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Analyst: CEOs Should Remain Steadfast in the Face of Economic Downturn


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March 12, 2008

Analyst: CEOs Should Remain Steadfast in the Face of Economic Downturn

By Greg Galitzine, Group Editorial Director

Each day it seems we are besieged by negative news from the financial markets (yesterday’s 416-point surge in the Dow Jones industrial index notwithstanding). Housing crises, mortgage crises, sinking dollar, soaring Euro, and on and on… We’re heading for a recession they say. No, a depression! In any event, the news is certainly bleak.

The instinct for many business leaders is to circle the wagons… to trim the sails and ride out the storm… to cut back on growth plans and wait the downturn out.
Frost & Sullivan (News - Alert) Chairman David Frigstad believes now is no time to operate timidly. In fact, Frigstad thinks that such nervous thinking might even be at the root of any impending economic troubles.
“CEOs creating cautionary growth strategies and consumers spending more conservatively based on their fear of what the future will bring will be the fundamental cause of any slowdown or recession we may experience,” says Frigstad.
According to Frost & Sullivan, CEOs would do well to consider the following list of recommended actions as they are faced with the specter of an economic slowdown:
  • Rethink targets and expectations to ensure hitting margin and revenue objectives
  • Invest in technology by protecting new product development and create a plan to launch new products during an economic rebound
  • Explore asset acquisitions since pricing will be attractive in many instances
  • Partner with financial institutions to leverage ability to improve balance sheet and strengthen capital structure in times of Fed easing
  • Implement aggressive competitive strategies to gain market share
  • Look to global market for geographic expansion and investments
  • Take advantage of competitor uncertainty and weaknesses to attract exceptional talent and fill key positions
Frost & Sullivan Global Financial Services Vice President Ken Herbert agrees now is not a time for CEOs to lose confidence.

“It is not uncommon for companies to get distracted and focus inwardly by cutting costs and laying off employees when facing economic uncertainty,” Herbert says. “Leading companies have the opportunity to take advantage of the uncertain times by surprise and drive initiatives that their competitors may not respond to as quickly as they would during a time of economic growth.”
Herbert also believes that falling interest rates, which create cheaper access to capital, can go a long way to helping companies “increase their overall flexibility in the marketplace.”
“Overall, our research on technology, markets and economics clearly shows that the global economy is very healthy and fueled by technology driven productivity improvements, enhanced logistics, global democratization trends, better trade infrastructure and a very dynamic commercially-focused Asian business community,” adds Frigstad.
Frost & Sullivan also believe that due to a falling dollar and the subsequent increasing strength of foreign currencies like the Euro, there exists a “strong possibility that foreign buyers will look to the United States for properties with long term value.”

In the end, it is up to business leaders to decide what's right for them, but it should be noted that history proves that times of economic uncertainty and confusion create opportunity. The question is, will more chief executives see today's economic climate as a door opening, or a window closing? 

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