How to Win BSG – Economic Stages Part Three – Riding the Recession
In boom times your profits roar, but the question stands when and in recessions will your profits proportionally drop the same way the other companies The pinnacle of industry power is when you have the largest company and control a huge amount of the supply. All the customers want your shoes because you’ve created other strategic advantages such as celebrities, good advertising, and strong distribution lines to reinforce financial security. In the case of a recession where your company greatly controls 2/3 variables being supply and industry aggressiveness (as your company adds to that). It is possible to create a situation where you “ride the recession”.
The metaphor I like to use is that your company is on a surfboard the recession is the wave, and your competitors are going to be hit by the wave. Like a surfer when they are on a crest, it looks almost as if they “control” the wave just like your company sort of “controls” the industry. The innate danger itself is very real and as long as you stand on top of it, you are effectively immune to whatever misfortune happens to those who are standing in the recession’s path.
Getting to this position creates a situation where everyone has next to zero net profits with a few market challengers being a little better, while your company is doing extremely well. It is possible to tame a recession to your favor and use the recession’s power to destroy your enemies. The real trick is understanding your industry well enough that you can create this situation without wiping out.