All businesses operate around certain business cycles. A business cycle refers to various trends that occur within a business or industry, such as growth or contraction. Often times, management decisions are impacted by where the company stands in reference to a particular cycle. Macro business cycles such as the general state of the economy also play an important role in management decisions. When the economy is in a cycle of retraction, management will act conservatively, whereas in a cycle of expansion, management may tend to act more aggressively to gain as much market share as possible. One of the main cycles business management will encounter in the life of a business is one that sees four, distinct trends: slowdown, bottom, growth and peak. All businesses, even the most aggressive sales organization on the planet, will experience these cycles. A slowdown occurs after a market has experienced a normal period of expansion. This is often followed by a period of sales maturity and product assimilation by the existing customer base, which is viewed as a slowdown. During a slowdown, competition has probably entered the market that has also created a dilution, or taken away from existing sales. Eventually the business hits a bottom or trough. After this bottom or trough period business gets aggressive and makes steps of expansion and marketing efforts to aggressively go after new market share. Following this period of expansion, business will again begin to see a peak in their performance and start the cycle all over.
When the business cycles moves from each phase, managers are presented with obstacles or opportunities. Knowing how to manage during the different phases of the business cycle can help the business better develop its forecasts and strategic plans.
Strategic Plans for Each Phase of the Business Cycle
Shifts in the business cycle require managers to