Page 84 - Accelerating out of the Great Recession

THE NEW REALITIES

sabbaticals to their employees rather than cutting jobs alto-
gether. Not only do they wish to preserve their skill base, but
they also wish to act responsibly—and to be seen as acting
responsibly in the aftermath of the Great Recession.

■ THE SHAKE-UP OF INDUSTRIES ■

Recessions typically accelerate the reshaping of industries by
exposing ineffective business models and weeding out under-
performers. And given the pressure on profitability that we
have just described, the Great Recession will be no exception.
The sluggish recovery and long period of slow growth certainly
will provoke the restructuring of companies and industries.
The Demise of Poor Business Models

Companies with poorly grounded business models will face sig-
nificant pressure and either adjust or be forced to exit the mar-
ket—witness the stress being placed on the automotive industry.
Tough economic times tend to reinforce structural weaknesses.
The newspaper industry, for example, is suffering from a double
whammy. For years, it has been struggling as the Internet has
transformed the way people access and use media—and now, in
addition, it is facing a decline in advertising, which is forecast to
recover only slowly. The same holds true for the postal sector: the
shift away from mail to electronic distribution gained significant
momentum in 2009 and industry leaders, considering this more
than a mere cyclical change, don’t expect companies to return to
precrisis levels of spending on direct mail.
Companies with structural weaknesses are more likely than
well-grounded companies to default on their financial obliga-

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