Regardless of whichever economic crisis occurs, it always significantly impacts business activities. In particular, small and medium-sized enterprises face even greater pressure when experiencing financial shortages and lacking competitiveness. Concurrently, buyers’ demand gradually diminishes. Therefore, what should they do to sustain revenue during these challenging times?
Throughout history, the world has endured numerous economic crises, plunging it into turmoil from the Credit Crisis of 1772, the Great Depression of 1929-1939, the OPEC oil crisis of 1973, the Asian Financial Crisis of 1997, to the global economic downturn of 2007-2008.
Global crisis. Image illustration
Despite the fact that crises present significant challenges for businesses, they also offer valuable lessons to help them adapt, identify risk opportunities, and be prepared for change. Embracing these challenges and being willing to innovate allows businesses to ensure their financial revenue.
1. Why does the state of economic recession and societal fluctuations always endure?
The term ‘economic recession’ is a frequently mentioned concept in macroeconomics, exerting negative impacts on all financial activities of a nation and having the potential to escalate into a global economic downturn, typically lasting for several consecutive months to years. Moreover, it can be characterized by a decline in Gross Domestic Product (GDP) or consecutive negative economic growth rates below the alarm level, leading to an economic collapse, commonly known as an economic crisis. Recognizable signs include abrupt changes in bond interest rates, banks tightening credit lending, increasing bad debts, declining stock markets, labor market fluctuations resulting in unemployment, businesses going bankrupt, and large enterprises curbing investments. The economic recession has a profound influence, causing global trade repercussions, reducing economic growth, severe currency depreciation, income inequality disparities, soaring interest rates, and disrupting the supply and demand equilibrium of goods, leading to production interruptions.
Market fluctuations. Image illustration
According to expert analysis, the majority of causes behind economic recessions stem from political and military instability, wars, pandemics, natural disasters, economic speculation, asset bubble bursts, and international financial crises. In addition, they also point out that economic recession cycles are characterized by the fluctuations of GDP divided into 3 phases: recession, recovery, and prosperity. These cycles are predicted to return on average every 10 years, representing a natural mechanism to help balance underutilized resources within the market. Meanwhile, adherents of monetary theory in economics believe that economic recessions are due to government management and control limitations. Hence, these fluctuations accelerate the purification process, reorganize organizational structures, eliminate biases, and curb inflation to balance supply and demand interactions. In doing so, they demonstrate the ‘steering force’ of leadership and aid businesses in uncovering new opportunities to keep up with modern trends.Top of Form
2. Preparation and Coping Strategies for Competition During Difficult Periods
The inherent economic instability can recur; thus, leaders must continually enrich their knowledge to prevent cognitive stagnation. Additionally, it is imperative to accumulate dedicated reserve funds for risk contingencies or for navigating broader challenging phases, ensuring their judicious allocation. Furthermore, incessantly observe the steps of business activity evaluation, study competitive adversaries, cultivate innovation, optimize management costs, and simultaneously delineate clear objectives for the purpose of ensuring the sustained stability of the enterprise.
For industries marked by intense competition, certain endeavors must not be overlooked. Crafting niche markets, capitalizing on strengths, understanding consumer preferences, fostering effective communication skills, augmenting product quality, standardizing workflow procedures, intensifying marketing endeavors, customer care, and adeptly adjusting strategies in alignment with circumstances, while simultaneously revitalizing the array of products and services and broadening distributor networks—these are all pivotal undertakings.
Particularly noteworthy is the retention of an optimistic and proactive spirit, for it serves as the most potent source of energy to surmount challenges. Mr. Nguyen Xuan Phu, Chairman of Sunhouse Group’s Board of Directors, stated, “Life enables us to solve even the most intricate problems, and that in itself is a source of joy. Be patient, composed, and reassured that everything will improve. Business practitioners are well aware that the market economy is characterized by competition, and this very competition might disrupt stability; however, it is also the driving principle of development. Therefore, for us to thrive, we must continuously innovate beyond the competitive horizon, which will aid business development in all circumstances.
3. How to maintain financial resources when lacking competitiveness?
In the realm of business, there are numerous factors that challenge enterprises, particularly during the current period of general difficulty. Aside from the fierce competition among entities in the same industry, the diminishing consumer demand is significant, driven by apprehension due to the prevailing crisis, leading individuals to tighten their spending habits and maximize their financial reserves. This dilemma exerts substantial pressure on less established businesses, rendering them lacking competitiveness in the competition. The majority of these challenges revolve around 5 common reasons, including a lack of specialized knowledge, insufficient financial strength, a deficiency in persistent determination, a scarcity of flexible innovation in management practices, and a shortage of long-term strategic planning skills.
All these factors culminate in an outcome of ineffective business operations, even risking bankruptcy. To fully comprehend these circumstances, leaders must be honest with themselves and seek answers through self-inquiry: “Do I genuinely have a deep understanding of the field I pursue?; If I am an expert in this industry but lack financial resources, how can I develop secure funding sources?; In case I identify a lack of patience within myself, what should I do?; Are there any instabilities in my management practices?; How can I confront challenges to achieve my objectives?”
In this complex landscape, enterprises need to find adaptive strategies that allow them to navigate these challenges and maintain financial sustainability.
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Firstly, they choose their business’s strengths in the field they excel in. Secondly, if lacking financial resources, they seek investment and capital contributions to mitigate risks while enhancing their competitive advantage. Thirdly, they consistently replenish positive capabilities, cultivate good habits to develop themselves, and improve their knowledge to maintain their determination. Fourthly, they update their mindset in line with current trends, streamline operations, and even overhaul their workforce if they feel a lack of progress. Fifthly, they set achievable low goals because they understand the principle that in order to reach higher heights, they must go through each small step, consistently progressing, eventually realizing they have ‘surpassed’ where they once didn’t know.
Similar to the case of Bento Delichi’s founder, who started with limited capital and faced numerous challenges when establishing the business during the COVID-19 pandemic. However, in less than three years, the system has established over 22 branches and is still expanding. Therefore, remember the saying, “After the darkness comes to the dawn”.
By TTVN Press
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