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What matters now: four strategies depending on market resilience and relative company strength


Lars Linnekogel
04.11.2022
Lars Linnekogel
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In our view, companies can assess quickly where they need to play right now – based on two dimensions:

We suggest looking at the resilience and stability of the market they are operating in on the one hand, and, on the other, at their relative competitive positioning and strength within that environment. This basically means that four distinct strategic approaches can be derived from companies’ current positioning to help them to navigate through the upcoming period in the best possible way.

Strategy 1: ensure survival

Organizations that operate in an environment, industry, or market that is heavily impacted by the current crises and that have a relatively weak position in this market need to follow this strategy. For their leadership, it is of the utmost importance to conduct an in-depth risk and resilience assessment to identify where potential threats and requirements for scenario and mitigation work lie. At the same time, these organizations need to embark on stringent cash and value efforts – with a strong focus on short-term result delivery. This is crucial to ensure financial survival and to create buffers should the disruption worsen. Once breathing space has been created, leaders need to identify strategic options for renewal in case the turbulence continues.

Strategy 2: sustain results

This second strategy is suitable for organizations that find themselves in similar market environments as those in strategy 1, but they are the market leaders here. They are still over the waterline but can feel the sea getting rough. For their leaders, preparation for further market disruptions is essential – they need to understand where the risks are and prepare for resilience mitigation. At the same time, they need to allocate resources to a dedicated “results sustainment program,” which identifies and delivers value across all EBITDA dimensions and potentially also reviews the CAPEX plan to ensure sufficient cash going forward. In a strong market position, these organizations have the opportunity to leverage their power to create top-line value or to pass through some of their increased cost positions. Strategically, the leadership must start identifying and validating diversification options to reduce cluster risks.

Strategy 3: focus on growth

Organizations that operate in a stable market that is less affected by the current turmoil, or even benefits from it, but do not yet belong to the market leaders can leverage the current environment to review their growth ambition. As an initial must-do, they nevertheless need to conduct their resilience housekeeping and verify that they are prepared should the market situation or environment also change for them. But the main activity can center around a substantiated medium-term growth strategy. Here, specifically due to their relative strength in the market, they should also explore inorganic options such as M&A (medium- to long-term if financing is required due to current credit challenges, or short-term if cash allows), but also review partnerships or leverage their ecosystem. As part of this, they can also check whether business model adjustments in the context of their ecosystem and value chain make sense, for example in terms of sustainability.

Strategy 4: build future

This strategy is suitable for strong companies in strong market environments. They need to ensure they defend their position and leverage their relative advantage above other companies and other markets – central to this is keeping defenses up and making entry or market share gains difficult for others. Of course, as part of this, they should also review their risk profile and ensure resilience across all key dimensions. Their leaders now need to reevaluate medium- and long-term strategic options, validate their purpose and vision, and explore new pockets for growth and margin contribution. They are in the unique position to shape and build their future, and potentially influence the entire value chain.

Across all four strategies, it is essential to keep in mind that there is a high degree of uncertainty not only from a market perspective, but also from a human one. It is essential that leaders include their people in their specific strategic efforts. Here, TTE suggests using the TTE Fair Process Methodology with specific engagement and contribution measures to create a systematic buy-in and commitment from within the organization. TTE supports clients across all four strategies with specific tools and hands-on support.

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