A manager needs to monitor:
Managing through the Business Cycle
| Steps | Description |
|---|---|
| Assess vulnerability to the recession | “How vulnerable is our company to recession or a slowdown in sales?” Assess the vulnerability in terms of magnitude and timing of slowdowns in sales using national data on the company’s industry. |
| Sketch out a contingency plan for dealing with a recession | It’s an one or two page plan, which can lead a manager to build flexibility into the business. |
| Build flexibility to cut expenses | A company needs the flexibility to cut costs in difficult times. A manager can build flexibility in the business by considering the following areas.
|
| Develop an early warning system. | In 1940, the Battle of Britain began as 2,400 Luftwaffe aircraft attacked England. The Royal Air Force had only 900 planes., yet they successfully defended their country from the Germans. They key to their success, was radar. The early warning system is “radar for business.” |
in order to gauge a company’s vulnerability you must look at the national data on a company’s industry. this will show how vulnerable a company is to recession or a slowdown or sales.
good business managers will prepare a plan for a recession before a recession is even predicted. this will prepare for the inevitable and will identify weak areas in the business.
To help build flexibility into a Business business managers must make decisions I will overall improve the company in the future. They must see how much flexibility is being gained or lost during their decisions.
A company that learns in its contingency planning that it has limited options for cutting expenses may spend a year adding flexibility wherever it can.
Explan each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the terms in your own words briefly.
This is the standard classification for identifying a business category to search for industry data
The cost of producing goods, depending on how many units you produce. The cost added by producing one additional unit of a good.
Increase in savings of costs by improving your business and improving your production.
Goods that are used in order to manufacture other goods for sale.
The value of shares offered by a company.
A bond represents a loan made by an investor to a borrower
A loan Provided by a bank that provides interest for a certain period of time.
The amount of credit extend to a borrower
Short term unsecure notes issued by companies.
Describe the characteristics of the following events briefly.
The author uses this as an anecdotal example to explain the danger of inflexible labor contract. This business practice was used to explain how dangerous it is to have a inflexible labor contract. This program was created in 1984 by General Motors, in order to Help create more Flexibility in their labor rules to increase productivity. People were afraid that they would lose their jobs, but a agreement was reached that the company would end up paying full wages and benefits to workers who are not needed.
The author uses this as an anecdotal example to advocate for smaller modular investment in stages. During this time period There was a decline in demand in the electric utility industry. But as sales growth slowed, their company still had access of capital equipment. With a modular investment even in times of economic downturns you can hold capital spending and start back up again once the recession ends,
The author uses this as an anecdotal example to advocate for borrowing with staggering maturities. During this time. There was a recession which ended up making this company go bankrupt. The reason for this is that the company had financed themselves with bonds instead of short term loans. This means the creditors were able to pull out fast, and stop financing the company which ended up forcing the company into bankruptcy.