A management approach to the crisis

By Nasser Majeed   

In a corporate environment, when faced with a crisis of declining revenues and increasing costs, how might we approach the problem?

A couple of factors to be considered, among others:

Short-term actions and long-term

• Within your area of control and outside your area of control

• Your core competencies

• Leveraging existing markets versus expansion into new markets

• Comparative advantages

• Benchmarking against the best, highest or the lowest

Whilst implementing marketers would be cognisant of their target markets. Those who pay closer attention not only to the demographic but more importantly the behavioural and psychographic profiles would extract better output and productivity from the market.

Taxation or revenue

Short-term options

Raising taxes, duties and other levies is a no brainer, period. However the impact of the taxes must be equitable. When COVID impacted corporate performances in 20/21 most responsible companies had zero cuts on employees earning less than Rs. 50,000. All other employees had to take a progressive pay cut from 5% going up to 15% or even higher.

In this context we should see the increase in value added tax on essentials as an unfair tax.

Higher taxes on high value and easily portable products like mobile phones, laptops, etc. immediately moves the supply of products from the formal to the informal sector. Having been in the consumer durables sector for decades we have experienced market share shifts as high as 30% from or to the informal to formal sector whenever duties and taxes are lowered or vice versa if raised. The key here is to see at what point is the arbitrage profit for the informal sector lucrative enough to invest time and risk resources into an illegal or quasi-immoral activities.

Long-term options

Post-2010 we saw taxes on easily portable electronics, watches, jewellery and perfumes reduced to a point where it was cheaper for tourists to by luxury watches in Colombo than Singapore or Hong Kong.

Amazingly, we experienced re export of mobile phones from Colombo to Dubai with a profit to boot.

The strategy here was to increase the average spend of inbound tourism.

Exchange rate

The biggest drop in our net dollar revenues arise from the inward remittances from our own citizens. How irresponsible were we when we chose not to act or acted with arrogance when the monthly remittances, as high as $ 650 million started to rapidly decline to as low as $ 200 million.

Many economists have written and spoken about this since almost a year ago.

We see a very emotive marketing campaign appealing to our fellow citizens to send the dollars through the banks.

Considering that money, interest rate and exchange rate are near perfect markets from a free market economic perspective can a marketing campaign create a premium or discount in the price of the dollar.

Most marketers would agree that if you are in a commodities market you need to invest in adding value if you want to make above normal profits. Branding, packaging, changing taste, odour, etc.

Unfortunately we can’t do that to the US dollar. It carries the same value in the hands of kings and paupers, be it clean or dirty, even slightly damaged.

An appeal to deep emotional attachment might work and we hope it does.

Identify the deepest emotional attachments that we have.

Tribe, race, cast, family or religion not necessarily exhaustive or in order of intensity.

Consumption

It’s a no brainer that we should reduce consumption more so of imported commodities.

Fuel

Judging by the queue at fuel stations we might even wonder that people are actually consuming more fuel now than in the past. Mercifully I invested in an electric car and haven’t been in a queue yet. We have all heard some news reports that someone was caught hoarding diesel, petrol or gas. We should keep an eye on the volume imported this year versus last year and prioritise the distribution. Public consumption versus private consumption.

If consumption of imports can’t be reduced rationing is an unpleasant alternative.

What are the programs initiated to reduce the demand side of power consumption. Most people have forgotten that Sri Lanka advanced its clock by one hour (GMT + 0630 hours) in 1996 and to half an hour (GMT +600 hours) thereafter. This was sustained right up to the election of 2005.

I’m not sure of the reason to push back the clock to GMT +0530 but doubt it was scientific. If we were to advance the clock by a half hour I doubt any astrologer would come forward to claim its malefic to Sri Lanka or even to those in high office. Things can’t be worse for both the people and those in power.

Food staples

It’s a no brainer to grow all your food. The problem is agriculture is physical work and the reward needs to be lucrative enough to move the youth from seeking a pensionable government job to agriculture. A land census and registry similar to that envisaged by MCC should be an urgent program. Even if the State doesn’t have the gumption to do it this could be an initiative of the IT sector. Future generations will be grateful and rewarded by such an act.

Letting our imagination run riot

We could start a ‘grow more campaign’ with a mandatory draft. Instead of a military training we could get our youth and retirees into a program akin to the Kibbutz movement of pre-independence Israel. With our current relationship with Israel I’m sure they’ll be willing to assist with the expertise. As we have a powerful executive with a two-third power in the legislature such an act can be achieved immediately if you are willing.

In the alternative the massive manpower in our armed forces (we have the 16th largest standing armed forces in the world) could be used for such a program.

The post-war recruits could also gain the reputation of being true heroes of the nation.

(To be continued.)