If you’re like me you’ve been ignoring your 401(k) statement for quite a while now. During tough times like these often ignorance is bliss. But as growth strategists, we can’t ignore what’s going on in the economy if we want our clients to not only survive the current conditions, but thrive.
A recent presentation at a Global Economic & Investment Forum I attend looked to the past for insight into the future. One conclusion was the possibility of today’s market recovery resembling the times following the 1973-1974 recession. During that time interest rates were high and the fear of inflation led commodity prices and land values to shoot up. The aftermath of the spending for the Vietnam War and the Great Society, along with OPEC gaining strength weighed the economy down for years. Finally, in 1980-1981 Paul Volker broke inflation with sky-high rates and the U.S. Dollar rebounded. So, it wasn’t until a long 9 years later, in 1982 that the S&P 500 finally pushed above and remained above its pre-recession high from 1973.
We might see similar things this time around but current budget deficits and the global nature of the economy change the dynamics in a serious way. Nouriel Roubini, the thoughtful yet persistent bear of the past couple of years, has some thoughts that are provocative as opposed to the old news about banks that we’ve all heard. Roubini and Ken Roboff offer a more broad perspective on the impact of our actions to address the housing, corporate and financial crisis. Future inflation, government borrowing, taxes and the value of the dollar are somewhat easy to predict, but it is more challenging to contemplate how currencies, commodities and foreign markets will react in this environment.
How does all of this information help us position our clients for success? While the specific tactics for each need to be defined, the governing strategy seems clear:
First, if we expect a drag on growth in advanced economies such as the U.S. and EU, business leaders will look to emerging markets such as China, India and Brazil for expansion. For global communications this increases the importance of an infrastructure to quickly create, localize and deploy communications to new markets for product introductions.
A recent conversation I had with a Sourcing Manager with one of our multi-national clients centered on this topic. One of the established products this company manufactured and serviced was gaining success in new areas of the world. Support documentation for the product was complicated, took a long time to produce and was expensive to localize for each new global market. One solution to lower the cost was to take advantage of technologies and services provided in a country where the exchange rate was more attractive than their current arrangement; effectively producing over 20% savings immediately with no other effort. The amazing part of this story is that the efficiency would be gained not by moving the work from the U.S. to India, but from Europe to the U.S. due to the relative weakness of the U.S. Dollar to the Euro. So, if we follow the money in this real-world example, a company looks to new markets for growth, in this case the Middle East, and benefits from low-cost providers in regions around the world (surprisingly in the U.S.).
So as we navigate our clients through these tough times it’s good to know we have options on the sales/growth side and the expense/cost side. My hope is today’s recovery doesn’t take 9 years. There’s no doubt that when it does recover, though, the world economy will look very different than it ever has. As global communications strategists we are at the center of it all of and our ideas help our clients thrive today and position them for continued success in the future.
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