State of the Industry
gain a competitive advantage by being
well positioned when the inevitable
recovery occurs.
These strategies are further described
in the following six outcomes:
• Take decisive actions. A “do nothing”
response to market upheaval and dramatic downturns can be devastating.
To believe that you can “ride it out”
with the typical cost cutting responses
will leave you unprepared for the consequences of expected structural
changes that are occurring in the global economy. Developing and implementing a well thought out and sustainable strategy is essential to getting past the bad times;
• Reduce working capital requirements.
Significant cash must be freed up by
reducing inventory and receivable levels. These untapped cash reserves can
be accessed over the near-term with
usually little to no capital investment
required by undertaking initiatives
involving optimizing the planning tools
of management information systems
typically in place but under-utilized or
poorly understood;
• Reduce operational costs. Streamlining your organization and improving
business process efficiencies will free up
cash requirements. Once again, this
usually results in immediate cash flow
improvements;
• Adapt to meet shifting customer needs.
Needs of customers change during difficult market conditions. Your pricing
strategies, credit terms, product mix and
service offerings may need to change
with them. Being prepared to show customers that you can be flexible in these
areas and that you will help them during
the difficult times can gain you much
sought after customer loyalty.
• Improve credit worthiness. Use the
above strategies to improve credit
worthiness by reducing debt and
strengthening your balance sheet.
Bankers are looking much harder at
these factors in today’s economic environment. Good credit worthiness and
a strong balance sheet translate into a
decisive competitive advantage in the
marketplace, especially during these
difficult economic times.
• Seize upon game-changing opportunities. Be ready (and able) to identify and
move on the “right opportunities” such
as geographic expansion, new industry
sectors, new products and acquisitions
among others. These actions will
address near-term revenue shortfalls
and help position your business to capitalize upon the upturn in the economy
when it arrives.
SUMMARY
The global coatings market is a large
and important part of the global economy and has enjoyed significant growth
over the past five years. At present,
however, the coatings market faces
challenges as a result of the current
economic conditions. Decline in overall
economic activity, construction spending and manufacturing output have all
had a negative impact on coatings
demand. This downturn is likely to continue to at least mid- to late-2009.
Western economies, and thus coatings
demand in those regions, have been
particularly hard hit as these
economies have fallen into full-blown
Chart 2
recession. Once booming areas like
China and India will still show positive
growth, but at a much lower rate than
has been experienced of late.
Over the mid- to long-term, the
forecast for the coatings industry is
positive. The coatings market will
rebound as does the global economy. If
the recovery occurs as is currently
predicted, the coatings market will
approach $120 million by 2012.
Growth, however, will vary significantly from region to region and
across the end-use segments. In order
to enjoy this predicted prosperity,
companies must be able to survive the
short-term crisis by limiting exposure
to the market downturn and by positioning themselves to take advantage
of the inevitable upturn. CW
About the Author: Scott Detiveaux is a
senior consultant with Orr & Boss, Inc.,
a U.S. based, international management
consulting firm that specializes in the
global specialty chemicals and coatings
industries. Mr. Detiveaux was the project
manager for the recently published
IPPIC global coatings market study
report on which this article was based.
