Strategic responses for nutritional companies during recession

Macro / Micro Integration

The American economy has entered, along with the global economy, into a period of recession and the latest measures adopted by the government are clearly in favor of arguing such a position. There are significant indicators that this trend is likely to continue over the next 6 to 12 months as well. For example, the unemployment rate has gradually increased from 5.0% in April 2008 to 6.1% in September 2008. Despite the fact that the indicators for the GDP growth have remained encouraging (3.5% in the first quarter and 4.1% in the second one), the estimation of a recession of the U.S. economy in the next 6 to 12 months is based on our perception that the crisis in the banking and financial sector will impact the economy through the decrease in credit supply. As the companies will not be able to borrow as much, business will shrink, generating a decrease in the population's purchasing power as well.

These are likely to affect a company manufacturing and selling nutritional as well. The three strategic decisions we propose include (1) diversifying into a related activity that is likely not to be affected by the recession (something that the population will always need); (2) concentrate the business on those areas where the recession is likely to be felt least (generally rich urban centers, where the need for nutritional products is likely to remain constant) and (3) expand into countries where the market will still support demand for such products.