Markus Venzin, Director of SDA Boccon..." />

Financial crisis: how to survive the tsunami

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by Markus Venzin, Director of SDA Bocconi's Strategy and Entrepreneurship Department and Full Professor at the Department of Management and Technology of Università Bocconi, and Guia Pirotti, Assistant Professor of Strategy and Entrepreneurship at SDA Bocconi and Research Fellow at the Department of Management and Technology of Università Bocconi.

Research by SDA Bocconi has identified companies that have successfully got back on their feet following the financial crisis. Here's what we can learn from them. The economic and financial crisis of 2008 swept through many companies and multinationals like a tsunami. The impact was sudden and caught many of them off guard. How many companies survived the wave and recovered, and which ones are they? How did they do it? Can we learn from these best practices? Research by SDA Bocconi (http://learninglab.sdabocconi.it/volare) tried to answer these questions about the resilience of companies. Those that can guarantee a solid and steady performance, despite the impact of external factors, are the most resilient. The research went on to identify the most resilient companies in seven sectors.
For example, the best performing companies in the automotive industry are Audi, Porsche and Hyundai. In the pharmaceutical sector, Novo Nordisk is excellent, while amongst the top banks, we have Bank of Nova Scotia and Banco Santander. The picture that seems to emerge is that of a return to sound and prudent business management and the analysis shows that they are five rules to be followed in order to improve a company’s resilience. The first one is that internationalization must be focused. To be resilient, it’s not necessary to be present all over the world, but to select a few markets consistent with the core business, without underestimating the weight of the market of origin. The slogan “think global, act local” should be changed to “think regional, act local, forget global”.
The second rule concerns niches: focusing on areas of competence and having few products allows companies to defend themselves better. For example, in the pharmaceutical industry, Novo Nordisk is focusing only on diabetes treatment and biopharmaceuticals. However, many multinational companies underestimate the importance of having their own niche.
The third rule concerns the ability to make decisions: too many direct reports to the CEO create an overlap. Making decisions becomes a problem. Many resilient companies have leaders with few direct reports (less than 15). A less bureaucratic and rigid organizational structure allows people to make decisions quickly and to control others better because they know each other well.
Fourth: the most resilient companies are those that know how to focus on the customer rather than the shareholder. They care about their consumers even if it means sacrificing profits in the short term. This was the case for Hyundai, which in 2008 designed the Hyundai Assurance program for the American market. The program allowed customers to return a car purchased up to a year before, if the client had suffered job loss or serious financial problems.
Fifth rule: the most resilient companies are those that have been able to define their value assets, often dependent on the country of origin. German car manufacturers are renowned all over the world for innovation, efficiency and precision. Nestlé bases its success on integrity, honesty and accuracy, which are seen as Swiss heritage par excellence. Authenticity based on strong values not only fosters team spirit within the company, but allows it to be perceived as more credible in the eyes of consumers, who at times of crisis are more aware of the choices they make.
There are other recipes and rules to make a company more resilient. Some of these are not easy to implement and often require sacrifices in terms of short-term profitability. However, these sacrifices pay off over time.

Source: Sarfatti25, translated by SDA Bocconi School of Management

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