As we discussed before regarding the tripod of trouble for the credit crisis (govenment, corporations and individual consumers)over the past two weeks one can clearly see that the govenment and corporate parts of the machine are deleveraging and working to rebuild new models. The last piece of the puzzle and the one that has me most concerned is the individual consumer.
Read the article on household income versus housing cost:
http://www.thetruthaboutmortgage.com/study-rising-housing-costs-greatly-outpaced-income/
It is no great mystery that the average American household is spending more thna they take in. As credit markets freeze, income growth stagnates or falls and living expenses continue to rise as the cost of doing business rise with increased borrowing costs and reduced cash flow flexibility, there stands a real chance that in our consumer driven economy a drastic slowdown in spending occurs in order for American households to deleverage and right their household balance sheets the same way the government and corporations have done in the past few weeks.
Any company operating in this environment has a few things to think about-
1) How am I connected to the cash? Where does your customer place your business in the context of their wallet?
At the end of the day- My wife and kids have to eat and have a roof over their heads- is your business tied into those two areas?
2) Is my business model right for this environment? if it comes down to an economy of basic choices how will you survive?
3) How will reduced household cash flow, rising job insecurity, and over leveraged households choose their new products and services?
I'm not saying I have the answers to these questions- but in a world of drastic and lighting fast change- the fundamental assumptions that people use to manage their business and lives needs to change in order to evolve and survive in the next go round.
How are you evolving?
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