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What Are the Different Methods of Business Cycle Management?

Article Details
  • Written By: Geri Terzo
  • Edited By: PJP Schroeder
  • Last Modified Date: 17 July 2014
  • Copyright Protected:
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    Conjecture Corporation
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Economies go through cycles, some of which are more challenging than others. In order to keep a company running efficiently even through the hard times, it is possible to adopt business cycle management techniques and remain ahead of the changing economic conditions. Business cycle management is a discipline that is useful throughout expanding economies just as much as it is needed in downturns. The different methods that can be used include preparing for the future, making discretionary investments, and continuing to fulfill needs.

Some of the best-performing companies during an economic pullback are staple companies, or those that provide products and services that consumers continue to need through any economy. While every business cannot produce staple items, there are ways to stay needed. A type of business cycle management is to keep a company's primary function relevant to customers. This might involve welcoming current technologies, such as social media, in order to remain in front of clients through economic expansions or downturns. By consistently taking advantage of the latest technological offerings, any prolonged economic downturn is less likely to threaten a company's ability to remain current and relevant or at least seen.

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It may be necessary for a company to change its business cycle management in response to a new environment. For instance, throughout economic contraction, when revenues and profits may slow, a company may still need to invest in the business to prevent further damage. During tough times, a company should remain highly selective about the areas in which it invests to promote growth. Some aspects of a business might warrant further resources during more stable times but can afford to be cut for the benefit of the organization under extreme conditions.

Other ways to approach business cycle management are keeping a long-term plan in place and creating market forecasts of where business is expected to be in the future. If predictions are made under various potential circumstances, there may be less of a knee-jerk reaction when a different cycle begins. For instance, if gross domestic product (GDP) declines for at least two straight quarters, this is a sign that an economy is heading into recession. Knowing what may be ahead can help managers to make more accurate business forecasts.

Also, having some plan in place for the transition of a recessionary environment, for instance, into a period of expansion ahead of time may save resources. Historically, economies emerge out of recessions, and being prepared to respond to those stages can be beneficial. Some of the common business cycles to identify include periods of abnormal expansion, an economic peak, and a slowdown or contraction in addition to a market trough.

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