It’s the economy, stupid.
Here’s a tale I’ve heard all too often.
It’s a great business, respected in its category and suddenly your best client announces that all projects over $100k will go through an RFP process requiring six bidders. Now you’re facing serious competitors, and a shortage of work. Worse, projects you do win are far less profitable.
This is nothing new. We live in a market economy and prices for consumables have been dropping since the dawn of the industrial revolution. The phenomena of dropping prices, isn?t steady, it comes in fits and starts. This is one of those down moments. A couple of years ago it was all up. However, over the long term the downward trend is relentless. That’s the big picture.
The small picture, however, is where it can get really ugly.
The current economic climate has unleashed a wave of corporate cost reductions that have hit my clients hard: Walmart’s relentless pressure on suppliers to lower prices; P&Gs recent pricing drop to private label levels; Microsoft’s adoption of tighter purchasing policies.
Some say that the giant public companies are using the recession as an excuse to cut costs across the board far in excess of what’s necessary, using the recession as cover. Maybe so, but the real question is what to do about it.