Making a key decision in a downturn: go on the offensive or be defensive?

Citation

Deans, G.K. (2009), "Making a key decision in a downturn: go on the offensive or be defensive?", Strategic Direction, Vol. 25 No. 8. https://doi.org/10.1108/sd.2009.05625had.010

Making a key decision in a downturn: go on the offensive or be defensive?

Article Type: Abstracts From: Strategic Direction, Volume 25, Issue 8

Deans G.K., Kansa lC., Mehltretter S. Ivey Business Journal (Canada), January-February 2009, Vol. 73 No. 1, Start page: 3, No. of pages: 10

Purpose – To study the criteria influencing the decisions taken by companies facing an economic downturn on whether to go on the offensive, by aggressively pursuing growth, or to take the defensive stance of protecting revenues and profit margins. Design/methodology/approach – The current worldwide economic crisis (“credit crunch”) and possible recession is taken as the backdrop to the consideration of how companies are effected by the deteriorating financial climate, with consumer confidence and manufacturing indexes at 25-year lows, major stock indexes having fallen by over 30 percent, and major companies such as Lehman Brothers, Bear Stearns and AIG as high-profile victims. Discusses how companies can plan their future offensive or defensive strategies to take advantage of any future improvement in the economy. Findings – The strategic elements of an offensive strategy could include: revenue growth (entry into new markets, acquisition of weaker competitors, innovation in products, services and processes); and strategic investments (“cherry picking” competitor talent, pricing aggressively to “steal” customers, implementing sales force effectiveness strategies). Notes that the strategic elements of a defensive strategy could include: protecting revenues (implement pricing incentives, staying in tune with customer needs); protecting profit margins (aggressively benchmarking and managing costs, strategic sourcing); and preserving balance sheet (asset and working capital management). Illustrates the points made in the article with particular reference to selected companies who were “winners” and “losers” during the 2001 recession and the offensive/defensive strategies they adopted. Concludes that there are significant opportunities for a company to improve its competitive position during a downturn, regardless of the strategy chosen. Originality/value – Provides clear and timely advice to any senior manager planning a course through the difficult business environment. Notes that this article may be obtained in full text at (www.iveybusinessjournal.com/article.asp?intArticle_ID=810).Article type: Viewpoint ISSN: 1481-8248 Reference: 38AF607

Keywords: Competitive strategy, Decision making, Economic depression, Managers, Organizations, Recession, Strategic management, United States of America