Economic depression within a state has a severe impact on the operations of big and multinational company such as General Electric (GE) Company. Economic depression entails that there is recession and reduction in economic activities resulting from inflations, and low sales, low revenue generations, reduction in monetary value, increasing cost of production and low output for organizations operating in such economy. This usually leads to reduction in the volume of turnover for an organization and low profit maximization.
According to Dalsgaard, et al (2005, pg 36) “Economic downturn may be caused by a mix of factors such as monetary or fiscal tightening, increased risk relating to long-term interest rates or loss of competitiveness for countries following a fixed exchange rate policy”. Strategic management entails the utilization of available organization resources to achieve effectively the objectives and goals of the organization. Economy downturn impact on multinational companies, like GE, leads to greater impact on their operations.For GE its strategic mission is to maintain the leadership in the different market in which it operates. Thus, with this objective it becomes challenging for company like GE to attain and maintain such market leadership during economic downturn. During such period, the resources to operate effectively in meeting the organization’s strategic plan would be deficient, thereby resulting in the organization adopting a cost reduction strategy, instead of maintain its original strategic thrust.
Such cost reduction strategy as workforce downsizing, sourcing for cheaper supply of raw materials, reduction in research and development activities. All this factors brought in by economic depression tends to reduce the sales volume and profit maximization of the organization. Furthermore, economic downturn affecting multinational organization as GE entails that its market linkages and operations within other countries will be affected in terms of supplies and the cost of its services and finished goods to these markets.The impact on economy downturn on smaller and less diversified company, compared to GE, will be greatly impacted on the operations of such organization.
Smaller firm mostly operate domestically. All the infrastructure and resources for their operations are usually sourced locally. In period of economic downturn in a country where these small firms operates, the full brunt of the economic depression will be felt by this category of firms. There will be sharp decrease in turnover, lower profit maximization, and increasing cost of production in recourse to the galloping inflationary rate experienced in the depressed economy.For a more diversified organization, they do not only enjoy advantages inherent in economies of scale, but can relay on proceeds from their subsidiary and foreign operations and business units.
This will make them not to feel the impact harshly, as the less diversified firm would be made to pass through. Furthermore, a much-diversified organization as GE has the capacity to relay on backward linkage in its production process, thereby producing on a cost effectiveness strategy, but this is not so with a small and less diversified organization.Google is an online organization, and it operates on a global scale, not restricted to a national boundary in its operation scope. Thus, in times of economic downturn organization as google may not get the direct and harsh impact, especially when such economy downturn is experienced in certain country or region. Just as GE that operate in a multinational scale a cover up or succor from other areas and business units will aid in leveraging the low ebbs felt in the other area of depressed economy.
