The global recession of the late 2000s, fueled by easy credit and inadequate regulation, rocked the industrialized world. While subprime loan losses began to surface in 2007, the real jolt to the overall economy came from the demise of Lehman Brothers in September 2008.
When unrealistically increasing asset prices and the associated bubble in economic demand burst, the result was a significant decrease in international trade, rising unemployment, and a drop in commodity prices, all affecting the electronics market.
Yet the economic backdrop has not changed much. In the United States alone, 2.4 million jobs were lost in 2008 with another 4.3 million lost in 2009. Unemployment continues to hover just under 10%. According to the IMF, domestic GDP decreased 2.5% in 2009. It is expected to increase by 2.7% in 2010 and 2.4% in 2011, although recovery may not truly begin until 2011.
These turbulent times lent greater import to our annual list of the top 50 employers in the electronics industry (Table 1). For the pool of 97 publicly held companies that we analyzed for this year’s report, 2009 was a difficult year (Table 2). In addition, the percentages of these companies that saw gains (Table 3) in key areas also were very small.
The bad news is only 9% of our company pool showed a year-over-year increase in pretax income. On a more positive note, almost one-third of our company pool kept increasing their investment in R&D, and almost one-quarter increased their employee base.
Given this scenario, what can companies do to manage and create an advantage during these difficult times? Seven strategies can lead to success:
• Build strength during good economic times. Conservative financial management, low debt, and high liquidity provide flexibility.
• Overcommunicate transparently with and involve employees, customers, and suppliers in solving problems and looking for opportunities to increase profit. Make it a conversation. Be candid about any challenges to be faced.
• Focus the business portfolio narrowly into areas where you have a clear advantage. Choose internal growth opportunities over external acquisitions, unless you can integrate and consolidate those acquisitions expertly.
• Cut costs, but make them the right costs. Know where the profit comes from and make budget decisions accordingly.
• Cut costs during good times and then use that pricing flexibility during bad times to pick up market share. Walk away from unprofitable business.
• Increase your R&D efforts and budgets. This isn’t a cost you want to cut, as it will impact future results.
• Invest in information systems and use the data to drive value and focus on profit.
The top employers in the electronics industry all have exhibited these traits. In fact, several companies used these strategies to their advantage and to improve (Table 4) their performance and move up higher on our list since 2009.
Two non-OEM companies in particular, Boeing and Medtronic, saw some remarkable gains. For a closer look at some OEM companies (Table 5) that charged up the chart last year, go to www.electronicdesign.com and see:
• “3M Sticks With The Plan For Success”
• “A Diverse Line Drives TI’s Growth”
• “Logic Gives Xilinx Some Smart Choices”
We also found five “All Star” companies that held flat or showed an increase in employees, sales, pretax income, and R&D: Apple, Raytheon, SAIC Inc., St. Jude Medical, and Synopsys. In fact, Raytheon enjoyed significant gains in all four of those categories. Finally, for a complete description of how we developed this year’s list, see “The Method Behind Our Mathematics”.
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