BackThe C-suite survival guide to inflation and economic turbulence
Here are ways executives can navigate challenges in corporate finance, IT, logistics and marketing.
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C-suite executives and other business leaders are planning for a period where inflation is sticky, interest rates are rising, the geopolitical landscape is fraught with tumult and the economy is slowing.
Over the past few years they have been battle tested, forced to adapt to a host of fundamental changes stemming from the Covid-19 pandemic, including supply-chain snags and a tight labor market.
WSJ Pro reporters and editors have been examining the cloudy economic outlook, looking at how some of the biggest and most successful companies are adapting their budgeting and managing costs, approaching mergers and acquisitions, adjusting their borrowing, and more. We have looked at the steps companies are taking to gird for tougher times, and found that many are approaching this period of uncertainty as an opportunity as much as a challenge.
U.S. retailers, for instance, are struggling to balance consumer expectations for discounts and the need to keep raising prices to offset high inflation. The coming holiday season is likely to test a number of midsize retailers that have seen sales slump as inventory piles up. It remains to be seen whether these chains have enough capital to ride past potentially disappointing end-of-year sales.
Meanwhile, some companies are seizing on mounting tech layoffs to find talent that gets cast off from rivals, and others are looking to renew contracts with vendors on more favorable terms, among other steps. Real-estate companies are finding it costly to hedge their floating-rate debt amid surging interest costs, and even highly rated companies are pursuing term loans instead of bonds to save on interest costs.
Consider global deal making. Mergers and acquisitions are slowing as many companies navigate the worrisome business climate. During the first nine months of the year, the value of announced global M&A deals fell 34%, according to data provider Refinitiv. But strategic M&A is still going on, even if at a slower pace, as inflationary forces and economic uncertainty drive rivals such as groceries Kroger Co. and Albertsons Cos. to combine to squeeze out more cost-cutting opportunities or bulk up to better compete down the line.
And the impact of the quickly shifting landscape goes beyond M&A and the U.S. In Europe, the war in Ukraine is driving inflation, food shortages, and the prospect of a long, cold winter. German chemicals manufacturer BASF SE, hit with big energy bills this year, said it would downsize its operations permanently. In China, a zero-Covid policy adds an element of uncertainty as lockdowns continue to weigh on manufacturing and supply chains.
Here’s a guide to recent months’ coverage from WSJ Pro on how executives are tackling these challenges and approaching the opportunities:
Corporate Finance
Finance executives and leaders have their work cut out. Expenses are proving difficult to hold down as inflation—even if it has hit its peak—continues to surge. Financing costs are also climbing, and it is getting more difficult for some companies to borrow. The strengthening dollar is making it harder for companies to hit profit targets. And now companies, particularly in technology and related industries, are starting to implement layoffs. Here are some tips and ideas for CFOs, treasurers and others in finance on navigating the turbulence.
Enterprise Technology
Tech companies had a good run during the pandemic, and in the years leading up to it, with the likes of Apple Inc. and Amazon.com Inc. garnering trillion-dollar market valuations and robust profits. Now the tide is turning, slashing companies’ market values and driving widespread layoffs at companies including Amazon, Meta Platforms Inc. and Lyft Inc., among others. But some companies are looking resilient, particularly in cybersecurity, cloud computing and automation. Here are some tips for CIOs and other tech officers on responding to the challenges ahead.
Logistics
While the impacts of rising inflation and higher interest rates have played out unevenly across the economy, the logistics and transportation sectors have been hit hard as consumer demand has shifted to services and away from goods. Cargo volumes are sharply lower, and shipping costs have followed suit with one widely watched index measuring the average price to ship a 40-foot container hitting the lowest level in nearly two years. And it couldn’t come at a worse time—the peak season when business booms ahead of the holidays. Here is how logistics and supply-chain managers can take advantage of the slowing market.
Marketing
Often one of the first things companies cut when the economy slows is the marketing budget. While there hasn’t been much pullback in ad spending yet, some companies are already expressing uncertainty about the coming year and big ad firms are predicting a growth slowdown for U.S. advertising in 2023. But in this unusual economy, where nflation hits households differently, many luxury-goods companies are doing brisk business and haven’t felt the same pressure to cut marketing budgets. Here is how marketing executives can continue to sell their brands to consumers during tight times.
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