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© Copyright IBM Corporation 2008 Expectations from the stakeholders during downturn G Venkatraghavan March 24,2009 NASSCOM, Chennai
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/20152Economic Impact of the Financial Crisis | 23 rd October 20082 To understand the impact of the financial crisis, it is important to remember the drivers of economic growth AD = C + I + G + X - M Aggregate Demand Investment Government Expenditure Consumption Imports Exports
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/20153Economic Impact of the Financial Crisis | 23 rd October 20083 In this financial crisis, the negative impact on all drivers of growth will be more extensive and severe Consumption Disposable income Consumer confidence Interest rates Availability of credit Attitudes to spending Attitudes to saving Investment Business confidence Interest rates Availability of finance Level of economic activity Economic growth Level and changes in consumer demand Cost and efficiency of capital equipment Rate of depreciation Government policy Government Expenditure Income (revenue) Borrowing Necessity for economic stimulus Exports Disposable income and firm income Consumer and business confidence Interest rates Availability of credit Exchange rates Attitudes to saving Attitudes to spending Economic activity in export markets Imports Disposable income and firm income Consumer and business confidence Interest rates Availability of credit Exchange rates Attitudes to saving Attitudes to spending Economic activity in import markets Aggregate Demand AD = C + I + G + X - M
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/20154 A different kind of downturn – Traditional responses will not suffice Long and Difficult Unprecedented constraints on access to credit and capital; Unwinding of over-leverage Falling demand, increased price sensitivity as consumers and enterprises cut back Disruptions in supply chains, partner and customer arrangements Transformative Restructuring of industries: Firms fail, sold off overnight New regulatory regimes Stress on global inter- dependencies Typical cost management will NOT be enough Firms must examine working capital & investment: identifying opportunities to restructure, reduce, and preserve capital as well as streamline operations
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/20155 The 3 C pointers Cash is King (doesn’t mean that customer is not ) Cash Credit is hard to get Credit Perceptible ‘lack of confidence’ even among seasoned CEOs Confidence
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/20156 Organization ManagementSuppliers Customers Employee What are our stakeholder expectations in this scenario?
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/20157 What the employees want 1.Job security 2.Facilitate up-skill/cross-skill 3.Increased communication 4.Keep me engaged 5.Focus on ‘trust’
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/20158 What the suppliers want 1.Honour contracts 2.No knee jerk reactions 3.Work together towards the long term 4.No unreasonable ‘squeezing’ 5.Transparency on company performance
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/20159 What the customers want 1.Clarity on situation - Serve with same quality at potentially lower costs 2.Share burden 3.Flexible arrangements 4.‘Partnering’ and ‘Risk-Sharing’ arrangements 5.Help in leveraging existing assets to ‘do more’
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/201510 What the Management wants 1.Sustained business (even if growth is lower than usual) 2.Sweating of existing assets 3.Conservation of cash 4.Voluntary efforts to deal with current situation
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/201511 Along with these demands, broader forces are at work … And tomorrow's leaders will capitalize on the new opportunities created Our world has become… Smaller & Flatter Riskier Pervasive connections and communications Emerging markets Open trade Systems-level complexity Viral spread of information Widening gap between information available, and information effectively managed. Smarter Instrumented Interconnected Intelligent
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/201512 Companies need to do three things: Focus on Value Exploit Opportunities Act with Speed Do more with less Focus on the core Re-align relationships Capture share Build future capabilities Change industry dynamics Manage change Leadership Risk & Transparency
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/201513 The 3 C pointers Cash is King (doesn’t mean that customer is not ) Cash Credit is hard to get Credit Perceptible ‘lack of confidence’ even among seasoned CEOs Confidence
© Copyright IBM Corporation 2008 Succeeding in the New Economic Environment | November 2008 | 1/15/201514 In summary.. Answers to the 3 C lies in 3 A Create agility to incrementally expand or contract, build key capabilities by spending on a vision to leverage investment and reshape the industry Agility improve productivity and conserve capital, cut spending and redeploy to products and markets that generate growth, margins, and true differentiation Adaptability Creates an environment to anticipate changes before they occur and the ability to use fast, sustainable decision-making Alignment
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