sustanability of manufacturing companies during recession period orignal version

8/2/2019 Sustanability of Manufacturing Companies During Recession Period Orignal Version

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SUSTANABILITY OF MANUFACTURING

COMPANIES DURING RECESSION

PERIOD

INTRODUCTION

In todays business world, many businesses face thecyclic fluctuation in business environment. Among

which the manufacturing sector and the service

sector are the ones which gets hit hardly . The

successful companies are those who survive

through all these phases, tackle the problems

during the recession and also growth in its

prosperity. Volkswagen Group (VW) is the best

example to check how to maintain sustainable

growth in recession phase too, as they are the

worlds leading Car manufacturing company. Even

in todays situation there are lots of colleague at

rivals such as Diamler , Fiat , General Motors ,


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Peugeot which are struggling to survive in the

current economic storm. So here we are going to

study about sustainability of manufacturingcompanies during the recession period with an

example of Volkswagen.

OBJECTIVES AND SCOPE

The main Objectives of this project are the

following:

What is Recession?Methodology of recession

Volkswagen as an example of recession

Share value of VW

Comparison of GDP between countries

Opportunities to India during recession


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WHAT IS RECESSION??

Definition:-

A significant decline in activity across the economy,

lasting longer than a few months. It is visible in

industrial production, employment, real income and

wholesale-retail trade. The technical indicator of a

recession is two consecutive quarters of negative

economic growth as measured by a country's gross

domestic product (GDP); although the National

Bureau of Economic Research (NBER) does not

necessarily need to see this occur to call a

recession.

In economics, a recession is a business cycle

contraction, a general slowdown in economic

activity.During recessions, many macroeconomic

indicators vary in a similar way. Production, as

measured by Gross Domestic Product (GDP),

employment, investment spending, capacity


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utilization, household incomes, business profits, and

inflation all fall during recessions, while

bankruptcies and the unemployment rate rise.

Recessions generally occur when there is a

widespread drop in spending often following an

adverse supply shock or the bursting of an

economic bubble. Governments usually respond to

recessions by adopting expansionary

macroeconomic policies, such as increasing money

supply, increasing government spending and

decreasing taxation.

Recession is a condition in which the

economic activities production and consumption

of goods and services decline. Economists disagree

about the cause of recession. Some think that

recession is set by decline in consumer spending,

others point to decrease in capital investment, and

still others blame go nsumers fund starved thereby

reducing the demand for goods and services and


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declining level of production and consumption. In

such a situation, the governments of the capitalist

domain never try to find the roots of economicrecession and they try to divert the attention of the

masses by one way or the other. Economic

recession is the natural fall out of extreme level of

exploitation which the capitalists perform in their

everyday life with a varying degree. Recession doesnot come suddenly and it does not cause through

exogenous forces. It occurs through the action of

the powerful market forces from within the system.

The roots of recession lie in the deregulatory,

market oriented policies of liberal economicregime.

The immediate impact of recession is the piling up

of goods waiting for buyers leading to falling of

prices (deflation) with worsening joblessness for

months and sometimes years together. The oil-rich

countries of the Middle-East and the Persian Gulf

which served for years as lifeline for many countries


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providing employment, sending dollars and tourists

who filled up the hotels of western nations

suddenly find themselves pulled into shrinkingdemand of their products and piling of huge oil

stocks that led to dropping of oil prices and stock-

markets across the globe causing panic among the

investors. With reducing demand for their products,

the people of the oil-rich nations defer going fortourism as also putting their money into stock-

markets and initiate laying off workers creating an

environment of joblessness and depression in most

of the surrounding countries.

METHODOLOGY OF RECESSION

Causes Its Impact in general

Its overcome


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CAUSES OF RECESSION

One thing that every economist believes is thatrecessions are something that cannot be

avoided. The reason for this is that in a healthy

economy you are going to have periods of high

growth, slow growth and no growth. In fact in

order for the economy to be healthy thereneeds to be some contracting and expanding.

But in order for the economy to be considered

in a recession the contracting period has to last

for at least two consecutive quarters of a year

or more simply put 6 months in a row. But themost common question that nobody can seem

to answer very well is what is going to cause the

next recession. In fact even fifty years after the

great Depression, a really bad recession, and

the answers to what causes an economicdownturn or a recession is still a huge mystery.


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Another theory about what causes an economic

recession is that they are caused by events that hurt

particular firms or industries rather than events thatimpact the entire economy. The reason that some

economists support this theory is because of how a

recession seems to affect some industries badly,

while other industries seem to thrive during these

hard times. The economists believe that thishappens because either a major innovation or a

change in the price of a key item can adversely

affect some firms. And when they are adversely

affected they tend to lay off workers and reduce

their production, which slows down that industryeven further because they demand is greatly

reduced. But at the same time there are other

industries that are going through a major hiring

phase and are actively looking to hire new workers,

so it seems they are being helped by the recessionactivity. But what happens is that the people who

were laid off can't find work right away because

sometimes it takes time to find new employment so


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while they are waiting for that new job to come in

there is a period of reallocation, moving workers

from one job to another, which can cause arecession until everything is figured out.

Here are some other popular theories about what

causes a recession.

Some people believe that each recession has a

unique cause, while others think that recessions

usually only have a single cause.

Example of a single cause bad investments by

businesses

Recessions and depressions, like that of the Great

Depression, are caused by stock market crashes

Factors that stunt short term growth in the

economy, such as a sharp increase in oil prices or

even going to war


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Globalization has changed the nature of the

business cycle.

Here are five negative items that could cause an

economic recession or even worse a depression.

Dollar collapse - there is a growing concern for the

United States ability to attract foreign capital to

finance both private and public investments. The

reason for this is that the effect of high budget

deficit subtracts from domestic savings, which

means investing in general. Not to mention that the

huge trade deficit also adds to financing needs.

Something else to keep in mind with the dollar

collapse is that the dependence on foreign financing

is actually reducing the confidence in the United

States economy. In fact between the years of 1985

to 1987 the United States dollar fell 49% against

major currencies, Treasury bonds increased 2% and


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stock prices fell 30%. But in general a falling dollar

would greatly affect the United States corporate

bonds and 50% of those bonds are actually held byforeign investors.

Oil rise - if the price of crude oil were to rise that

would be harmful to the economy because of the

fact that other prices would rise as well. Crude oil

actually affects a lot more industries than just

gasoline because of the fact that you need to have

gas to run most machinery, but crude oil is also

used in making other products such as asphalt. But

if these prices were to rise it would actually slow

consumer demand. And because of the slowing

consumer demand it would undermine business

and consumer confidence.

Inflation - this can happen if both the dollar starts

to fall and oil prices start to rise. The reason that

this happens and is connected to oil prices and the

falling dollar is that these factors make it to where

consumer goods are more expensive, producers


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have to increase the prices of their products to

make up for the increase in oil prices and to make

the same profit that they were making before thedollar fell. But if the United States was dealing with

inflation what you need to know is that China would

then revaluate their currency at a higher rate, dollar

value decreases yen increases in value, which would

make the inflation even worse. But something elsewith inflation is that high inflation makes existing

bonds unattractive, so new ones have to be offered,

but the new ones are going to be offered at a higher

rate.

Housing bubble - if the interest rates on mortgages

raised by 2% this could actually stop people from

buying houses, which would in turn bust the

housing bubble. But on the other hand if the prices

of houses dropped or deflating prices, this would

deflate household wealth, meaning people would

have less equity in their homes.


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Global economy- this is where you are going to

need to look at other economies other than your

own to see if they are showing signs of a recessionbecause in some cases other countries recessions

can greatly impact the other countries depending

on how much they rely on imports. A great example

of this is that Euro is weighed done by currency

appreciation, and both Europe and Japan areexperiencing a slowdown of economic growth. Not

to mention the fact that increasing Arab violence

can erode business and consumer confidence.

IMPACT OF RECESSION

The immediate impact of recession is the piling up

of goods waiting for buyers leading to falling of

prices (deflation) with worsening joblessness for

months and sometimes years together. The oil-rich

countries of the Middle-East and the Persian Gulf


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which served for years as lifeline for many countries

providing employment, sending dollars and tourists

who filled up the hotels of western nationssuddenly find themselves pulled into shrinking

demand of their products and piling of huge oil

stocks that led to dropping of oil prices and stock-

markets across the globe causing panic among the

investors. With reducing demand for their products,the people of the oil-rich nations defer going for

tourism as also putting their money into stock-

markets and initiate laying off workers creating an

environment of joblessness and depression in most

of the surrounding countries.

The great economic depression that beset the

United States and other countries in 1930s was

unique in its magnitude and consequences with one

American in every four was out job shaking the

foundation of Western capitalism and the society

based on it. The people with dwindling incomes


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were unable to pay their creditors taking the United

States into economic breakdown. Most of the

European countries were hit even harder. Thedeepening of the great depression coincided with

the end of the term of the then US President

Herbert Hoover who opposed government

intervention to control the mounting economic

distress. Hoovers one major action, the creation ofthe Reconstruction Finance Corporation in 1932, to

lend money to ailing companies was seen as

inadequate that led to his defeat and election of

Roosevelt as his successor. President Roosevelt,

despite being a champion of free market economicregime, tried to bring increasing role of the

government in economic activity and control of

market and stimulate the economy through

introduction of National Recovery Administration

charged with establishing minimum wages andcodes of fair competitions for stabilising production

and preventing price slashing that began in 1929.

However, continued depression led to questioning


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the validity of his economic policies and political

ideas leading to election of socialist writer Upton

Sinclair as the Governor of California in 1934 with aprogramme for redistributing States wealth. With

world trade sliding downwards the countries turned

towards nationalist economic policies and

strengthened extreme right and left in politics

helping Adolf Hitler to power in Germany andswelling left wing movements in other European

countries creating massive insecurities among

people and government contributing to tensions

across the globe leading to 2nd World War. The

massive military expenditure for the war thatcaused unprecedented death and destruction

unfortunately provided the economic stimulus

finally bringing the end of the depression.

The current recession has led to extensive reduction

of imports in the United States that in turn caused

reduction in exports and production cut in many


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countries. To counter this economic slowdown, the

governments across the globe have intervened. The

US pumped 70,000 billion dollars into its bankingsystem. The United Arab Emirates injected 32 billion

US dollars into its banking system and guaranteed

its bank deposits. The current recession dealt a

body blow to Chinas export industries compelling

production reduction and laying off workerscompelling the Chinese government to roll out 586

billion US dollar package to stimulate the economy.

Indias IT and financial services, the bulk of which

goes to the US as exports started shrinking rapidly.

Indian government through Reserve Bankseconomic measures like lowering compulsory cash

reserve rates and other measures infused about Rs

1,45,000 crore into the baking system. The

European countries also announced 50,000 US

dollar package to face the crisis.

OVERCOME OF RECESSION


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1.Do not worry or panic

Most business entrepreneurs, professionals are too

much worried. There is a saying that worry is a

prayer for something you do not need or what you

do not wish for. Agree that the times ahead is the

recession hit economy. We have to pass through

those situations however reluctant we are. Take

this as an opportunity given by God (If you believe

in God that is) or any other supreme power you

believe in, as a chance to prove your mantle. Think

how you can operate successfully in these times.

2.Increase marketing tactics

Focusing on yourself, customer satisfaction, keepingfinances are all important. But when coming to this

recession time what you must keep in mind to

strengthen or to increase with full vigor is your


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MARKETING efforts. Marketing is what drives

customers to your business be it small or large.

Who knows for sure, maybe this recession time willturn out to be the best year for your business. It is

not only necessary that you derive the maximum

value out of each dollar you spend but also to get

the return. You learn new techniques; adopt new

strategic marketing plans and so on. So get creative,increase your marketing and get the maximum out

of it.

3.Get new customers to sustain your business

What makes a business a success? The customers ofcourse!!! If you have customers you thrive, else you

don't. It is as simple as that. So what do you do to


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get new customers? Read how to get new

customers for your business.

4.Try to stay away from financial talks

If you are attending any seminars or meetings, try

to ensure that the outcome of the meeting/seminar

increases your creativity and productive power. Try

to stay away from talks which might include topics

on how recession can adversely affect a business or

what all business will be affected by this recession.

5.Understand that in any dire situation there is an

opportunity

Take the case of most companies today. Most of

them might have catered to a different business

when they started off. When they faced hard times


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they took advantage of the new opportunities by

tuning their business to suit the new needs. Find

such new niche markets.

6.Fix your target

When challenges and hardships come most people

turn their attention from their actual goal to their

day to day life. This is not the right way. During this

recession it is your responsibility to uphold your

mission and attain your target

7.Publish motivating articles and stories on your

company newsletter/magazine

Let your employees derive inspiration after reading

these stories and articles.


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8.Uphold your company achievements

You heard me right. Just brag about your company

achievements however small they are. When all the

thoughts are related to recession and slow down,

then our eyes and ears will crave for more negative

news. That's human psychology. Your brain will like

to think that your business will be impacted

negatively. This will indirectly reflect on your

companies standings. Just go about flaunting even

the minutest achievement of your company.

9.Even your managers need training

How you overcome this recession will depend on

how well you think. For the same reason you mustconsider training your top level management staff

as well. This may prove more costly and time

consuming, but eventually this is what will pay off


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more as the decisions which make or mar a

company are usually the result of this section of

your company.

10.Have a clear idea of what you want from your

business as well as your life

What you think is what attracts you. If you think the

recession is going to bury your company deep

down, well I must say with utmost regret that it is

going to happen in no other way.

11.Find a mentor or a coach

You need a mentor or a coach who sees problems

and down times differently and one who motivates

you. Imagine going to a gym for work out (You are

running a company). You are not alone in the gym


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(There are lots of similar companies). You have fear

of the dumb bells dropping on your chest

(Recession hitting your company). Yet you want toexercise because your profession demands it. (You

have a company with many employees and you

want to move forward). You see people around you

on whom the dumb bell fall and die (Recession hit

companies going bankrupt). How dedicated will yoube? How much effort will you put into each of your

sets? How much concentration will be on your work

out? Now imagine there is a trainer for you (A

mentor or a coach) who has a vast amount of

experience and he guides you. He will support youin each set of work out ensuring that even if the

dumb bell slips from your arms he is there to catch

you. Now how much MORE confident will you be?

How much MORE dedicated will you be? You can

take the service of mind parlors which offer trainingfor CEO's and business owners.


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VOLKSWAGEN AS AN EXAMPLE OF RECESSION

Volkswagen (abbreviated VW) is the originaland biggest-selling marque of the VolkswagenGroup, which now also ownsthe Audi, Bentley, Bugatti,Lamborghini, SEAT,and koda marques and the truckmanufacturer Scania.

Volkswagen means "people's car" in German,

where it is pronounced [flksvan]. Its

current tagline or slogan is Das Auto.

Volkswagen

Industry Automotive
http://en.wikipedia.org/wiki/Marquehttp://en.wikipedia.org/wiki/Volkswagen_Grouphttp://en.wikipedia.org/wiki/Volkswagen_Grouphttp://en.wikipedia.org/wiki/Audihttp://en.wikipedia.org/wiki/Bentleyhttp://en.wikipedia.org/wiki/Bugatti_Automobileshttp://en.wikipedia.org/wiki/Lamborghinihttp://en.wikipedia.org/wiki/Lamborghinihttp://en.wikipedia.org/wiki/SEAThttp://en.wikipedia.org/wiki/%C5%A0koda_Autohttp://en.wikipedia.org/wiki/Scania_(company)http://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Taglinehttp://en.wikipedia.org/wiki/Advertising_sloganhttp://en.wikipedia.org/wiki/Automotivehttp://en.wikipedia.org/wiki/Automotivehttp://en.wikipedia.org/wiki/File:Volkswagen_logo.svghttp://en.wikipedia.org/wiki/Automotivehttp://en.wikipedia.org/wiki/Advertising_sloganhttp://en.wikipedia.org/wiki/Taglinehttp://en.wikipedia.org/wiki/Wikipedia:IPA_for_Germanhttp://en.wikipedia.org/wiki/Scania_(company)http://en.wikipedia.org/wiki/%C5%A0koda_Autohttp://en.wikipedia.org/wiki/SEAThttp://en.wikipedia.org/wiki/Lamborghinihttp://en.wikipedia.org/wiki/Bugatti_Automobileshttp://en.wikipedia.org/wiki/Bentleyhttp://en.wikipedia.org/wiki/Audihttp://en.wikipedia.org/wiki/Volkswagen_Grouphttp://en.wikipedia.org/wiki/Volkswagen_Grouphttp://en.wikipedia.org/wiki/Marque


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Founded 28 May 1937

Founder(s) Ferdinand Porsche

Headquarters Wolfsburg, Germany

Area served Worldwide

Key people Martin Winterkorn:Chairman of theBoard ofManagement,Ferdinand Pich: Chairman ofVolkswagenSupervisoryBoard

Products Cars

Production

output

4,591,851 units (2010)

Revenue 80.251 billion (2010)(US$119 billion USD)

Employees 368,500 (2009)

Parent Volkswagen Group
http://en.wikipedia.org/wiki/Automotivehttp://en.wikipedia.org/wiki/Automotivehttp://en.wikipedia.org/wiki/Automotivehttp://en.wikipedia.org/wiki/Automotivehttp://en.wikipedia.org/wiki/Automotivehttp://en.wikipedia.org/wiki/Wolfsburghttp://en.wikipedia.org/wiki/Worldhttp://en.wikipedia.org/wiki/Martin_Winterkornhttp://en.wikipedia.org/wiki/Martin_Winterkornhttp://en.wikipedia.org/wiki/Vorstandhttp://en.wikipedia.org/wiki/Vorstandhttp://en.wikipedia.org/wiki/Vorstandhttp://en.wikipedia.org/wiki/Ferdinand_Pi%C3%ABchhttp://en.wikipedia.org/wiki/Aufsichtsrathttp://en.wikipedia.org/wiki/Aufsichtsrathttp://en.wikipedia.org/wiki/Aufsichtsrathttp://en.wikipedia.org/wiki/Aufsichtsrathttp://en.wikipedia.org/wiki/Holding_companyhttp://en.wikipedia.org/wiki/Volkswagen_Grouphttp://en.wikipedia.org/wiki/Volkswagen_Grouphttp://en.wikipedia.org/wiki/Volkswagen_Grouphttp://en.wikipedia.org/wiki/Holding_companyhttp://en.wikipedia.org/wiki/Aufsichtsrathttp://en.wikipedia.org/wiki/Aufsichtsrathttp://en.wikipedia.org/wiki/Ferdinand_Pi%C3%ABchhttp://en.wikipedia.org/wiki/Vorstandhttp://en.wikipedia.org/wiki/Vorstandhttp://en.wikipedia.org/wiki/Martin_Winterkornhttp://en.wikipedia.org/wiki/Worldhttp://en.wikipedia.org/wiki/Wolfsburg


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Website Volkswagen.com(International)

VW.com(US)

SHARE VALUE OF VOLKSWAGEN

The share price of Volkswagen(VW) increased

rapidly during recession period in 2008.
http://en.wikipedia.org/wiki/Volkswagen_Grouphttp://www.volkswagen.com/http://www.vw.com/http://www.vw.com/http://www.vw.com/http://www.volkswagen.com/

sustanability of manufacturing companies during recession period orignal version

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