Supported Browser
  • About Us
  • Subscribe
  • Contact us
Strategy - BLOG

A good strategy can turn crisis into opportunity

Javier Gimeno |

According to the press, we are in the middle of the “ten days to save the Euro”. Although this may sound a bit sensational (it’s not clear how any country could exit the Euro without incurring economic suicide), it is evident that we are in the middle of unprecedented financial uncertainty in Europe, and that business leaders need to consider the impact of possible scenarios for their concerns.

This is good moment to consider what we have learned from the previous crisis, and understand how strategy can help organizations prepare to weather a possible storm.

During the 2008 global financial crisis, some organizations claimed that they had abandoned their strategy and planning processes, and focused instead on managing for survival. Although this may not sound very strategic, it is true that only those who survive the short term and left standing to strategize for the long term. Maintaining liquidity to support operations, building reliability in the supply chain, managing counterparty risk – those are important survival skills. But certainly, strategy also plays a role in distinguishing who benefits or suffers most from a crisis.

A recent paper by Geoffrey Martin and Manuel Becerra, presented last month at the Strategic Management Society conference, provides some evidence about performance resilience of firms during the 2008 crisis. Using a sample of over 7,000 publicly traded U.S. corporations, they found that companies with greater income stream variability and lower performance during the 2003-2007 period suffered more after the 2008 crisis. Although the study did not examine the specific strategies of these companies, it suggests that those firms with strong competitive advantages prior to the crisis, and good risk management practices, were able to weather the crisis much better than their rivals.  Indeed, for those with competitive advantage, a crisis may be an opportunity to strengthen competitiveness and gain market position. As executives in cyclical industries know, there are always good bargains to pick after a downturn. But the prize goes to those companies that were strategically prepared before the crisis.

Add a comment Already a member?
We welcome your comments and encourage lively debate. However, to ensure the quality of discussion, our moderators reserve the right not to publish personal attacks, abusive comments or overly promotional content. You can view our Terms & Conditions
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.

Your Privacy

INSEAD takes your privacy very seriously. For this reason, we inform you that the data collected via the form above is processed electronically for the purpose(s) specified in this form and will not be used outside this framework. In accordance with the Data Protection Act of 6 January 1978 amended by the GDPR, you are granted statutory rights of access, modification, update, deletion and limitation of treatment of your personal data. You may exercise these rights at any time by writing or sending an email to INSEAD at insead.knowledge@insead.edu. You have the right, on legitimate grounds, to object to the collection and processing of your personal information. For more information, please see our privacy policy.