Wednesday, March 25, 2009
CNA: Current Crists Prime for Companies to Grow
Hello friends! Even with the guidelines I'm not very sure what to post haha. Okay never mind I shall just post something and cross my fingers that it's okay.
The winners of this year's Singapore Business Awards said the current crisis is prime for their companies to grow through acquisitions of smaller businesses and distressed assets.
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Charles and Keith is putting its best foot forward to go against the downturn. It is stepping up expansion plans, with six new outlets in Singapore worth S$1.8 million by the first quarter of 2010.
Source: http://www.channelnewsasia.com/stories/singaporebusinessnews/view/417479/1/.html
My thoughts when I saw this was that these companies are investing in capital goods during this economic downturn - when everything is cheaper - so that when the economy improves, they'd be able to reap the benefits. That is, there would be an outward shift of their PPC.
Although investing in expansion right now means that less resources can be used to produce more goods now, it is actually more practical. Firstly, capital goods are generally cheaper now due to the poor economy. Secondly, many people have been retrenched or had their pays cut, and thus are less willing to spend on consumer goods. The demand for the goods thus falls. If Charles and Keith were to keep producing at the same rate, there would be a surplus of shoes.
Thus, it is more practical to invest in expansion and use less resources to produce goods. Not only would the goods not be in surplus, the greater amount of capital goods once the economy returns to normal would allow Charles and Keith to produce even more capital goods then. When the economy improves, unemployment rates fall, and companies are more free with giving bonuses and raising salaries. With this greater income, people are more willing to spend and thus demand increases. At that time, Charles and Keith would be able to meet this demand, preventing a shortage.
In conclusion, it is indeed the right time now for companies to aim for expansion by investing in capital goods. Companies should by all means capitalise on this economic downturn rather than be smothered by it.
To end off, I found this cartoon very cute. Opportunity cost :D Our favourite word, yes?
Source: http://www.stus.com/Hoping for coherence and relevance,
Sarah
Updated.
Posted at: 7:31 AM
