During a recession, many companies are forced to make very difficult decisions. This has been especially true in the current recession, which has been not only been deep, but global.
Most recession decision-making is pragmatic. The future is not guaranteed and depending on your company's financial situation, short-term survival often trumps long-term strategy. But while surviving may be your priority, decisions made during a recession can have a significant impact on the future of your business well beyond the recession.
They can even impact how well your company will do once recovery begins. Companies that cut themselves to the bone may be ill-prepared to meet demand when it picks up. Companies that weren't in a position (or didn't take the opportunity) to gain market share at their competitors' expense may lose out to competition that did. Businesses that made fundamental changes to their strategy that they thought were temporary may find that those changes are much harder to reverse.
Case in point on the latter: a recent BusinessWeek article makes the point that luxury brands that lower prices too aggressively "could tarnish their glitzy brands". The article notes that, thanks to the recession, "brands from Chanel to Chloé have marked down items to entice customers through the door".
While this may be a pragmatic necessity, how it's done may have a huge impact on how these brands are positioned for recovery. Brands that discount too aggressively and publicly could very well lose the cachet that enables them to charge a premium in the first place. Brands that don't discount at all may put themselves in a financial straightjacket. Neither option is entirely appealing, which is why BusinessWeek notes that luxury brand "executives are well aware of the need to woo today's frugal buyers while trying to maintain tomorrow's prestige".
Executives in many industries are faced with trying to pull off similar balancing acts. From revisiting your pricing to analyzing your ad budgets, there are no easy answers but recognizing that many recession-driven decisions made today will have effects lasting long into the future is something every business owner should be doing.
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