The market is regarded as a leading indicator, which means that steep declines as seen in the past week are a leading signal of an impending recession.
What can managers do to prepare for a recession?
First, expect demand to shift from luxury to basic brands: from the Lexus to the Toyota, etc. If you run a multiproduct firm, will you be able quickly to shift production from luxury to basic items?
Second, demand in most industries will fall overall. Thus it is a good idea to get flexible.
Hire temporary or “casual” employees rather than permanent staff. Rent equipment and real estate rather than buying it. Chose short-term rental contracts rather than long-term ones.
In part 2, I will explore the different ways to cut your wage bill in a downturn.