© Copyright IBM Corporation 2008

Expectations from the stakeholders during downturn

G VenkatraghavanMarch 24,2009NASSCOM, Chennai

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 2 Economic Impact of the Financial Crisis | 23rd October 2008 2

To understand the impact of the financial crisis, it is important to remember the drivers of economic growth

AD = C + I + G + X - MAggregate

Demand

Investment

Government

ExpenditureConsumption

Imports

Exports

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 3 Economic Impact of the Financial Crisis | 23rd October 2008 3

In this financial crisis, the negative impact on all drivers of growth will be more extensive and severe

Consumption

• Disposable income• Consumer confidence• Interest rates• Availability of credit• Attitudes to spending• Attitudes to saving

Investment• Business confidence• Interest rates • Availability of finance• Level of economic activity• Economic growth• Level and changes in consumer demand• Cost and efficiency of capital equipment• Rate of depreciation• Government policy

Government Expenditure

• Income (revenue)• Borrowing• Necessity for

economic stimulus

Exports• Disposable income and firm income• Consumer and business confidence• Interest rates• Availability of credit• Exchange rates• Attitudes to saving• Attitudes to spending• Economic activity in export markets

Imports• Disposable income and firm income• Consumer and business confidence• Interest rates• Availability of credit• Exchange rates• Attitudes to saving• Attitudes to spending• Economic activity in import markets

Aggregate

DemandAD = C + I + G + X - M

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 4

A different kind of downturn – Traditional responses will not suffice

Long andDifficult

Unprecedented constraints on access to credit and capital; Unwinding of over-leverage

Falling demand, increased price sensitivity as consumers and enterprises cut back

Disruptions in supply chains, partner and customer arrangements

Transformative Restructuring of industries: Firms fail, sold off overnight

New regulatory regimes Stress on global inter-

dependencies

Typical cost management willNOT be enough

Firms must examine working capital &

investment: identifying

opportunities to restructure, reduce, and preserve capital as well as streamline

operations

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 5

The 3 C pointers

Cash is King (doesn’t mean that customer is not )

Cash

Credit is hard to get

Credit

Perceptible ‘lack of confidence’ even among seasoned CEOs

Confidence

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 6

OrganizationManagement Suppliers

Customers

Employee

What are our stakeholder expectations in this scenario?

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What the employees want

1.Job security

2.Facilitate up-skill/cross-skill

3. Increased communication

4.Keep me engaged

5.Focus on ‘trust’

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 8

What the suppliers want

1.Honour contracts

2.No knee jerk reactions

3.Work together towards the long term

4.No unreasonable ‘squeezing’

5.Transparency on company performance

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 9

What the customers want

1.Clarity on situation - Serve with same quality at potentially lower costs

2.Share burden 3.Flexible arrangements4. ‘Partnering’ and ‘Risk-Sharing’ arrangements5.Help in leveraging existing assets to ‘do more’

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 10

What the Management wants

1.Sustained business (even if growth is lower than usual)

2.Sweating of existing assets

3.Conservation of cash

4.Voluntary efforts to deal with current situation

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 11

Along with these demands, broader forces are at work

… And tomorrow's leaders will capitalize on the new opportunities created

Our world has become…

Smaller & Flatter

Riskier

Pervasive connections and communications Emerging markets Open trade

Systems-level complexity Viral spread of information Widening gap between information available,

and information effectively managed.

Smarter Instrumented Interconnected Intelligent

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 12

Companies need to do three things:

Focus on ValueExploit

OpportunitiesAct with Speed

Do more with less

Focus on the core

Re-align relationships

Capture share

Build future capabilities

Change industry dynamics

Manage change

Leadership

Risk &

Transparency

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 13

The 3 C pointers

Cash is King (doesn’t mean that customer is not )

Cash

Credit is hard to get

Credit

Perceptible ‘lack of confidence’ even among seasoned CEOs

Confidence

© Copyright IBM Corporation 2008Succeeding in the New Economic Environment | November 2008 | 04/11/2023 14

In summary .. Answers to the 3 C lies in 3 A

Create agility to incrementally expand or contract, build key capabilities by spending on a vision to leverage investment and reshape the industry

Agility

improve productivity and conserve capital, cut spending and redeploy to products and markets that generate growth, margins, and true differentiation

Adaptability

Creates an environment to anticipate changes before they occur and the ability to use fast, sustainable decision-making

Alignment