Guest Post

Opting Out of the Recession

by Eric Bippus

Looking at the actions we've taken over the last 12 months, some have said we at CNH, and our parent company Fiat, found our nerve early on. I prefer to think that although there may be a recession going on, we've simply chosen not to participate. Who can afford to pass up an opportunity like this for growth?

Recessions provide an ideal time to gain on competitors, precisely because most of them tend to lose their nerve. They postpone investments, cut R&D and marketing budgets, and often demoralize their companies through layoffs. True leaders see this as an opportunity to capitalize.

However, before we go rushing head first to implement a recession-busting growth plan, the key strategic question to consider is whether or not our actions will lead our companies to a permanent shift in market position.

I know this question well, for it's one that we at CNH pondered deeply towards the end of 2008 when news of the unfolding recession was everywhere. Here was the crux of our debate: Could we balance the two competing objectives of minimizing any hit to our profits while attempting to capitalize on long-term growth opportunities?

In order to answer these questions, we took a long, hard look at our many business channels, seeking evidence of opportunity for growth rather then opportunity to make cuts. Our conclusion was that the opportunities for long-term growth more than offset any short-terms risks. Specifically, (1) There were key distributors that, if offered incentives, were willing to open their doors to us during these difficult times and that these relationships, managed properly, would create new growth. (2) There were several weaker competitors at risk in the marketplace and that any market share gains we achieved due to our actions had an excellent chance to stick long term. (3) Advancements we had achieved in product innovation vs. those of our competitors could lead to product superiority in certain categories. (4) If we chose to retrench to protect earnings while our competitors chose to invest, we would almost certainly lose significant ground.

Since that time, we've announced several major initiatives including forming multiple new strategic alliances, widening our distribution base and further leveraging e-commerce. And while I can't say everything we've done is providing an immediate payoff, I can tell you we have seen some very encouraging early results and I am more convinced then ever that because of our willingness to act, (i.e. find our nerve) we will profit in the long run. My hope is that you will too.

Eric Bippus is vice president of Sales & Marketing for CNH Parts & Service North America, a division of the Fiat Group and a $15 billion global supplier of agricultural and construction equipment.

  1. Social comments and analytics for this post…

    This post was mentioned on Twitter by Benoit_Dupont: RT @EconomyHeroes: “Although there may be a recession going on, we’ve simply chosen not to participate.”

    Trackback by uberVU - social comments — 12/01/2009 @ 10:13 AM

  2. To use an old and much-used phrase, I couldn’t have put it better myself. I too chose early on “not to participate in the recession” and it has worked out very well for my tiny business. And perhaps one of the reasons that I am so busy is that at Seams to You! my clients can enjoy a happy, upbeat atmosphere free of all the negativity and economic fearmongering going on almost everywhere else.

    Comment by Sylvia Leinweber — 12/01/2009 @ 10:42 AM

  3. Thanks for sharing your thinking on the strategic decision to invest in “peanut butter” market-share opportunities (those that will stick).

    I think you *are* choosing to participate in the recession. Finding and acting on opportunities is simply another (and probably smarter) way to do it.

    I consult with and train banks and their lenders on credit analysis. One of the challenges in 2010 will be borrowing money when, perhaps on top of recession-induced reduction of revenues, you have made a strategic decision to forgo profits to take advantage of opportunities. Your Debt Coverage Ratio based on recent history may not meet guidelines even if your strategy was sound.

    What are your ideas on how to provide the lender with the information (and ammunition) to approve the loan if your recent profitability was down?

    Linda Keith CPA
    Helping Lenders say “yes” to good loans…

    Comment by Linda Keith — 12/01/2009 @ 11:38 AM

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