The Economic Cycles as an opportunity factor

 

Business cycles are inevitable in the capitalist system. The macroeconomic actions that are implemented may extend the period of the most benign phases or attenuate the impact of the less favorable ones, but they can never eliminate the alternations. The economic cycles in their phases of expansion and contraction are inherent to the capitalist system.

 

Experience indicates that a good part of the entrepreneurial success, both in the cases of large corporations and small or medium-sized companies, has had its germination precisely taking advantage of the opportunities that only appear in the less favorable phases of economic cycles.

The habitual behaviors that companies adopt with greater focus when the less favorable phase of economic cycles arise are, among others, the following: take care of liquidity, renegotiate the cost of supplies with suppliers with a long-term relationship vision, eliminate the untidy growth of the expense produced in the previous expansion phase, focus on the core business and strengthen the relationship with customers.

However, to stay only in these actions, whose feasibility of application should be evaluated in each case, is to miss the protagonism for the innovation that the less favorable moments precipitate. The latter because in those moments those who integrate the management of a company are more permeable to the introduction of changes.

It is not about adjusting to less favorable cycles, but rather to act with conviction to take advantage of them.

In this sense, three specific behaviors can be identified to describe how to take advantage of the opportunity offered by a deceleration of an economic cycle:

Behavior 1: Conditioned to the availability of sufficient financial capacity or availability of the funding source, the first behavior is to take advantage of the opportunity to gain market, incorporate technical capabilities and / or achieve greater benefits linked to the lower incidence of fixed costs associated with the possibility of operating on another scale. How to achieve it? acquiring other companies in a situation of weakness that accelerate the strengths of the company itself by the possibility of working in another dimension or incorporating technologies / capabilities critical to the business.

How to achieve it? acquiring other companies in a situation of weakness that accelerate the strengths of the company itself by the possibility of working in another dimension or incorporating technologies/capabilities critical to the business.

Behavior 2: A second behavior is to take advantage of the opportunity by making an analysis of the policy of resource allocation that the company is making and its consistency with the vision of the business.

This means adopting a criterion that, in the face of limited resources, does not discretionally cut investment and spending but, on the contrary, based on an intelligent analysis eliminate or reallocate those disbursements that are not aligned with the business strategy. This means working hard on the quality of the investment and expenses.

How to achieve it? The way is by replacing the question of how to reduce an investment or an expense, by another much more ambitious and intelligent question related to the coherence of the investment and expenses within the framework of the company’s business strategy.

Behavior 3: Finally, the third behavior is to work on the validation of the business plan pillars and sustainability in the long term in its operating model, taking advantage of the periods of less vertigo that provide the time for its approach.

How to achieve it? Through the deepening of the professionalization process and management model of the company.

Considering any or all of the above mentioned behaviors will allow the company to be better prepared than its competitors to take advantage of the economic cycle of expansion that will sooner or later arrive in the future and, consequently, to obtain at that moment the largest portion of the additional wealth that will occur in the market.