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Economist speaks on Ohio’s future, what businesses can do to weather crisis
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Although no part of the country is immune to the current economic crisis, some states are hit harder than others. Ohio, says Scott Shane, Mixon Professor of Entrepreneurship at Case Western Reserve University, is worse off than most. Job loss (largely manufacturing jobs) has especially taken a toll. Ohio, which has the nation’s second highest loss in the number of jobs after Michigan, “is not out of the woods yet,” believes the economist. “There will be more job losses.”
Businesses getting hit hardest are those that are cyclical, says Shane. Those doing better are counter-cyclical.
For example, candy companies fare better than most in a recession. “People are going to treat themselves to a $1 candy bar as opposed to a $100 spa treatment.”
The economist and author points out that while people do less when money is tight, it’s unrealistic to think they do absolutely nothing at all. “Most people don’t have that strong a response,” says Shane. “People are hurt, yes, but it’s not like everyone has gone bankrupt.”
Within industries, there is also a noticeable trend: For example, high-end restaurants typically do worse than their less expensive counterparts. “If you are running a restaurant, you’ll want to cut back on the number of steak items and boost the number of pasta items on the menu,” advises Shane.
So, can businesses do anything to counter the crisis?
The simple answer is to preserve profits by cutting costs. Another avenue is to innovate, says Shane. “You can get customers you’ve never had before if you can come up with something new,”
On the credit side, he adds, businesses should look for alternative ways to borrow money. Explore peer-to-peer lenders or individuals with money instead of banks, or bring in partners.
However, Shane cautions, there are no easy answers. “But relative to other people, you are going to do better if you are more creative in solving the problem.”
–J.Dery
Businesses getting hit hardest are those that are cyclical, says Shane. Those doing better are counter-cyclical.
For example, candy companies fare better than most in a recession. “People are going to treat themselves to a $1 candy bar as opposed to a $100 spa treatment.”
The economist and author points out that while people do less when money is tight, it’s unrealistic to think they do absolutely nothing at all. “Most people don’t have that strong a response,” says Shane. “People are hurt, yes, but it’s not like everyone has gone bankrupt.”
Within industries, there is also a noticeable trend: For example, high-end restaurants typically do worse than their less expensive counterparts. “If you are running a restaurant, you’ll want to cut back on the number of steak items and boost the number of pasta items on the menu,” advises Shane.
So, can businesses do anything to counter the crisis?
The simple answer is to preserve profits by cutting costs. Another avenue is to innovate, says Shane. “You can get customers you’ve never had before if you can come up with something new,”
On the credit side, he adds, businesses should look for alternative ways to borrow money. Explore peer-to-peer lenders or individuals with money instead of banks, or bring in partners.
However, Shane cautions, there are no easy answers. “But relative to other people, you are going to do better if you are more creative in solving the problem.”
–J.Dery
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| Economy watch: Local businesses feel pinch from poor economy |
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