The spring has already come. But many enterprises have not welcomed their own “springs”. The financial crisis forces some enterprises to think carefully of “how to survive”.

In April, China’s economy has already seen a small hint of recovery, but many enterprises are still wondering how they can survive the financial crisis. Some enterprises not only assume the load caused by the financial crisis, but also become the center of the public opinion.

Those “viruses” have made the winter for the enterprises even more shivery.

Entrepreneurs in Storm Center

The silliest mistake in this tough period is other than to challenge the social bottom line of morality and the mainstream values. AIG just committed that stupid mistake.

In the fourth quarter of 2008, the US-based AIG saw a record-high deficit of 61.7 billion US dollars. Regardless of that, AIG’s top management were still paid high salaries. “This is absolutely ridiculous and angering,” a Chinese financial corporation’s manager gave out a review about this matter. AIG was seriously criticized by the public opinions from all over the world and its top management were completely isolated.

Niu Gensheng, Board Chairman of Chinese milk giant Mengniu also triggered a storm of public opinions in China.

When the melamine event broke out, Mengniu’s fast movement of public relations in crisis got some effect. Niu Gensheng also showed in the mainstream media that he was a person who dared admit his mistakes and assume the responsibilities. However, he gave out a “ten-thousand-word letter for help” last October (we had a detailed report in our last year’s December edition), to which strong response arose in the society. Niu Gensheng’s positive image which was gradually built in several years collapsed at one night. This also amplified the negative effect of the event that Mengniu’s Deluxe milk was detected to contain too much OMP (Osteoblasts Milk Protein). In less than a year, Niu Gensheng was no longer the entrepreneur who used to be admired and praised by a lot of people in China.

Like Niu Gensheng, Board Chairman of Vanke Group Wang Shi also angered people because of his improper words about donations and philanthropy after the earthquake last year. Fortunately for him, such a mistake was easier to be corrected.

Ma Mingzhe, President and CEO of Ping An Insurance Corp. never stays away from the focus of public opinions. The sky-high salary and huge deficit caused by investment in Belgium’s Fortis pushed Ma Mingzhe into the center of public criticism. Huang Guanyu, who used to be the richest man in China, was arrested for a series of illegal movements. His enterprise Gome was influenced a lot by this event.

Lenovo’s Liu Chuanzhi and Yang Yuanqing, though different from the above-mentioned entrepreneurs, still became the focus of public in this tough period.

Last November, Lenovo published its financial report showing its worst business performance since the acquisition of IBM’s PC section. Its net profit was only 230 million US dollars, down 78.1% from last year. The gross profit rate fell from 2007’s 14.1% to 12.6%. Because of the difficult situation, Liu Chuanzhi who had resigned from the post of CEO had to come back and tried to lead Lenovo out of the “chilly winter”.

This March, Board Chairman of Huiyuan Zhu Xinli also received a lot of attention from the public for the Coca Coal-Huiyuan acquisition case was denied by China’s Ministry of Commerce. Zhu Xinli had to give up his dream of focusing on upstream industry.

“Body Exercise”

For the ordinary entrepreneurs, those people who own sick large-sized enterprises have to suffer more in this period.

“This (financial crisis) only makes things worse, making it more difficult for the enterprises to deal with the problems of competition, capital and management. Some problems will arise sooner or later. The financial crisis made them happen more quickly. The financial crisis forces those enterprises to respond quickly to the changes and difficulties,” said a marketing expert.

How to make the enterprises survive this crisis? The entrepreneurs must start with the targeted “body exercise” over them and their enterprises.

For those entrepreneurs who were blamed by the society for improper actions primarily need to be watchful over their deeds and words. “Don’t believe that they can break the legal and moral standards without any harm,” said an expert. Indeed, the entrepreneurs can not predict all the possible results of their deeds and words. But they must think carefully before they do or say something.

This expert also provided the enterprises with a suggestion about public relations, which is: do not long for the perfect image of an entrepreneur. A few tints can be tolerable. Take Niu Gensheng for example, because his previous image was so flawless that he was seriously criticized when the enterprises faced the crisis. If an entrepreneur’s image is too perfect, he must know that he may be more seriously criticized when facing crisis.

Not only the entrepreneurs, but also the enterprises, need the “body exercise”.

“A test must be conducted to check the anti-stress ability of an enterprise in strategy and management,” said Chen Zhaofeng, Vice President of Monitor Group (China). “The test can help to know whether the enterprise’s strategy can keep stable in different market situations.” If an enterprise lacks strategic guidance, it may count on the opportunities which may result in the wrong investment decisions. The enterprise’s inter management system also needs tests to ensure whether the risk management system is effective and whether the organization structure is reasonable. Meanwhile, the enterprise shall check its business composition to differentiate those non-core businesses and bad businesses.

As the leader of the enterprises, the entrepreneurs, as suggested by Chen Zhaofeng, should not only check out  whether the measures and devices for their enterprises to deal with the crisis are complete. They also need to check out whether those are suitable for their enterprises. Especially when cutting cost, the way of “one-stroke cutting” is unacceptable.

In Chen’s opinion, the cost of enterprises shall be divided into four categories: the one for promoting long-term investment strategies, the one for balancing and reducing the risks, the one for improving the efficiency and the one for maintaining the basic operation. “The first two shall not be cut lest the competitive power of the enterprise reduces while the risk increases. The third one can be cut according to the analysis of effect and investment. The fourth one can be cut greatly,” said Chen Zhaofeng.

How to Survive

“The entrepreneurs must react quickly and have the courage to assume the responsibility when they realize their mistakes,” said the expert mentioned above. Meanwhile, the attitude is much more important. Dishonesty and irresponsibility may easily push the enterprises into death.

When facing the financing storm, exorbitant salaries and huge deficit from the investment in Fortis, Ma Mingzhe chose to have zero annual salary in 2008 and this got positive effect. Wang Shi also held a series of public charities after the earthquake, which were also praised by the society. However, Niu Gensheng, after the “ten-thousand-word letter for help” and “Deluxe milk’s OMP”, never came out and gave people a satisfactory answer. The consumers were also disappointed at the official reply from Mengniu.

Those entrepreneurs must avoid blind and irrational activities which may result in immediate death of the enterprises. For all those enterprises during the tough period, stable cash policies are necessary. The enterprises should re-consider their market strategies from two aspects of product structure and market distribution and reduce the investment in the non-core businesses and markets. Meanwhile, the enterprises shall control the cost and widen the financing channels.

Some enterprises don’t need changes. But that doesn’t mean all the enterprises need to do noting. They must take some cautious but active measures to deal with the difficult situations, instead of doing nothing but cut costs. Presently, Lenovo is under a series of reforms. After the return of Liu Chuanzhi, the restructuring of company and the adjustment of structure, Lenovo introduced 50 kinds of new products in a short period, which never happened in the past.

“Innovation is the best way,” said Chen Zhaofeng. This is the most effective way for those “sick” enterprises to catch up with the “healthy” ones. In the 1930s when the world encountered economic depression, the solid pure chocolate bar was not sold so well as before. Facing this market crisis, Mars Chocolate Company launched the new filled chocolate whose cost was low and began to sell chocolate in a single-bar package at a low price. In that way, this company got rid of the difficulties and flourished.

“Human resource is also very important,” said Zhang Jiangyan, an expert in corporation management. “The problem that the employees can not unite during the crisis is quite serious.” The enterprises must attach importance to the construction of the core groups, try their best to maintain the talented people and prevent the low morale spreading over the whole companies.

Meanwhile, the top management of an enterprise should frequently convene the discussion meetings on the situation of macro-economy and market competition, focusing on the danger and opportunities hidden in the complicated situation.