By Rachana Shanbhogue: Deputy business affairs editor, The Economist, outright war, a global pandemic: anyone who has led a business through the ups and downs of the 2020s so far probably feels like they’ve seen it all. Now they must prepare to battle another foe—the two-headed monster of high inflation and economic stagnation. This fearful stagflationary beast last made an appearance in the 1970s, well before most of today’s senior executives had even set foot on the career ladder.
Companies are already having to deal with soaring inflation. Share prices tumbled in 2022 as first one firm and then another warned of eye-watering cost squeezes. Ford reported that its costs in the third quarter of the year were $1bn higher than it had anticipated, for instance—an overshoot equivalent to about 25% of its adjusted operating profits in the second quarter.
As they head into battle with the stagflationary monster, bosses will deploy a mix of strategies. More of them will seek to pass cost increases on to customers. In 2022 McDonald’s raised the price of its cheeseburgers in Britain for the first time in 14 years, for example, and other firms will follow suit. That is never comfortable: customers may react badly to price rises, causing a firm to bleed market share and revenue.
Not all firms are blessed with such pricing power; and in any case, there are limits to just how high prices can go before customers start turning away. Some companies will resort to the ruse of “shrinkflation”—making chocolate bars smaller, for example, while leaving prices unchanged. Others will seek to hold down costs through efficiency gains.
Perhaps the trickiest attempts to hold down costs will involve workers’ wages. With labour in short supply for much of the pandemic, bosses tripped over themselves to court employees, sprucing up their offices and encouraging remote work. But with costs rising and demand wobbling, managers may shift from suitors to adversaries. As the cost of living soars, unions in America and Europe have been demanding big wage increases.
Tonne honest: i dont See decline in demand , some goods Just wont se upsales (which is Standard i guess) Obsolesence ist present anyways
We don't need no stinking boss! Besides the year that I was delivering groceries to various grocery stores in the local tri-state area, I don't remember feeling good about any work I worked. Never been a pharmacist so idk.
Ahh, by “strong pricing power,” do you also mean “those in a monopolistic position”? And, did these companies also indulge in share buybacks and massive dividend payouts after governments fire-hosed them with tax-payer money?
& this is true of nations as well. The world is afflicted by: A pandemic Supply chain disruption Recession Ukraine-Russia War Sky rocketing of petrol prices Inflation High US interest rates. World leaders who manage their economies well will find their reputations enhanced.
Savaş başlasın.....
GDReferences
It will stagnate. Fed's rapid increases in interest rates overcompensated. Of course demand will drop. Significantly. Are they trying to create a recession that the GOP will use as a political weapon into 2024?
Oh no! Not the profit margins!!! Part of the reason why inflation is so bad in the first place! NOT THE PROFIT MARGINS!!!
Bizde bir söz var kaba bir tabir olacak affınıza sığınarak söylüyorum ' tecavüz kaçınılmazsa zevk almaya bak'. Patronlara tek tavsiyem zevk almaya baksınlar 😁🤭🤦
Is stagflation showing up in holiday discounts?
Vote Blue. Always. 👍
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Source: TheEconomist - 🏆 6. / 92 Read more »