The Well-Timed Strategy

Managing the Business Cycle for Competitive Advantage

Wharton School Publishing, 2006

15 min read

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Business cycles offer strategic opportunities – here's how to take advantage of each cyclical twist and turn.

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This handy, concise compendium offers managers a series of tips on managing through changing business cycles, and illustrates its advice with intriguing actual cases. The book originated in the five-year "Master Cyclist Project," launched to teach business-cycle management to MBA students at the Paul Merage School of Business at the University of California in Irvine. Author Peter Navarro’s lively evidence shows managers who take the right steps but at the wrong times and, thus, invariably meet ill fortune. He also shows managers taking steps that conventional wisdom regards as foolish (e.g., upping advertising during recessions) and meeting with invariable success. It may seem just a bit too neat. But, even if you don’t agree with every detail of this analysis, the book’s cases are strong and its underlying principles are sound. Ride the business cycle or it will ride you. Just as a contrarian investor buys in bad times and sells when times are soaring, so the counter-cyclical manager invests during bad times and spends cautiously during the good. getAbstract recommends this book as a useful antidote to groupthink.

Summary

Good Times and Bad

Few corporate risks are more pervasive and consequential than business cycle risk. When the business cycle moves, many other factors move with it. Consumers become more optimistic or pessimistic. Interest rates go up or down. Bad times create pressure on companies. Sales decline or margins wither. Capital becomes scarce as investors flee to quality and safety. Yet, in some ways, managing in good times can be equally hard or even harder.

Managers, like investors, have an unhealthy habit of projecting trends into the indefinite future. Wall Street has a saying that, "Trees do not grow to the sky." That is, no boom lasts forever. The business cycle inevitably, inexorably, turns. Yet, every time, respected business leaders fail to season their optimism with sound sense. They embark on ill-considered expansions at the peak of a boom, only to be laden with impossible debts when the crunch arrives. Or, they make pricey acquisitions just before the market tanks. Like timing-sensitive investors, managers must be contrarians. When everyone thinks times are bad, prepare for good times. When everyone thinks times are good, lock the doors. A globally competitive...

About the Author

Peter Navarro is a business professor at the Paul Merage School of Business at the University of California, Irvine. He’s the author of the best-selling investment book If It’s Raining in Brazil, Buy Starbucks.

Peter Navarro

The Well-Timed Strategy

Managing the Business Cycle for Competitive Advantage

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