Success in Uncertain Times -The Outlook of Corporate, Government & Academia
Posted in Finance Articles, Total Reads: 1876
, Published on 15 December 2012
Life has its ups and downs. So, does the economy. You win some, you lose some. Sometimes there are times when the stock markets are in a never ending rally, investors get unbelievable returns, government is just passing favorable bills after bills, and FDI is flowing in. On the other side, there are times, when the stock markets just are not able to find its bottom, government is just regulating everything, profits are shrinking and there is no relief in sight. But, life goes on and so does the economy.
The uncertain times in an economics context, is generally referred to a situation when, the economy is contracting, slowing down or is at a standstill, investors are not investing, new projects are not being signed as a result, there is a credit crunch in the market, the government of the day is not passing bills which are very important for the smooth functioning of the economy, companies are on a pink slip issuing spree, investor sentiments are very low and the list goes on and on.
As we know there are various stakeholders in an economy, the investors, the markets, the common people, the employees, the employers, government. This paper advocates for collaboration among the different stakeholders, in uncertain times & in certain times too, in order to sail smoothly through the stalled growth period and emerge victorious.
There are many reasons for this slump in the economy, but every problem has a solution & we would be looking at a solution at the corporate, government and the academia level one by one.
Role of the Government – The Sutradhars (Policy Makers)
Democracy, good governance and modernity cannot be imported or imposed from outside a country - Emile Lahud
While consumers and producers make most decisions that mold the economy, government activities have a powerful effect on an economy in at least four areas. Stabilization and Growth & perhaps most importantly, the government guides the overall pace of economic activity & regulates it wherever needed , attempting to maintain steady growth, high levels of employment, and price stability. Government in India manages the economy, by two verticals –
1. The Finance department, Govt. of India manages the Fiscal policy, maintain & controlling the fiscal deficit, balance of payments by controlling the government borrowings and expenditure
2. Reserve Bank of India, Central Bank, monitors & controls the monetary system. It regulates the interest rates (repo & reverse repo) to control the liquidity in the markets.
So, what are the steps government should take to buoy the investors’ sentiments and create certainty and confidence in an uncertain economic environment?
The major issues the government should try to tackle are –
1. Reduce red tapism – A complex bureaucratic system is a big impediment to ease of doing business. The bureaucratic system creates a lot of problems to companies, both foreign companies which are looking for a FDI route in India and domestic companies. The major problem is the corruption plague engulfing the Indian system, majorly at the lower levels, which is a turn off for lot of Small and medium enterprises. Creating a corporate like working culture in the Government departments, where incentives & compensation are given on merit of the person & not his/her seniority, would lead to a leaner & more efficient Bureaucratic system in India .
2. Transparent Policies - Creating transparent rules for FDI investments is a very important issue for a developing country like India, as it appreciates its currency and leads to a reduced deficit. Transparency in issues like sourcing of raw material from domestic SME’s should be done immediately.
3. Passing important Bills - Passing important legislations like Land Acquisition Bill, APMC amendment bill, Direct taxes code Act have to be passed. Passing these laws, will reduce the uncertainty of the investors in taking the important strategic decisions like acquiring land to construct their industries e.t.c.
4. Investing in basic infrastructure, like roads, hospitals, educating our children should be high priority for the Govt., if it wants to create a strong base for a sustainable economic development.
The fundamental duty of the Govt. of the day is to create policies, which would lead to a healthy environment for a sustainable economic growth. Govt. should break the shackles of the vote bank politics and should walk on the path of economic and social reforms.
Role of the corporate – The Captains of capitalism
“The greatest leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things.” ― Ronald Reagan
During uncertain economic times, a company has to be flexible and adapt. Business Firms should have a flexible strategy. They should keep in mind that past extrapolations are inadequate. We are living in a fast, volatile, information saturated world, where one moment the economy is bullish and the other, it is down the dumps.
The following are some steps, by which a company can make itself more shock proof & ready for the future -
1. Concentration on revenue generating activities - Concentrate on revenue generating activities versus spending time on things that direct your valuable selling time and customer-facing time on things that will never generate a dime of revenue.
2. Incorporating uncertainty in a business’s corporate strategy - Rather than adopting a single deterministic view of the future, firms should explore a range of potential future scenarios in order to uncover new opportunities and threats to their business, and respond with winning strategies. Having a flexible strategy and a broad perspective about your immediate and distant economic environment is of upmost priority.
3. A supportive, visionary leadership – If the captain of the ship, is not calm, confident of what he is doing , then no one can save the ship from its doom. A calm, confident leader at the top , who knows what he is doing , can convert an inefficient , loss making company into a superstar. 4. Building strong Brands helps a company to sail through uncertain times smoothly, as your consumer would be more price inelastic , he would believe in you and trust the functional quality of your product almost blindly. There are many examples of strong brands , but brands like Harley Davidson , Coca cola just standout in their brand following , loyalty and brand engagement department
5. CSR activities - Corporates investing in social infrastructure, during hard times, would prepare the Indian economy for future shocks.
Role of the Academia – The corporate Chanakyas
“The mediocre teacher tells. The good teacher explains. The superior teacher demonstrates. The great teacher inspires.” William Arthur Ward
The teachers mould the future leaders in class rooms, to take on the challenges of the future. In a philosophical sense, teachers mould the future in a sense. Academicians are very important in the economic growth picture. Many of the academia’s work as consultants in companies & in government departments. Their input, their views, whether positive or negative, shapes up the outlook of the companies as well as the government
Academia should try to give a more pragmatic, practical, and a relevant to the times vocational training to the young work force in the making so they are ready for the ever changing business world.
Academicians, during uncertain times, should research and find some positive aspect, a silver lining in the dark cloud & publish articles on it, in important journals. This should be done to buoy the sentiments of all the stakeholders involved.
Academicians should work with organizations like World Bank, IMF or National governments to create a sustainable, rational roadmap for the economy.
Uncertainty is a part & parcel of life. A company should be flexible and ready to adapt to the changing technological, economic & social environment. In the end, as Charles Darwin said “Survival of the fittest”. Joining forces together, would lead to a sustainable competitive advantage to the economy.
A collaborative solution which takes a comprehensive look on the environment, both political & economic, which creates not only, a road map for a sustainable, inclusive economic growth leading to a blissful situation of increased revenue for the government and the companies, adulation and respect for the academicians, but also and more importantly progress and development for the people of the country, which would make their lives better and more comfortable.
“Success is not final, failure is not fatal: it is the courage to continue that counts.” -Winston Churchill