ESG Webinar – 2023 Outlook and Strategy

The Executive Study Group (ESG) webinar named “2023 Outlook and Strategy – How to Survive in a Recession and Thrive Afterwards” was held by Asia Pacific Institute for Strategy Limited (APIFS) on 12^th Dec 2022.   In the beginning, Dr. Mark Lee briefed the background, history, and goal of Asia Pacific Institute for Strategy Limited (APIFS). Firstly, Dr. Mark Lee introduced today’s content including ‘Probability of a Recession’, ‘Higher and Longer Inflation’, ‘Problem of Short-Sighted Behaviors’ and ‘The 8 Recession Strategies’.

Before the talk, Dr. Lee surveyed us about GDP growth in next year that high participants selected higher than 2.9% and the other half selected lesser than 2.9%.

Then he quoted Economist Intelligence Unit (EIU) forecasting on world economy and explained their prediction ground. There was worsening US forecast in 2023. “Post-pandemic labor market overheating showed up not in excessive employment but in unprecedented job openings” was observed.  In Wall Street Journal forecaster survey showed 65% of probability for a US recession in 2023.

And then Dr. Lee surveyed again for predicting inflation rate in 2023. It showed normal distribution and mean at 6%-7.9%.

After that he also quoted EIU about inflation and trade predication from 2018 to 2027. Considering the revenue and EBITA in different sectors, it was found that few of sectors (e.g. Real estate, Automotive & Assembly, Logistics & Trading, Agriculture & Food Production, Oil & Gas, etc) would have good EBITA even though most of sectors to have good revenue.

Dr. Lee also discussed the problem of short-sighted behaviors such as firefighting, increasing price & cutting procurement costs, etc. But Prof. Nitin Nobria said “Research shows that 9% of companies come out of a recession stronger than ever.”

The third polling was performed and bell shape response received, indicating that half of companies’ management thought they would be in 9% stronger after recession.

Finally, Dr. Mark Lee introduced the 8 recession strategies in three directions and they were Strategy Formulation, Sales and Marketing, as well as, Finance and Performance Review.

Strategy Formulation:

1.      Manage Your Management Mindset

Problem of Prevention-Focused (e.g. Survival focus build a feeling of disempowerment or same cut for all things) and Promotion-Focused (Optimism culture and wider customer expectation gap that do not notice the pie is shrinking).

2.      Integrate Offensive and Defensive Plans

Defensive action is to improve operational efficiency rather than by slashing the number of employees relative to peers. Offensive action is to develop new business opportunities by making significantly greater investments than their rivals do in R&D and marketing.

3.      Protect Strategic Expenditures

An indiscriminate slash-and-burn response is a big mistake because it fails to distinguish between short-term operational and long-term strategic programs.

The poll 4 was performed about strategy formulation and most participants selected changing mindset which was most difficulty.

Sales and Marketing:

1.      Careful About Discounts

There was dilemma of short-term visible performance vs long-term invisible performance.

2.      Focus on Switcher-Type Customers

Switchers were spending 40% of coffee-related dollars at Starbucks.

3.      Provoke Your Customers to Buy With Urgency

Finance and Performance Review:

1.      Manage Your Cash-Flow

“I will be very careful about the cash and inventory control over than other things before any investment decision.” Said by Andrew Lok.

2.      Review Control Measure like KPI Carefully

Current ratio is short-term assets (cash, inventory, debtors) divided by its short-term liability (creditors, taxes, and deferred dividends). Quick ratio subtracts inventory from short-term assets and divides the result by short-term liabilities. 

Reference:

Asia Pacific Institute for Strategy Limited (亞太策略研究所有限公司) – www.apifs.org

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