A manager needs to: Be prepared for a potential downturn with-in the economy.
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 is a way that will help you by reducing your capital spending.
Moderate steps is a way to cut out most your capital spending while also freezing potential hires.
Survival steps is when you will unfortunately have to cut your capital spending entirely, this is the last effort to keep your company above ground.
To be taking advantage of recessions you would be trying to enter with a lower operating expense.
It is important to be able to understand identifying opportunities. One of these ways is by making sure you know financially how much a business has to be able to spend so you can prepare for a potential recession.
You will have to be very observant when it comes to this especially if there are prices that start to lower, and continue to lower. Your company will not financially profit solely by prices lowering, you will have to make sure that prices will over time go back to where it was prior.
For managing in the recover you will have to be ready with a plan to know what the appropriate amount of employees you will need to potentially rehire as well as preparing to gain back supplies and services that were lost over the period of time.
To be prepared to manage in a boom you as a owner must be prepared to know when it is a smart decision for the business to play the market and accept or decline potential offers of goods and services being approached. You must be prepared to make difficult decisions that will best benefit the company and its employee’s in the long run.
When you are managing during a recession you as a manager must be equipped with a plan going into it so you can be prepared to bounce back once a recession is over.
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.
Accounts receivable is what is owed to a company but has not yet been paid to.
Profit maximization is when you have equal supply and demand for a company. This is best described as when a company is producing the most that it can at that given point.
Describe the characteristics of the following events briefly.
The case of the Washington Mutual in the summer of 2004 had let go of a ton of workers almost being at nearly over a thousand at that point. With the let offs of so many employees going public there was a lot of backlash about nothing being taken care of for the ex employees of the company which led to other companies being able to hire more employees that were let off and this allowed them to gain a competitive advantage over the Washington Mutual.
During 2001 the airline industry hit a massive recession. Everyone was afraid of flying due to the 9/11 attacks. Due to this a lot of major airlines had to let go of many employee’s on their airlines due to there not being a need for employee’s to flights. Overtime this allowed discount carriers to to pick up employee’s and give them a competitive advantage by ensuring they had a full staff to make sure all their flights ran smoothly.