Inside CI: An Era Of Uncertainty

We’ve made it to the year 2001 without any major calamities. We should feel proud. A new decade, a new century, a new millennium is stretched out before us…a road yet to be traveled, with twists and turns yet to be explored. A new beginning.

But the economy that has been so good for so long now threatens to turn on us, and more and more companies are facing the new year with reluctance rather than anticipation, and fear rather than hope. The “R” word is on the tip of everyone’s tongue as consumer spending tightens, corporate profits fall short of expectations, and technology stocks continue to drift downward.

Over the last decade, the ceramic industry has been buoyed along by the success of the rest of the economy. Even through 1999 and the first half of 2000, demand for ceramics remained strong. According to information provided by the raw and manufactured materials suppliers that thrive off our industry, output has steadily increased in computer chip production, ceramic parts for the aerospace industry, heat sinks in electronic circuits, lenses for laser radiation equipment, and silicon wafers and disk drives in the computer industry. Housing markets have been strong, boosting the demand for sanitaryware and ceramic tile, and consumer confidence has been high, leading to increased dinnerware and artware purchases. (See the Materials Overview article beginning on page 18 in this issue for more information.) But all this appears to be changing, and no one can say for sure what lies ahead.

Are we in for a recession? While economists think it’s possible, few think it’s likely, and The Federal Reserve continues to boast that it is merely bringing the country in for that “soft landing” at last. But soft landing or not, the events of the past few months indicate that we should probably get our feet back on solid ground and do some real planning for the future.

According to John A. Pearce, a professor of strategic management and entrepreneurship at Villanova University in Villanova, Pa., and author of the book, Formulation and Implementation of Competitive Strategy, companies that best survive an economic downturn generally move quickly and take decisive action to combat such a downturn.* Such moves may include trimming expenses and looking for new markets or new customers to offset any downturn in regular sales. The most successful companies are those that are in a niche so small that competition doesn’t increase during a recession or those that have a broad enough product offering that any economic maelstrom in one sector will be offset by strong business in a different sector, Pearce says. But this isn’t the first time I’ve heard such advice. Ceramic manufacturers have been preparing for hard times this way for decades—in fact, it was just such thinking that kept most manufacturers in good stead through the Asian economic crisis several years ago. But now is not the time to let down our guard.

Our industry is innovative and resilient. We may be facing an era of economic uncertainty, but it won’t be the first such era we’ve seen, and certainly won’t be the last. For now, all we can do is prepare for the worst…and hope for the best. Because it is, after all, a new year.

*Source: McCune, Jenny C., “How to Prepare For, and Deal With, An Economic Downturn,” USA Today, November 16, 2000.

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