Business strategies to survive the coronavirus emergency

27 Mar 2020

These are undoubtedly turbulent times for business of all shapes and sizes, but we can take comfort in the knowledge that downturns are an almost unavoidable part of economic cycles; we have been through them before and we will go through them again. While the causes of this current emergency are unprecedented, there is much you can learn from looking at research into previous recessions to gain insights into how successful business owners steer their companies through intact – and potentially to an even stronger position when the economy begins to pick up again.

Weathering the economic storms

We’ve been providing serviced business accommodation for SMEs for more than 20 years. In that time, we’ve seen the economy and consumer confidence rise and fall – and rise and fall again. Few people could have predicted a more challenging business environment than that triggered by the 2008 banking crisis – yet here we are.

With nearly 700 business operating from our offices, workshops and studios – and with even more virtual office clients – we’ve seen business owners guide their companies successfully through the most challenging of environments. And, just as in 2008, we’re confident that the entrepreneurs who adopt the right mixture of strategies will come through the current crisis ready to capitalise on new opportunities.

The key is working out what strategies will best help you bring your business successfully through this economic storm triggered by COVID-19 and the social measures designed to slow its spread. Research¹ published in the Harvard Business Review, which is recognised worldwide for shaping strategic business thinking, identified four key strategic positions adopted by companies in times of recession – with varying degrees of success:

Prevention strategies

These are essentially defensive moves, focused on cutting costs; for example, laying off staff, downsizing business accommodation and reducing spend on advertising and marketing. While this is a very understandable approach, it has considerable drawbacks, the main ones being:

It is hard to maintain market presence when you are no longer visible to your customers or having proactive dialogue with them. The loss of visibility can make it very hard to secure market share when things start to pick up again.
Asking everyone in your organisation to make cutbacks and find savings is likely to create huge internal stress and lack of confidence, engendering a blame culture in which your staff are always looking over their shoulders to see if they can encourage the axe to fall elsewhere, rather than fostering a team spirit of working collaboratively to pull through.
Companies that lay off staff as their first policy find it hard to recruit again when demand revives – and can find it more expensive to hire than their competitors who showed loyalty to their teams.

Promotion-focused strategies

This term is used to describe companies that adopt a bullish approach, attempting to spend their way out of the recession. Investing in offensive moves to get ahead of the competition can lead to increased market share, especially if rivals are implementing prevention strategies and cutting back on spend. But promotion strategies alone, which are not accompanied by analysing costs and addressing operational issues that could provide a competitive advantage in the long term, are likely to create a situation in which you are less competitive than your rivals once consumer confidence returns.

Pragmatic strategies

The report¹described companies that adopt a combination of defensive and offensive moves as ‘pragmatic companies’:

“The CEOs of pragmatic companies recognize that cost cutting is necessary to survive a recession, that investment is equally essential to spur growth and that they must manage both at the same time if their companies are to emerge as post-recession leaders.”

Defensive moves will include:

Reducing the number of employees
Improving operational efficiencies

Offensive moves will include:

Developing new markets
Investing in new assets

Progressive strategies

This is the term that the researchers¹ reserved for the optimal mix of offensive and defensive strategies. The key question here is: what separates pragmatic companies from those that are successfully progressive?

“These companies’ defensive moves are selective. They cut costs mainly by improving operational efficiencies rather than by slashing numbers of employees relative to peers. However, their offensive moves are comprehensive. They develop new business opportunities by making significantly greater investments than their rivals do in R&D and marketing, and they invest in assets such as plants or machinery.”

Of course, identifying the optimal mix of offensive and defensive strategies for your business in these difficult times is the real challenge. There is no one-size-fits-all solution: it’s time to read, brainstorm with your team, consult your business adviser, accountant and bank and leverage the advice that many are offering for free or at reduced rates to help organisations of all shapes and sizes get through this unique situation.

Taking a deep breath and creating a structured, strategic response is most likely to position you to steer your business through these choppy waters safely.

MEET THE EXPERT

Siobhan Stirling is the director of award-winning marketing and PR agency Sharp Minds Communications. She is currently partnering with a business coach and accountants to offer up to 90 minutes’ free business strategy advice to companies in Kent and Sussex and to Capital Space clients. Read more about this offer here.

SOURCE

1 Roaring Out Of Recession by Gulait, Nohria and Wohlgezogen