Academia de Studii Economice Bucuresti Facultatea de Relatii Economice Internationale Managementul Riscului Tranzactii Comerciale

Chaotics Philip Kotler & John A. Caslione Main ideas

Omeniuc Alexandra Oprescu Raluca Tudor Monica Bobilca Ionut Radu Razvan Vlad Alin

2012

The world has entered a new economic stage. From normality to turbulence - After every crisis, when normalcy returns to economy, some of the industries or markets still need some help to grow up and stabilize. Turbulence always means an increase in risk, which is used to describe uncertainty for which insurance is purchased. Companies shall make decisions that minimize risk instead of seeking to maximize their returns. The National Intelligence Council released in 2008 a report entitled The Global Trends 2025: A Transformed World. It is a description of the drivers and developments likely to shape world events. This report reinforces the point that the will be facing disruptions, turbulence, chaos and violence. These factors will impact business around the world directly and indirectly. Market Turbulence In the natural world turbulence is characterized by violent or agitated behavior (e.g.: hurricanes, tornados, tsunamis). The butterfly effect refers to the idea that a butterflys wings create tiny changes in the atmosphere that may ultimately alter the path of a storm system like a tornado or delay, accelerate, or even prevent the occurrence of a tornado. The butterfly effect occurs because ours is an increasingly interconnected, interdependent globalizing world that is accelerating in its globalness. A good example of severe turbulence could be the last four months of 2008, sever trillion dollars evaporated and leaving economic carnage for a newly elected president and the rest of the world to clean up. Turbulence may be described as a comparison between normal economy vs new normality economy. Business owners have always lived with certain level of turbulence in the business, being the normal economy. But todays economy, the new normality economy, is more than just up and down business cycles. The heightened turbulence is the new normality that challenges business and government leaders to better understand and create new strategies to succeed in the years ahead. Hypercompetition occurs when technologies of offerings are so new that standards and rules are in flux, resulting in competitive advantages that cannot be sustained. It is characterized by rapid moves in which competitors must move quickly to create new advantages. The one absolute truth about the uncertainty that turbulence creates is that the longer it persists, the more cautious people become. When businesses are unable to predict their customers expectations, they tend to abandon their core principles causing a dangerous combination of turbulence that compromises a business leaders ability to make sound decisions.

Executives should strive to make their operations more efficient and to reduce unproductive expenditures, when the fact is that business executives approach impending trouble with overconfidence, often denying that their industry or their companies face any real danger. Even the most skilled CEOs can fall under the influence of economic uncertainty and make serious mistakes like slashing costs in all the wrong places, firing talent, cutting back on technology and product development and these actions can destroy a company. Some of the most common mistakes that business leaders make when turbulence hits are: across-the-board spending cuts versus focused and measured actions; quick fixes to preserve cash-flow, putting key stakeholders at risk; reducing marketing, brand and new product development expenses; cutting back on training and development expenses in economic crises; undervaluing suppliers and distributors. The moral of this story: Never lose sight of your companys core values. The main idea is that you need to be prepared for almost anything. You should have a system which is supposed to help you detect your problems as a company and estimate as accurate as possible what you might be facing in the future. Also you should be opened to hearing any suggestion for improving your business and you should not stand against change if it is good for business. Having this in mind you might be paying a little more attention in the future to everything surrounding you and happening inside your company, because you dont know when and from where a business opportunity reveals itself. We understand that the future is not predictable and it comes with a lot of surprises, but by following a set of simple rules that help you see from where turbulence might appear, you, most likely, would be able to have some idea on how your company should react in different situations and by doing so you will probably stop chaos from invading your organization. No matter how big your company is, when that day comes you should be prepared. Business leaders and their executive staffs will be charged with ensuring that chaotics behaviors and strategies are infused and embedded into the organization. With the Chaotics Management System, we present not a customized strategy into which every business enterprise must fit but a customizable framework of strategic behaviors. This framework is adaptive in its usability, as the variables of each business enterprise are inherently specific and unique. The goal is for business leaders to create organizations that are responsive, robust, and resilientin short, organizations that have the ability to live and thrive. These are

organizations that aspire to and attain Business Enterprise Sustainability (BES). There are five-step process to execute chaotics strategic behaviors that should be applied to the organization overall, department by department, for key support systems and stakeholder groups for each of the key functional Departments.As each business works its way through each step in the execution process, it should be mindful of the continuous need to reassess and revise strategic behaviors of each department. Employee morale in manufacturing/operations is crucial to ensuring that

productivity remains strong and the corporate environment upbeat. It is very important that you ensure worker participation by including them in communications so that they know what is going on. 18 This is an ideal time for additional training. Cross-training boosts productivity and flexibility as it allows workers to cover for one another in the event of an illness, vacation, or termination. This investment in extra training also provides deserving workers with extra responsibilities, which, in turn, increases their self-motivation. Such organizations have the ability to react quickly to a constantly changing environment. They can withstand great stress and pressures with minimal damage. They can cope with unpredictable variations in their environment, and they have the ability to rebound when the hard times end and circumstances improve. These enterprises will succeed in the new environment, and in any environment. By boldly implementing the prophylactic protections of chaotics strategic behaviors, department by department, business executives will move forward to secure their companies futures against the increasingly unpredictable environment that lies ahead. Moreover, implementing such strategic behaviors will begin the long and steady process of creating newly evolved culturesones in which allmembers are more keenly attuned to the environment and have the tools to meet with success in an uncertain future, secure their businesses from threats in the environment, and exploit new opportunities that may arise. Finally, such organizations will possess the collective knowledge and skills to create cultures that have the necessary underpinnings deeply embedded in them to attain long-term Business Enterprise Sustainability well into the future. A must for a company which is defending itself from the external shocks of turbulence and chaos which can destroy it is the increase of its capacity for resilience at all levels, but most important in marketing and sales. The developments of the turbulence put the company at a strategic inflection point: to continue with the same strategy or to recognize that is needed a new one. If the company does not revise its marketing policies, the new environment will affect in a negative way.

There are four key changes which call for radically new thinking by managers and marketers: Customers are better informed than ever; Customers are increasingly ready to buy and trust well-known store brands when they are priced lower than the well-advertised national brands; Competitors are able to copy faster any new product or service; The Internet and social networks have created radically new media and information sources. There are three likely consumer behaviors: Consumers move toward lower-priced products and brands; Consumers reduce or postpone discretionary purchases; Consumers cut back on driving and start buying more from suppliers nearer to their work or home. One of the worst business responses to sudden turbulence and recession is to institute across-the-board cost cuts. There are five questions which can help leaders determine how best to reduce and reallocate their budgets: Do you have a complete inventory of your growth investments and can you identify waste (or inefficient spend)? Do your investments change your customers buying behavior? Are your investments focused on customers barriers to buying your brand? Do you have the right mix of marketing levers among your investments? Do you have a system to maintain winners and cut losers?. Marketing plans in The Age of Turbulence need to ramp up quickly and show resilience. One of the biggest challenges for marketers will be keeping the cost-cutting wolves at bay to minimally maintain their pre-recession budgets and, even better, to have them increased. Increasing the pressure on the sales team doesnt necessarily translate into increased revenue. There are six key steps for sales executives to get their sales teams to take on the tough economy and increase those badly needed sales: Think high touch; Build team spirit; Dont cave in to pressure to do any deals; Find new ways to get sales teams motivated; Keep expectations high, but not impossible; Protect the sales teams base salaries. The company needs to develop a vision of what strategic and tactical responses are available during a slowdown and, in particular during a long, extended slowdown. Fiinally, the company must develop a sense of the possible scenarios and work out a view of appropriate responses to address each scenario. To develop and maintain a sustainable business we must consider some aspects of planning and business administration. These issues should be directed to: 1. A good business planning both the present and the future (Dual Vision) or a Triple Plan (a plan of present activity, an average planning - 3-5 years and a long term planning);

2. Company Reputation plays an important role in achieving its sustainability and the more powerful the more help the company to go through crisis and be driven further into the future; 3. Build Loyal Customers and hope they will not only buy repeatedly from your company but tell others good things about your company as well; 4. Care for the environment and social problems; 5. Training, internalization and a clear set of guidelines and rules.