Saturday, March 07, 2009

Recession or the slowdown ?

Just a snippet from the Aarohan Case Study meet ( or rather contest ) organized by students of Supply Chain Management of SIIB. 

When your attendance count is among the least in the class and the institute makes it rather mandatory to keep a minimum of 90%, failing which you wouldn't be allowed to sit for the placements...then you have no option but to oblige even if it meant keeping your ass glued to a remotely located seat of the auditorium for straight 7 hours.  Well, today was one such day... various experts and gurus from supply chain industry were among the dignified judges for the ocassion and I had to hear all they had to pour out... but am glad that I did that! 

The theme of the event was ...the Supply Chain in recessionary period ... which everyone by the end had to agree that it was slightly termed wrong. Should have been - supply chain in slowdown period, not recession. 

Everyday, newspapers flaunts about the troubling time all the B-schools are facing due to the recession in the bearish market which months ago was bullish. But, in an Indian it really recession for us. It is certainly a recession for the western markets in U.S because of the mortgage crisis, failure of the investment banks and finally leading to liquidity crisis... but does it work and mean the same for India. 

Indian economy, which was liberalised in 90s was the biggest thing that had happened to India to see it going up the ladder of economic power block of the world. And till, to the day it stands true. Government of India with its economic regulatory bodies has been the prime reason why India isn't facing, what we would have called the real recession. 

Whenever there is recession worldwide we see Indian government intervention through RBI cutting/increasing the repo/reverse repo rates. Which makes a perfect sense of the globalized economy we are tangled with. Recession somewhere is bound to have some sort of impact on the economy elsewhere. 

The recent collapse of two U.S Investment companies ( Meryll lynch & Lehman bros ) filling for bankruptcy finally triggering the panicky of Recession worldwide remains the ubiquitous and most popular explanation of the topsy turvy economic condition. But, when we bring it down to Indian context this would have never happened. Indian economy though liberalised remains a protected economy and thats for every good reason. The GOI with its apex regulatory bodies intervenes everytime it senses companies in troubled water. Hence, when we talk about Indian market, we would hardly find any companies filing for bankruptcy. And this remains the most attractive part of the protected Indian economy. 

If this isn't Recession with so many companies around employing job-cutting tactics then what is it?

And along with that we have various organizations predicting a GDP of 5-6% for subsequent years until and unless we get a government ruling at the centre which is open to foreign investments.

There is a healthy difference between the Recession and the Slowdown - which is what Indian economy is facing as of now. Recession can be termed as a period of negative growth for more than two quarters in a row and on the other hand slowdown is when the economy is growing at a slower rate, and is very Industry specific. Recession is a vicious cycle that sees a fall in profits of the overall market and tremendous decline in the economic growth rate, leading to cost-cutting methods companies start employing. Which ultimately results into large figure of unemployment and reduced spending power of the consumers. But, on the other hand what India is witnessing is just a slower growth rate of economy. 

You might one to go through this article as well Capitalmoney

In any marketing lectures of B-schools, quite often we get to hear about 'Blue Ocean Strategy' which exists vis-a-vis to 'Red Ocean Strategy'. These strategies were coined by two harvard grads Kim and Mauborgne and which they later went on to publish under the header Blue Ocean Strategy. 

For those who aren't familiar with these terms,

Blue Ocean strategy refers to a kind of business strategy that promotes creation of new market space known as "blue ocean" rather than contesting in an existing competition intensive market. These blue oceans are created when a company achieves value innovation beside adding value for both the company and the buyer. The trademark of such strategy is that it kills the competition to get a market of its own. 

One of the speaker of the Aarohan SCM summit pointed out very succinctly that it's only during good economic condition Industry people talk about Blue oceans and the red oceans. Quite obvious, merrier times would represent more blue oceans, and any company employing blue ocean strategy trying to find a new blue ocean for itself. The blue oceans gets more blue-ed. 

But what about when the economy is in a slowdown phase? Does it simply means diminishing needs of the consumers? Where does these marketing jargons go then? 

This scenario would tantamount to 'Red Oceans', where the market space gets crowded and the prospects for profit and growth are highly reduced because of the decrease in purchasing power. But, would that implicate that needs of the consumers have decreased? Certainly not... Then how do we justify the cost-cutting measures companies suddenly start using whenever market is bearish. Wouldn't creating or finding a blue ocean amidst the red oceans in these hard times describe the excellent value addition any company can add to itself and for the that matter the consumers too. 

What better marketing strategy and branding would that be, but quite far away from what we can expect from Indian market, which remains one of the most risk aversive market. Maybe for all good reasons ( whatever it is ). 

To end it in an optimistic way, all gone well...  we are in slowdown, not recession for certain! :)



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