Advantage in Adversity

Economic downturns present opportunities for companies to pull ahead of the competition.

During the last four economic downturns, an average of 14% of companies succeeded at increasing their sales growth rate and EBIT margin (the ratio of Earnings Before Interest and Taxes to net revenue earned), while 44% of companies saw those metrics decline. With proper foresight and strategic planning, companies can indeed take advantage of various downturn-related developments that will allow them to emerge from a downturn stronger than before.

Greater competitive volatility, for example, can present openings for companies to pull ahead of the competition. Slowdowns also provide opportunities for investing in operational improvements or acquisitions. Companies with considerable cash reserves may look to purchase or merge with a struggling...