A manager needs to know the first steps through the business cycle. The first step is when managers assess the companies vulnerability to a upcoming recession. The second step is that managers must Prepare a contingency plan in case of a recession. The third step is to build flexibility into your company, which will improve day-to-day operations. In the fourth and final step is that managers should develop an early warning system to detect recessions.
Table of possible options in a contiengency plan
| Expecting a downturn | During moderate downturns | During severe recessions | |
|---|---|---|---|
| capital spending | reevaluate | cut entirely or almost entirely | not only cut entirely, but consider selling assets |
| employment | slow hiring | freeze hiring, layoff generic production workers | eliminate future-oriented positions (e.g., R&D), keep sales personnel though not at previous levels, cut all other staff areas to the maximum extent |
| inventories | monitor closely | monitor closely, review for unnecessary inventory items | the same as the left |
| account receivable | tighten credit terms, set up a factoring (selling account receivables) relationship | collect as rapidly as possible, on the payment side delay to the extent possible | the same |
| financing | secure a larger credit line, delay payments to vendors, get some long term debt | consider stop paying dividends, keep good relationship with banks by disclosing the company’s condition early and fully | the same |
| lines of business | shut down unprofitable operations | the same |
Easy steps are used to help start the process in preparing for recessions, and can prevent emotional decision-making. Easy steps Like step one should try to save capital spending while also still maintaining business operations.Some ways to do this is to start selling receivables, and help liquidate your assets that will be considered useless during a recession, but it is important to not overdo it in case of emergencies.
Moderate steps are used once the recession starts And will help influence whether or not he will get through the recession. During this time you must cut all capital spending, And you must do what is necessary in order to maintain your business, such as firing people and freeze the hiring process.It is important to maintain a low amount of debt, and do what is necessary without killing your company.
Survival steps happen when the recession is at its worst, and you must do what needs to be done in order to survive. If you don’t do these steps it is very easy to become bankrupt during a recession.During this time all capital spending must be stopped, and layoffs will occur. All individuals that are not considered crucial to the operation will be fired.
Taking advantage of her sessions are important to your business because although recessions are bad, they have a lot of different opportunities as well. Some of these opportunities that business managers to take advantage of is low operating costs,Low prices on goods, and much more.
In order to identify opportunities in the market a business manager should properly prepare his company for a recession, and use this opportunity to help improve his company due to the low cost of operating expenses and much more.
Pricing and sales during a recession changes drastically because people become much more price sensitive. Business managers must properly plan their company for situations like this during recessions.
When recovering from a recession things like sales and pricing will be slow at first, And prove a threat to your company. But managers must make sure capacity is ready to expand with production. After this you should start hiring individuals who are needed in order to help improve your company to the point it was at before the recession.
Managing in a boom
During a boom you will experience high profits and market explosion. It is important to try not to get overwhelmed with all that is happening considering it will only last for a limited amount of time. You should increase your capital spending come up and increase your investing activities To prepare for more future Recessions.
Overall business managers must prepare a step-by-step plan for when a recession occurs. They must plan with the company must do before our session, during a recession, and after a session. They must also plan in case of an economic boom or any other situation so I will occur.
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.
Money that is owed to a company but has not yet been paid.
Economic policy and laws that are made to avoid monopolies or Monopolistic actions by companies. Otherwise these laws are made to make sure smaller businesses have a fair shot at being competitive.
Short run or long run processes by which a firm may determine the price, input and output levels that will lead to the highest possible total profit.
Describe the characteristics of the following events briefly.
What happened during the second I’m event was that the Washington mutual close down 53 business banking offices, And fired many of the workers.Although this didn’t happen during a recession, many different companies took advantage of this and started hiring employees at a much lower wage. This increased the available employees, and it allowed the opportunity to take every part of the company being let go including loan officers.
What happened during the situation was that during the beginning of the recession Air Tran, Had lowered its operating expense. They had managed to do this because of the increase in cash, And the bigger companies were selling planes at a discount. This allowed the company to purchase The same planes at a cheaper price. This is the main example of how a company can take advantage of a recession.