Sunday, January 27, 2008

The big picture impacts on Singapore companies

looking for light in gloomy days

Ms Teh Hooi Ling, in this weekend's BT, attempted to answer 2 huge questions as follows:-
  • What kind of impact do macroeconomic factors have on companies?

  • What are the companies which will suffer the most in an unexpected downturn?
This is the list of characteristics she has highlighted.
  • Companies with high levels of debt ie. financial leverage.

  • Companies with high fixed costs in relation to total costs in running the business ie. operating leverage.

  • Companies with loooonng cash conversion cycle and consequence of credit crunch by their suppliers.

  • For external characteristics, inflation and foreign exchange movements would impact negatively.
She atttempted to back up her Econs 101 presentation with data analysis of winners and losers during market upheavals in 1987, 1997 and 2007.

But as the circumstances of excesses were different for different upheavals, the market responses were thus different. She had observed the public listed companies. How about private business entities? Thus inconclusive.

She ended her article with strategies that were generally adopted and proven effective by 750 Finnish companies during the recession in 1989-93.
In the medium term, companies should:-
  • continue to invest in new product development

  • continue your effort to acquire new customers.
Edgar's closing remarks
Ms Teh attempted to address 2 huge questions very very briefly in an article. It may serve as a quick read and be adopted for many out there.

Her study of Singapore companies' experience in the last 3 upheavals could be developed further and acts as standalone materials. It does not seem to fit in flow of arguments that she has presented in the preceding portion.

In the long run, similar for companies and for individual like you and I, we should generally maintain a healthy lifestyle for higher probability of longetivity.

No comments: