There are always ups and downs associated with any line of business

There be always ups and downs associated with any extraction of profession frontier. IT is not an exception. During downturn profit margins take a toll and consumer confidence plummets. Business executives around the population eagerly s back tooth the latest report on economic indicators and search for good vernals.downswing affects umpteen segments. It is not only the industry that experiences the negatives of the economy, but as well the coarse man is affected. scotch uncertainty elicits variant reactions from different firms. well-nigh organizations simply tread water and attempt to ride push through the storm early(a)s float upstream with the intent to move ahead of their competitors.As executives rethink their personal line of credit strategies, they should consider a pattern of approaches including some that atomic number 18 not immediately unmistakable given todays uncertain economic climate.2 riddle DefinitionUnderstanding the problem is a pigment to solving it. Howsoever generic this statement may be, it is capable to say that the strategies and actions formulated to emerge strong in downturn may not succeed without mind how the downturn was powerd. It is imperative to understand the factors that influence the downturn and how a particular downturn may be triggered. The ca practise could be many an(prenominal) a particular industry segment might not understand expectations and could trigger decrease in ontogeny in some new(prenominal) sectors. E.g. the dot com burst. In this section we campaign to list down indicators that could assertable play a role in causing the downturn. Along with it we similarly list down the reactions that companies worldwide give to tackle downturns. By way of research we would like to break how these reactions mint indeed be made operational strategies to emerge victorious in the downturn.2.1 Economic downswing DefinedEconomic downswing is defined by a signifi puket decline in sum outpu t, in fix, employment, and trade, usually lasting from six months to a year, and marked by widespread contractions in many sectors of the economy.Downturns shag be* Industry specific* Economy based* Long term/ short term or* Geography specificThe severity of an Economic Downturn is measured through parameters likeEconomy* concern* GDP Growth* Interest rates* Inflation* Investments* Public ExpenditureCorporate* Lack of growth in profit talent* moveing earning outlooks* Squeeze in margins* Drop in share price indication* Low dividends* High investor expectation* Dried-up cash flow* Low capacity utilization* imperative need for cost optimization* Increased market competition* Stagnant Markets Non expanding Frozen pie vs. Expanding PiePeople* Fall in Personal income* Fall in Personal expenditure* Fall in Private Investments2.2 guild Reactions during downturnCompanies adopt various tactics that can help them emerge stronger and subsequently more combative when the economic uptur n arrives.Forward-thinking initiatives that concentrate on lowering an organizations ongoing cost structure are more impelling than blanket budget cuts. The tactics counselling equally on efficiency and expansion, since businesses keen on contemptible ahead hold in to consider both perspectives. In fact, when corporate coffers are clamped shut, companies must rely on efficiency gains to fund expansion initiatives2.2.1 Cut addresssCutting the cost is probably the most obvious option for a go with when margins are thin. Cost cutting is done in different forms and many of the following options directly or indirectly deal with them.2.2.2 Improve FocusIn boom terms, the proverbial strategy is to let a thousand flowers bloom. However, when the financial picture darkens, the businesses tend to do some pruning. An economic downturn becomes an ideal period to focus the corporations scarce resources -both marketing and manufacturing dollars on the most popular, promising or profitabl e products and brands. In other words, invest in the best and ignore the rest. Savings from consolidation efforts can then be applied to further support selected focus areas.Similarly, businesses try to concentrate on acquiring and retaining the most profitable customer sets How?1. Forego expensive mass-marketing efforts instead, market directly to carefully targeted prospects2. Focus efforts on serving fleet accounts better than ever. Understand customer cost and revenue drivers to determine the real top accounts, then consider e-commerce and self-service solutions that can increase satisfaction while lowering costs.3. Learn to in effect use nurture that is already available in-house to build revenues from the existing customer base. By combining in-house information with proprietary market data, the company can start to understand the why of customer preferences and build a stronger competitive advantage.2.2.3 Ease points of painWhen revenues are climbing continuously, inefficie ncies are easy to ignore declines in per-unit margins can be made up through volume. But when growth stalls, margins come under tremendous scrutiny, forcing companies to travel to every aspect of their business for possible make betterments. Rarely can a business simply recrudesce performing a function instead, it must attend a way to accomplish the parturiency differently. This a good deal requires the help of technology.Surplus inventory, high work-in-process and yield-and-demand discrepancies are more costly than ever. By digitally linking the entire supply chain and collaborating electronically with suppliers and customers, companies can potentially lower costs in the short term and improve market responsiveness over time.2.2.4 Share costsIts not surprising that when margins are squeezed, firms search out and eliminate redundancy. Internal and external best practices implemented through shared or common business models across the enterprise can dramatically lower costs wh ile increasing competitiveness. However, an all or nothing approach to standardization can sometimes backfire. When implementation teams look beneath the sur strikingness of common functions, they often discover legitimate needs for variance. Before too long, the cost of processing exceptions outweighs the anticipated synergism savings. An effective shared services strategy requires a deeper analysis up front pursuing standardized parts, not necessarily the whole function. Rather than forcing each function regardless of line of business into a standard mold, look for naturally occurring affinities, pinpoint specific areas of similarity, and combine those particular pieces.3 Analysis3.1 Reasons for DownturnStudies have shown that the following are the main reasons for downturn60% of the respondents feel that this downturn is caused by radiation pattern fluctuations in business cycles. The fluctuations in share markets are attributed as the reason for downturn by 20% of the respo ndents. Only 15% of the respondents felt that the September 11 terrorist attacks on the World Trade Center is the cause for the downturn.This shows that people perceive downturn as a natural phenomenon happening due to ups and downs in the economy. Terrorist attacks and other reasons, are not the main factors causing downturn, but they can trigger an already bad stance worsened.3.2 How do people see the downturnMajority (61%) of the people feel that downturn is an opportunity to find newer markets, restructure their organization and fine-tune the process to increase productivity.The findings here support our arguments provided in the prior section. Downturn is definitely an opportunity for businesses to take a look at their processes, the way they provide services to customers, markets and other factors affecting them and improve their way of working.3.3 Strategies to focus during downturnStudies found that during a downturn the energies of people are concentrated in keeping their customers happy. 32% of the people have made this as their radical focus area. The other areas where people are concentrating are in strengthening the sales and distribution/marketing.When getting new business is tough, it makes sense to keep the existing customers happy, provide them the extra bit for their dollar and come up with innovative ideas to service them. Keeping the existing business stable can sustain the current revenues and increase. reiterate business can increase the revenues. With these factors in mind, people are following customer centric strategies to face the downturn.3.4 HR strategies during downturnHuman Resources are on of the key focus area during a downturn. Cost can be cut cost by retrenching employees. Productivity can be increased by extending the working hours or by employing cross-functional training.Punish the non-performers is the key mantra. 80% of the respondents have stated that this is the primary task that needs to be accomplished or that the ir companies have started identifying non-performers and taken steps to ensure that employees perform to expectations.Some of them advocate extending the working hours. There seems to be not much support for unpaid leave or freezing salaries among the people interviewed.3.5 Outsourcing as an optionDownturns might pose a good opportunity to demand what the companies are doing the best and discard the rest.Outsourcing to low cost destinations is definitely being looked as a possible opportunity. 76% of the respondents feel that they should resort to outsourcing non-core activities.4 Suggested Strategy to Manage DownturnsRecessions, sound a lot worse than they are in part because theyre a great opportunity to move forward on key strategies and to take on competitors.To get through a deferral the most important thing for a company to do is to keep a positive attitude and identify its challenges and convert them into opportunities. There are various strategies that a company can adopt to not only survive but withal grow in a reversionary economy.Based on the various arguments and data provided in the previous sections, we are in a position to present these action items to manage business in a downturn. We have grouped them under different functional management areas.4.1 Core CompetenciesRecession is the time when a company must concentrate on its core competencies. Core Competence implies Resource, strength, skills or a confederacy that provide tangible advantage to a firm. It is very essential for the company to maintain focus and do what it does best. It is dangerous for a company to venture into unknown territories with an intention to broad-base itself, as one wrong termination could make it fall deep in the red.Every company must take stock of its strengths and leverage unique strengths that are difficult to emulate. It should strive to enhance its knowledge and skill by keeping in touch with the market requirements.Identify strengths and axe weaknesses. This can translate in restructuring, selling or block weak or mediocre businesses. Selling is particularly difficult, as the same division might have fetched much more in good days. In a downturn, this aspect should not change the focus. Companies cannot chip in to waste money and management attention in areas that destroy rate or limit their ability to invest in the future.Young companies may not have enough run way for the near year or two. They must rapidly adopt survival strategies. Tough choices range from giving up equity at low valuations merging with compatible product or service companies partnering to, in effect, use other peoples resources or narrowing the strategic focus to a bare minimum. A careful examine and analysis will help in taking the right decision.4.2 Customer is the KingRepeat business from customers is important to maintain profitability. It has been proven that, repeat business accounts for around 70% of the total business in most of the established c ompanies. Customer delight should be the focus. Offer something to the customer, which not only exceeds his expectations but also goes even beyond it. E.g. Special features in a software application/product in line with the customer requirements.Infosys receives 85% of its revenues from its existing customers. This is what we can call as a Customer focused capabilities which Infosys has construct over a period of time.Customer delight can also be achieved by rattling sending out people on the field and spending time with the customers to find out their requirements, the value they put on the product or service offered by the company, their level of satisfaction with the quality and other suggestions they can offer to better our product. This strategy was recently adopted by Hindustan Lever Ltd. with their feel the impulse drive.4.3 Human Resource4.3.1 Talent RetentionAt the outset, we have shown that recession and growth form a continuous circle. Therefore, it is imperative for c ompanies to resist the temptation of cutting costs through retrenchment, as it sows the problem of rehiring professionals when the economy turns around. Instead, companies should encourage their employees to accept pay-cuts, and cross- train them so as to equip them with the necessary skills that will help the company take advantage of the opportunities that arise once the situation improves.Many companies that want to cut costs during recession adopt the insurance policy of downsizing. A vast number of sharp professionals are thus available for recruitment. Managers can take advantage of this favorable situation by recruiting these professionals after thoroughly interviewing them, thus testing their efficiency levels, attitudes, and the organizational culture fit.4.3.2 Miscellaneous ActionsCompanies can resort to cross-train people in view of the opportunities that can come up after the recession is over. This is more like doing an investment in hope of better time to comeIn cas e of situations that warrant stopping the production, companies can ask the employees to take unpaid leaves or giving extended weekends. Lucent has adopted this strategy. It can have a downside to it by way of loosing talented employees because of employees getting demoralized.Offering additional perks to those who can get in more business can actuate employees. This can be mainly applicable to the marketing and sales force.Jack Welch, former CEO of ecumenical Electric Co. called pay freezes the worst crime of management and underscored his long-held belief in a meritocracy approach that consistently rewards the top 20% of employees and dismisses the bottom 10%. While he was CEO at GE, Welch said, 75% of his time was spent evaluating people and raising the companys intellectual capital through candid evaluations.5 ConclusionEconomic Downturn is a phenomenon that occurs at different spheres of the society and attracts a lot of attention from the corporate world, the policy makers a nd of course the common man. The strategies to set things right are also decided at various levels and sweep up a wide range of actions.Above study consists of observing typical industry response to downturn, conducting primary research through surveys and analyzing the data and secondary research through analyzing reports and news available in business journals and internet research groups like Gartner, Meta group etc.