How To Win in a Financial Crisis

Businesses face difficult challenges when enduring a financial crisis. But what highly successful businesses have discovered is a financial crisis can also provide many opportunities. If the right opportunities are pursued, market share can experience sharp increases. This gives companies the push needed to move ahead of industry leaders. With the right strategies, a business has the ability to maximize success during a financial crisis.

Unique Opportunities
A financial crisis provides unique opportunities in regards to regulations. While government regulations may have previously been stringent, a financial crisis can create a shift. Often times, companies are able to get around normal boundaries which can greatly increase the opportunities available.

Foreign Ownership
Companies often identify potentially lucrative opportunities in other countries. But because of foreign ownership constraints, the company’s options are at a standstill. A financial crisis often provides opportunities to bend the rules. Foreign ownership rules may be relaxed which allows businesses to execute successful business plans for expansion.

Stronger Negotiation Abroad
After time, many businesses become complaisant on their views regarding regulations. When a financial crisis occurs, management needs to adapt new attitudes and think creatively about regulations. Instead of accepting current rules, executives need to explore the effects of expanding the limits. If you challenge regulations, you may be able to gain entry into new markets. This can provide an advantage over the competition.

Taking on Industry Leaders
During difficult financial times, industry leaders are often hit hard. Difficult economic conditions often shake consumer confidence which can have a negative effect on these leaders. This provides a unique opportunity for small and emerging companies to penetrate the market. Smaller market competitors can capitalize on this opportunity by moving in and building a stronger market share.

Opportunities for Expansion
Many companies have ambitions to expand but have been limited by stringent regulations. Yet, as regulations begin to relax, companies are apprehensive about expanding during a financial crisis. Although this strategy may be counterintuitive, there are huge rewards for successfully expanding during a financial crisis. A company can take advantage of relaxed regulations that wouldn’t otherwise be available. And because many other companies aren’t willing to take the risk, it gives your business a strong edge against the competition.

Merger and Acquisition Deals
When a financial crisis hits, companies will often table discussions of acquisition or merger deals. Taking advantage of a merger or acquisition during hard times can actually turnout to be a successful strategy. This can be a great time to find deals that will create value and assist in expanding a businesses’ market share. The key to this strategy is finding the right deals and not overpaying. If you take advantage of the right opportunities, the payoffs can be huge.

Wagering Risk During Hard Times
When financially rough times occur, companies often clam up, holding all of their assets closely. But if you take a look into history, companies that make successful bold moves during a financial crisis can positively change the path of their company. Making strategic moves during a financial crisis can be risky. For companies who are up for the risk, the rewards are big. Work closely with management to develop winning strategies based on the economic changes.

Consider Your Positioning Strategy
During poor economic times, high-end goods providers typically experience drastic affects as consumers hold onto their money tighter. Companies that experience success in a financial crisis are usually those selling discounted goods. A company should develop strategies to tap into the marketplace changes. Closely evaluate your price points, marketing and packaging. This can assist in generating creative strategies to position your products closer to the market’s needs.

The Value of Quick Response
Those companies who come out of financial crisis ahead of the competition are usually quick responders to marketplace changes. Eliminating processes that slow down a company’s ability to respond to economic change quickly will add to your success. Work closely with senior management to quickly create and execute strategies.

Corporate Culture Changes
When companies design new strategies and quickly implement changes there is often a shift in corporate culture. Because managers often become comfortable with a set approach to business, there may be some resistance to change. Executives need to quickly gain management and employee buy in to make the new strategies a success.

A Call for Strong Leadership
In a financial crisis, companies need a leader that is resilient and can successfully implement change. Having a strong visionary that is willing to throw all of the old rules out and adapt new winning strategies is critical. Making these changes can lead a company down a path full of opportunities which can yield high payoffs and rewards.

Resources:
Dominic Barton, Roberto Newell, and Gregory Wilson. “How to Win in a Financial Crisis.” The McKinsey Quarterly 2002.

VERCOR is a middle market investment bank that creates liquidity for small and middle market business owners. For more information visit http://www.vercoradvisor.com/.