Wake up and smell the Coffee – whilst you can

The rise of the developing world is really just a return to business as usual.

After all, until the 18th Century, India and China were the richest countries on the planet. For 18 of the past 20 centuries China had the largest economy in the world until the 19^thcentury and the industrial revolution.

Chinese companies will continue to make international acquisitions such as the purchase by Bright Food of the controlling stake in Weetabix, which owns the breakfast cereal brand as well as Alpen and Ready Brek.

Bright Food will take a 60% stake in Weetabix in a deal that values the company at £1.2bn.

Meantime as evidenced by the recent purchases of Corn from the US, China will continue to be a major buyer in the international agri markets in response to demand from its burgeoning middle classes.

With a population in excess of 1.3 billion (approximately 20% of the world’s population) imagine the implication for Western consumers should an early morning cup of coffee become the beverage of choice! 

Greek tragedy- turning from a Drachma to a crisis

Following the Greek election results the left wing party Syriza is trying to form an alternative coalition government. This appears unlikely to happen.

However, If this were to succeed and there was a rejection of the austerity measures already agreed to reduce the country's deficit in exchange for international support, it would leave its bailout in jeopardy.

The rest of the Eurozone and the International Monetary Fund, who pledged bailouts worth a total of 240bn Euros (£190bn; $310). would have to decide if the bailout would continue. If not, Greece could conceivably end up leaving the euro.
In many ways the Greek crisis is a metaphor for our times. A customer develops a pattern of late payments but far from being called to order the supplier fearful of alienating the customer allows this to become the norm.

When the inevitable tipping point is reached there is no alternative to continue to support the errant buyer or risk realise a loss.

There is a growing realisation that the problem is just being kicked down the road.

However as the international banking community prepares for another serious blow to its capital structure the UK banking community will not be immune. At the very least there will be a renewed focus on exposure and this will impact on their willingness to lend.

Now more than ever businesses must demonstrate that they have full control over all aspects of their operations. Reporting procedures must be strictly observed and any potential problem areas or customers brought quickly into line. As it becomes harder to borrow, positive cash-flow is critical.

You can only win it if you’re in it

Some years ago whilst working for an international corporation I attended one of the bi-annual strategic reviews for senior Group executives. Each executive was required to give a presentation in respect of his/her business unit. One colleague addressed the audience with his one word objective namely “survival”.

At the time this was met with a fairly frosty response but current events show that it is probably a suitable watchword for the present time. As the machinations continue in the Euro zone and the commentaries become even more emotional with phrases such as “disintegration” and “meltdown” then to survive these times would seem to be a very laudable objective.

So many factors are coming into play over which individual companies can do little to protect their interests other than ensure that they react appropriately.

However the one certainty is that the global economies will survive and business will continue. In the coming months there will undoubtedly be casualties but by adopting a controlled and rational response to these challenges businesses can ride out these difficult times.

Hard sledging for SME’s

During March UK insolvency figures show that 2112 companies went into liquidation. SME’s are finding it particularly hard to survive against the current economic backdrop.

Funding as always is the main problem and the rejection of applications for bank loans makes for stark reading – in the North East 46% were turned down, West Midlands 47% and in the South West 41%.

With the marked reluctance of the Banks to lend, it becomes imperative that all businesses focus on their areas of exposure – rigorous policing of the Debtors book must be a priority and Stocks must be kept at a minimum.

More companies will try and improve their cash-flow by dragging their feet with payments and trying to put more of the burden of carrying stock onto their suppliers.

Those that adopt a passive approach to these issues will find themselves increasingly vulnerable and heading down a slippery slope.

When China wakes up, the world will shake

 The above quotation which is attributed to Napoleon during his exile at St Helena is almost 200 years old. It was an extremely prescient view and certainly resonates today.

During the last decade we all saw the results of the dynamic Chinese export programme as goods poured into the US and EU markets.

There has been a marked step up in acquisition of assets following the recent economic problems particularly in the US.

However there is another factor emerging as China steps up its demand for raw materials particularly agri commodities

 In the past week US Grain Exporters sold 2.84 million tonnes of Corn to China. Everything from grains to soybeans is being shipped to China, as we’re seeing an emerging middle class. Demand is very much there.”

As we near the tipping point

Current economic data economy returned to recession, shrinking by 0.2% in the first three months of 2012 illustrates the very real danger that the fragile economic recovery could be derailed.

It is vital to maximise your profits whilst avoiding locking your company into increased overheads

This is a time for a root and branch analysis of your business. As an independent Consultant I can give your business a full evaluation and provide you with a range of successful sales strategies and cost saving efficiencies.

Why not check out my profile at http://uk.linkedin.com/in/gordonblackburn

Toughing it out

Viewing the general air of gloom that now prevails in the current climate it is hard to remember the halcyon days of easy money (credit) and the all pervading feeling that the party would never stop.

There is no doubt the world and his wife embarked upon a collective spree for which we are now picking up the bill. With the benefit of hindsight the warning signs were there to see but these were readily ignored. One quotation springs to mind “They that sow the wind, shall reap the whirlwind"

The problem now is that as always there is an over-reaction and just as we never saw the top there is also the certainty that we will not see the bottom.

What is needed is a clear and unemotional assessment of the current climate, whilst few would dispute that difficult times lie ahead we are far from a financial Armageddon.

As always the markets are driven by fear and greed but the importance of sentiment should not be overlooked. Until and unless the Doomsayers gain a sense of perspective it will be hard to imagine business and markets on a sustained stable footing.