Any silver
linings?
The recession is far from over, says Kraig Kramers.
Distributors should be looking at ways to improve their
competitive position during the downturn
ANNA JAGGER/LONDON
THE SIGNS are that the US recession has
bottomed out, but companies need to prepare
for another difficult year in 2010. High
unemployment rates are denting consumer
confidence, which means the recovery is
likely to be slow, warns Kraig Kramers, president
and chief executive of US consultancy
Corporate Partners.
“The recession is not really ‘over’, as most
economists and the US federal government
seem to over-proclaim, it’s just bottoming,”
he says. “We’ll see starts and bits of a recovery
in 2010 but it’s going to be a rough year.”
The recovery in the US, and other parts
of the world, is expected to take two or
three years. The number of bankruptcies of
businesses and banks in the US in 2010 is
expected to exceed those in 2008 and 2009
combined, observes Kramers.
US unemployment rates have reached
9.8%, compared with “normal” levels of
about 5%, and double digit rates of 10-
11% are forecast for 2010, he predicts.
“Consumers in America are being conservative
about spending because of this high
unemployment rate.”
Low consumer confidence, combined with
an unwillingness by banks to lend both to
consumers and businesses, will slow down
the economic recovery. Business to business
credit levels have risen by $100bn in the
last 12 months in the US, says Kramers.
“Normally the banks would lend that money
to business. But the banks have pulled in
so much that now the credit levels between
companies is so high that it’s hurting them
in terms of cash flow and their ability to run
their business.”
US president Barack Obama’s proposed
healthcare reform has also been cited as
a potential obstacle to growth. Small and
medium-sized enterprises (SMEs), which
account for most of
American business,
are particularly
worried, says
Kramers. “It will
cost a fortune and
SMEs will have
to pay more for
employee healthcare
“This is the worst recession
since the Great Depression.
Don’t just hope the
economy is going to get
better around you.”
Kraig Kramers, Corporate Partners
to make it work – either through taxation
or directly. This is causing huge concerns
among business people across America.”
SectorAl recovery
The recovery will be sectoral, continues
Kramers. For chemicals distributors, the
speed and timing of the recovery will
depend on the product areas in which they
INTERVIEW: KRAIG KRAMERS NACD
operate. Companies distributing chemicals
destined for the food industry, for example,
will benefit from an expected early recovery
in that market, he explains.
The construction industry is another
major end-use market for chemicals.
Economists expect the US homebuilding
sector to start improving over the next
6-12 months, but at a slow pace. “We’ve
seen a dramatic slowdown in the decline
in house prices, but that hasn’t triggered
homebuilding to any degree yet,” cautions
Kramers.
To improve their competitive position
during the transition period between recession
and recovery, Kramers suggests that
companies focus on four key areas: increasing
their market share, managing costs and
expenses more tightly, changing the way
they manage their credit and cash, and finding
niche opportunities.
To gain market share, companies need to
understand what exactly causes sales in their
business, he insists. Sales channels include
salespeople, telemarketing, the internet, a
referral system, direct mailings and advertising.
Most businesses do all of these things,
says Kramers, but one of these sales methods
might drive 80% of the action. “Most businesses
have never figured out which one
that is.”
Changing the way a company manages
credit and cash is important because now is
the first time that credit no longer represents
cash, he continues. In the US, credit card
debt availability has been cut by $1.25 trillion
in the last 12 months. Therefore companies
need to arrange back-up borrowing,
he stresses.
Niche opportunities might include sharing
advertising with non-local “competitors”,
partnering with a supplier or trading price
and payment terms with a supplier.
Improving engagement with employees
and focusing clearly on the customer will
also help companies out-distance their competitors,
Kramers says. Employee buy-in can
be enhanced by setting a range of meaningful
goals together with employees, building
trust by providing feedback and tracking
progress publicly.
The key message, says Kramers, is that
companies must start working on these
areas now. “This is the worst recession
since the Great Depression. Don’t just
hope the economy is going to get better
around you.” ■
To contact Kraig Kramers, go to
http://www.ceotools.com/index.php
An ICIS Chemical Business supplement | December 2009
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.