumption, so its sales will not be too high. "In times of recession like this one," said a professor at UCLA's Anderson School of Management, "even the really wealthy people don't want to swagger."

Those who aren't so." Hyun" brand, luck is better. A "low-end" product is what the customer calls a bargain. In the third quarter of 2008, brewing giant Anheuser-Busch's product sales rose 6.6 percent to $4.92 billion, while most other beer companies saw their product sales decline. This is because its products are seen as a bargain in the eyes of customers.

So, which end of the market should you serve? High added value or low grade? In fact, you can combine both - offer different products for different customer groups.

Gary Lilien, a professor of management science at Pennsylvania State University, pointed out that most businesses depend on three basic customer groups to survive: "value buyers" - those willing to Better service and support pay extra; "price buyers" - who want only the most basic items at low prices; "greedy people" - who fantasize about getting all services at the lowest price.

In times of recession, most companies can't afford the cost of meeting the demands of "greedy people," and it's time to move them into two other categories of customers, Lilian said. This means that you have to package different products and services for different needs.

Dow Corning, for example, uses customer surveys to separate its core customers from less profitable customers.

No matter which end of the consumer market you are serving, high-end or low-end, what you need to ensure is to speed up the decision-making process in the supply chain. You decide: how much product will you produce?

McKinsey & Company advises manufacturers to speed up the decision-making process across departments so they can make timely adjustments based on short-term plans. Also because of this, the company's inventory will be reduced. As for how to speed up, one way is to establish a cross-departmental team that meets weekly or even daily to adjust all aspects in time according to market forecasts.

Faced with today's crisis, companies need to re-examine their marketing strategies. Many companies see emerging markets as key drivers of their own growth, drawing resources out of developed markets and into emerging markets.

Regardless of the market you serve, remember not to just cut costs, but to cut waste. Don't cut back on your sales force and corresponding marketing activities targeting growth markets. This "comprehensive" approach to cost-cutting in sales and marketing has long been proven to do more harm than good.

Don't neglect customer satisfaction while trying to cut costs. As long as you know what the right drivers of customer satisfaction are and don't plan to sacrifice them, you can have both. Questions to think about include: How many agents can you keep without lowering your customer satisfaction score?

>>[Management Resource Library] How to Achieve Customer-Centric Innovation

People: Achieving Optimization

Human resources consultancy Mercer states, “In times of economic uncertainty, a An efficient, competent, and engaged workforce can give a business the greatest competitive advantage."

Similarly, organizations must optimize their workforce, foster employee engagement, implement appropriate employee development programs, and realize human capital investments optimization.

SCG agrees with Mercer. In the past 100 years, SCG has been able to successfully stand in the business world, relying on its ultimate ace - employees.

"In the final analysis, people are the most important." Tara Valley said, "In our eyes, employees are the real human capital and the most valuable resource of the enterprise. We invest a lot of energy and resources to ensure the development of employees. .We take our people very seriously, and once people know that the business values and cares about them, they treat the business with the same mindset. Then they are more motivated to contribute to the company."

Tara Valley Mixer The above words are the embodiment of SCG's people-centered management philosophy. This philosophy is based on integrity, ethics and teamwork. SCG rejects individual performances, everything is based on the collective. In fact. Its CEO takes empowerment very seriously. When a company is as successful as SCG, the biggest temptation it faces is to stick to its own recipe for success. When this happens, leaders may refuse to listen to their subordinates. After all, success is irrefutable.

SCG seeks to avoid this temptation. To do this, it ensures that employees have the opportunity to learn from mistakes, are not penalized for failures, and can always challenge "the way we do things here."

Other companies have discovered other ways to manage talent during a downturn.

Some are enticing competitors to jump ship. For example, when aircraft makers Cessna and Hawker Beechcraft announced they would lay off hundreds of jobs, rival Piper Aircraft saw it as an invitation to those companies. An opportunity for talents to join their ranks. Piper soon organized a job fair at a hotel near the Cessna and Hawker Beach factories.

When hiring someone who has just been laid off by another company, be careful not to undercut their wages too much. True, even if you give them a low salary, they will accept it because they need a job. But when the economy improves, they will be the first to leave.

Also be careful not to cut training costs. When times are tough, it's no surprise that training fees are often among the first to be cut by companies. But if you cut too far, especially when you eliminate the training program entirely, the business can lose key talent.

"If you cancel all training, you're sending a message to employees: There are no long-term opportunities here," Lilian points out. what's the result? Your competitors will take all your best employees away. Over the next few years, your company will only have less talent.

If the company needs to cut training costs, try not to cut back on training for managers and executives. Because they serve as a link between the top leadership and the general workforce, and must be able to skillfully direct employees.

For many companies, it can be a great opportunity to hire and train people—an opportunity to demonstrate the strength of the company and retain talent. But some companies have no forward-looking awareness and only know about layoffs.

In this case, you can also take the following recommended steps as an alternative to layoffs.

The more commonly used alternatives are voluntary retirement plans, salary reduction plans, as well as delayed bonuses, hiring freezes, and reduced workweeks.

According to Knowledge@Wharton, these are the options a company should take if it wants to cut costs without laying off staff. Wharton professor Peter Cappelli said, "Companies that stay with their employees are much better structured than businesses that have gone through mass layoffs."

As senior leaders, What can you do besides layoffs? Cappelli recommends asking employees if they can substitute a voluntary pay cut for something like a delayed pay plan, like stock or extra vacation time.

It is also effective for small businesses to require employees to voluntarily reduce their weekly hours. The advantage of this is that the business plan of the enterprise is not interrupted.

The most important thing for business leaders is to be optimistic. Crisis can easily lead to pessimism within a company. To counter this, leaders must clearly communicate the purpose of the business to members of the organization. There are a few things you can do to help create a healthy mood within your business. "Surveys show that whichever idea dominates the minds of people, people go where they go. So, if we have a firm expectation of success, it can profoundly affect our attitude towards life." The American Urban Economy Magazine (American City Business Journals).

In short, by investing in adaptability, innovation, and human capital, companies can emerge from the flood of negative news and strive to survive the current crisis and continue to be successful in the future.

>> [Management Resource Library] How does a company retain key employees?

>>[Management Resource Library] How to maintain employee morale during the financial crisis?

The author, Jet Magsaysay, is a consultant for the magazine, translated by Chen Ying.