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The Well Timed Strategy: Managing the Business Cycle for Competitive Advantage

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Most business people who went to college were exposed to the principles of microeconomic analysis at some point. But most don't apply what they learned to their businesses. Professor Navarro's book is a lively look at some of the opportunities that are presented by adjusting your timing to buy low and sell high for:

- capital expenditures
- acquisitions
- hiring people
- adjusting your supply chain
- marketing (especially advertising and promotion)
- extending credit and collecting receivables
- dealing with volatility in raw materials, interest rates and foreign currency
- eliminating unnecessary risks when the environment is clouded
- dealing with natural calamities and wars

In addition, the book explains a variety of economic analysis tools that have proven to be helpful for business people.

Each chapter is clearly outlined and summarized. The key points are illuminated by vignettes about successes and flops (usually among those who ignored risk or didn't think it through properly).

The writing style is popular, rather than academic. You'll feel like you are reading a series of articles from the local business pages rather than a professor's book.

Much of the research for the book was done by students. That gives the book a lot of breadth. The weakness of that approach is that sometimes the students and Professor Navarro don't quite get it right.

I began to get nervous when Moore's Law was misstated as saying that the number of transistors on a chip double every year . . . rather than every two years. That concern increased when I read examples that I knew well from personal experience. The description of what happened and the reality were at odds. For instance, the famous case of Procter & Gamble losing on a derivative contract purchased from Bankers Trust is characterized as a bet against the bank by the soap maker. The relationship between the two wasn't like that at all. Bankers Trust was offering a way to reduce interest rate risk in a very complicated contract. Bankers Trust was supposed to be looking out for P&G. As the contract started to fall apart, Bankers Trust didn't play that fiduciary role. P&G was right to sue and Bankers Trust was right to take half the loss. Kmart's decent into bankruptcy is described as being totally due to cutting advertising. I'm sure that played a role, but Kmart's problems were bigger than that.

If you don't take the details of the examples too seriously, this is a valuable book. It's mostly aimed at those who are new to business such as business students and young entrepreneurs. But some seasoned managers in companies that don't use microeconomic analysis will find useful perspectives as well.

I don't know of a better book on how to adapt spending to various cycles. If that subject interests you, read this book.

There are plenty of business books that tell you *what* to do and *how* to do it, but few which talk about *when*. That's the key difference in Peter Navarro's The Well Timed Strategy: Managing the Business Cycle for Competitive Advantage. By understanding the timing of business cycles, a business person can make moves that position them well for the coming up- or down-tick in the economy.

Contents: Strategies and Tactics of the Master Cyclist Executive; Countercycling Your Capital Expenditures; The Acquisitive Master Cyclist Buys Low and Sells High; The Art of "Cherry Picking" and Other Well-Timed Tactics of the Human Resource Manager; "Macromanaging" Your Production, Inventory, and Supply Chain; Master Cyclist Marketing Through the Business Cycle Seasons; Pricing the Cycle and Managing Credit and Account Receivables; Proactive Profiting from Oil Price Spikes, Interest Rate Hikes, and Exchange Rate Risks; When You Can't Beat the Business Cycle, Hedge Its Risks!; Surviving - and Prospering from - the Economic Shocks of War, Terrorism, Drought, and Disease; The Master Cyclist's Favorite Forecasting Tools; Concluding Thoughts; The Master Cyclist Project's Treasure Trove of Data and All-Star Team; A Business Cycle Primer; Notes; Index

Navarro argues that a close examination of the business cycle (becoming a Master Cyclist) can help you make the right choices for your business in terms of when to do certain things. Based on economic forecasting tools (covered near the end), it's possible to have a better than average view into where the economy is headed, whether it's a recession or an expansion. These indicators, when followed, almost appear to make you look like a bit of a contrarian. If a booming economy has signs of an oncoming recession, the cyclist will take actions like dramatically cutting back on capital expenditures. Most other businesses will still be spending like there's no tomorrow. But when the economy turns, these spending companies are caught with large debt payments with high interest. The cyclist, however, is sitting on a pile of cash at a time when cash flow is king. Continuing to follow the indicators can show when the recession is starting to ease. The spending companies are all cut to the bone at that point, while the cyclist is able to start expansion with little competition and cut-rate pricing. Same with advertising... Spending on advertising at the peak of the recession can often be more effective as everyone else has cut their ad budgets. Fewer voices, more visibility. Then when the economy turns, guess who has mind share heading into the recovery?

I think the points made here are very valid and bear consideration. I will admit to thinking on more than one occasion that "hindsight is 20-20" when reading some of his examples. Granted, many of the bone-headed moves *were* just plain ill-advised and stupid. But at the time, you don't have the luxury of knowing how the story turns out. Also, many of the company demises outlined here are presented in such a way that it makes it look as if there was a single reason for the collapse. In reality, company failures are normally a combination of things, not just a single failure to do (or not do) something. In any case, the point remains that there are economic signals available to executives that are more often right than wrong. Ignoring them because you have a hunch or you've been reading your own press releases doesn't usually turn out to your advantage.

This is an interesting book to add to your business bookshelf, and it can definitely help you chart your course in these strange economic times...

Predicting the weather is part science and part art, but it requires an in depth understanding of weather conditions, phenomena and pattern recognition. Meteorologists spend several years studying these cycles, and they rely on advanced radar systems and computer modeling software to help identify storm fronts so people can evacuate or beautiful high pressure systems that people can enjoy. Peter Navarro's book titled - The Well-Timed Strategy - takes a similar tact at predicting business patterns, economic cycles and enterprise turbulence. Soundview recommends this read because it not only identifies tools that can help you sidestep micro-and-macro-market disasters, it also helps you align all aspects of your business to surf the cycle rather than be a casualty in its wake. This book is jammed with helpful insights regarding customizing your business to adapt to cycle change; operations and inventory management; negotiation maximization as well as best hiring strategies - to name a few. Given the current state of the economy and market uncertainties, this book is definitely worth a look to help you weather the storm.

I always enoy those shows on televiion where people are predicting the future. The overwhelming tendency is for the forecasters to predict that the future is going to continue about what it's doing now. If we're in a recession, they see nothing that looks like it's going to pull us out of the recession. If we're in a boom, the general consensus is that we are just starting a boom and that there's nothing that looks like it means the end of the boom.

Instead we have a lot of evidence that whatever is going on will change. Boom cycles, bust cycles happen. Most companies, it seems, ignore any idea at all of a long term trend. This quarter is down, fire people (really good for morale), cut back everything you can. This quarter is up, try to expand like crazy, making up for lost time -- just in time for the next down turn.

Dr. Navarro understands the business cycle and in this book explains the cycle that business follows with special attention to people, production, credit and so on.

Then there's a chapter on forecasting tools. Knowing what to do is a lot easier if you know what the future holds. Here the model shows weakness. There are a lot of stories about companies that guess right, or wrong about the future. Predicting the future however reminds me of the old saying: 'Predicting the future is easy, it's being right that's hard.'

A business professor at the University of California at Irvine as well as the publisher of a solid weekly newsletter on the economy, author Peter Navarro has written a sharp, timely tome on how executives can better manage their own businesses through economic cycles they inevitably deem unpredictable. What I like about Navarro's text is that unlike others who seem to thrive on crystal-ball methodologies, he doesn't pretend to hold all the answers to such macroeconomic turbulence. Instead, Navarro provides well-researched pointers on how to use existing economic indicators to formulate strategies to insulate firms better from the inherent volatility of business cycles.

Anyone can imagine that it has to be a daunting task to conquer trends perceived to be unforeseeable, especially since the executive teams of many well-known large corporations have failed so miserably at it. Through his comprehensive research, however, he identifies those who have indeed mastered these cycles by taking what outsiders would likely view as high-risk moves toward a less vulnerable future. Key examples that Navarro points out are those managers who fundamentally buy high and sell low, whether it means counter-cycling capital expenditures or snapping up great employees at low wages when a surrounding recession has forced competitors to lay off talented workers.

The greatest value Navarro provides here is how he unearths the hard-earned experiences of real companies that have managed not only to persevere but actually thrive during the business downturns. A particularly stellar case of a CEO paying attention to key economic indicators is Johnson & Johnson's Ralph Larsen. In anticipation of the 2001 recession, Navarro points out how Johnson & Johnson cut its capital expenditures by more than $100 million at the height of the economic boom in 2000. Building up its cash reserves, the company boomed in both revenues and earnings. At the time, market investors were moving money into defensive sectors such as health and medical care stocks, which allowed Johnson & Johnson to take advantage and be positioned to see their stock soar during a determinedly bearish market in 2001.

Similarly, the author points out how Lehman Bothers has, to great advantage, hired during recessions and how Dell Computers poured more money into advertising during the 1990-91 recession, consequently gaining customers from more established computer firms who had reactively slashed their advertising budgets. The "don't let this happen to you" end of the spectrum is best illustrated by Cisco Systems's CEO John Chambers. Ignoring the fact that oil prices multiplied and interest rate later escalated, Cisco did nothing to acknowledge macroeconomic indicators in their forecasting models, and the company stock price came crashing down as a result with unprecedented inventory write-offs and employee layoffs.

Several name-brand companies are profiled extensively and objectively - from the old guard of Proctor & Gamble and Anheuser Busch to intriguing niche players such as Abercrombie and Fitch, Gateway Computers and Southwest Airlines. Through these business cases, Navarro shows how to varying degrees of success, these companies align facets of their business strategy and operations to ride out often volatile cycles effectively, whether the focus is on production and inventory, marketing and pricing, hedging business cycle risk, or diversifying the risk. This easy-to-read book is certainly invaluable reading for those business leaders who lack consensus on their strategic plans and certainly holds interest for us investors who can assess whether companies are proactive or reactive in their approach to managing themselves in unstable markets.

"The Well-Timed Strategy" can be applied to you, your company, and your investing. This is a very informative, practical, and useful book that deserves a lot more attention. There's a lot of variety that's relevant and each chapter can be read in the order you choose. The index is very useful to go straight to the topic or concept, also.

Many specific examples and companies are noted, such as Xilinx, Nucor, United Airlines, Intel, Lowe, Soho China, Dupont, Labor Ready, South West Airlines, FedEx, IBM, Cemex from Mexico, the United Airlines Contract, and many more.

One of the many useful points in "The Well-Timed Strategy" is hiring through the the different economic cycles. Tapping the best available talent and also securing the best deal. Here is a paraphrase from page 73: A "Reactive Cyclist" keeps hiring employees at premium wages into the late stages of economic expansion. When the recession emerges they start massive layoffs which often leads to other employees leaving because of low morale. The Master Cyclist use a variety of means at this stage to avoid to pit-falls and also retain talent.

At the bottom of the recessionary trough the labor pool will be deepest and wage pressures least. This is the time to hire the most talented employees at bargain wages (Navarro, 73). By "Cherry Picking" this Master cyclist maintains a solid competitive advantage in getting a skilled and talented workforce and lower labor costs (Navarro, 73).

Spending throughout the cycles:
Be watchful of too much capital expansion during boom times. A concept referred to as "build the empire syndrome." This creates large cash flow needs. Revenue may fall. Cut back when a recessions seem imminent. The Master cyclist will engage in capital expenditures during a recession, to be ready for new innovation when the recovery begins (Navarro, 37).

A good detailing of diversification is covered. Once case study is IBM vs. Hewlett-Packard. IBM is diversifying into such areas as outsourcing, web hosting, and services, why HP remain in computer hardware.

There are many well-chosen quotes by known industry leaders, and they are edited to fit perfectly with the chapter and topic at hand, to augment the point Peter Navarro is making. (Even Robert Frost's "Road Not Taken" gets a plug.)

The constant array of natural and human-made events affect the cycle and influence what needs to be done and what is, actually done. The concept of "Chaos Theory," when a butterfly flaps its wings in China it causes a metaphorical typhoon half-way around the world. El Nino affects coffee and cocoa prices, Tsunamis in South East Asia cause increased demand for medicines to counter the resulting epidemics of cholera and typhoid. A massive earthquake in Taiwan drives up semi-conductor prices. "If it's raining in Brazil, buy Starbucks." The chicken restaurant 'El Pollo Loco' acted swiftly when they foresaw a drought in Australia and the simultaneous mad cow threat hit. They knew the price for beef would increase, followed by chicken, so secured fixed priced contracts before the price spikes (Page 176). Oil prices, Terrorism, disease, war, foreign government subsidies, and many other are listed.

"The Well-Times Strategy" is Well-rounded, useful book. The index is is excellent.

Timing is everything.

In the year 2000, the health care giant, Johnson & Johnson, cut its capital expenditures by more than $100 million. The action, its first capital spending decrease in more than seven years, swelled cash reserved and contributed to double-digit increases in both revenues and earnings. When the recession hit the following year, the company's shareholders experienced double-digit appreciation.

During the same period, Cisco Systems ignored the flattening yield curve, a rise in oil prices and increasing interest rates to continue its breath-taking rate of expansion. When the recession started in March, 2001, Cisco was unprepared. It was forced to take an inventory write-off of more than $2 billion and lay-off more an 8,000 employees. Cisco's shareholders experienced the effects of financial gravity.

Timing is everything. It drives return-on-investment. It is a critical factor in competitive advantage.

Peter Navarro, a business professor at the University of California, Irvine, argues business cycle awareness should drive each activity of the modern corporation. Marketing, production, human relations, supply-chain management, capital spending and even acquisition and divestiture strategies benefit from knowing not just how to make a move, but when.

Writing in a clear and concise style, Navarro reduces the business cycle to understandable concepts. Citing examples, case studies and economic indicators, he makes it even easier to act upon.

The conventional wisdom among many business executives is that you cut marketing expenditures, staff, prices and all other budgets as much as possible during the dips in the business cycle. Unfortunately for the practitioners, this is often very counterproductive. The best time to hire is during downturns, when the pool of potential hires is largest and contains the greatest number of outstanding people. With prices for many commodities at their lowest during their dips, it is often the best time to purchase new capital equipment or modernize pre-existing machinery. If you don't have the work to keep your people busy, it is a good time to carry out training programs.
Peaks in the business cycle are also often not a good time to make long-term commitments because the good times are not permanent. Many company executives look at their balance sheet, smile with pride and then think that they are so brilliant that future success is assured. Contracts are signed under the assumption that the only possible side is the upside and there is no thought of new competitors entering the field or that their decisions are anything but brilliant.
All of these excellent ideas are listed and their effectiveness demonstrated in this book. Case studies of companies that have successfully carried out such programs are presented as well as some that engaged in absurd policies that cost them dearly. There is a lot of solid business wisdom in this book, making it a worthy read for all business minds. However, to take advantage of that wisdom, the mind must be open, which is one of the most consistent failings of business executives. The sound business mind must be open to new ideas, capable of admitting mistakes and willing to take risks. Unfortunately, this combination is rarer than it should be which is why we use the phrase conventional wisdom.

Everybody involved in business activity directly or indirectly should read this book.The ideas are clearly stated.But there are alot of repititions.If the book was well edited,the number of pages could be halved.Anyway,welldone.

I love this book. Being a contrarian by nature, I enjoy this way of examining the business cycle for the best strategic moves that often use moving AGAINST the obvious move of the trend. While this is often the correct move, it is oftentimes exceedingly difficult to see and even harder to time just right. Still, the rewards can be great when it can be pulled off.

The book draws on real life examples for the things that work and the things that did not work. The author has a concept of the Master Cyclist (meaning a master of the business cycle) versus a reactive cyclist who always seems to be getting into trouble by doing the wrong thing and too late. The old saying that one shouldn't confuse a bull market with management skill holds true here. It is understandable that people tend to stick with what they THINK made them successful until it is too late, but we shouldn't applaud them for it either.

Another issue about being a Master Cyclist and especially for those times when going against the trend of the majority, is that what the majority trend is tends to change. So, a successful method tends to breed copies, so the way to counter-punch also changes.

Peter Navarro uses the image of a bicycle wheel with the spokes dividing it into a six slice pie to present his points. The six slices the Master Cyclist must master are: Capital Expenditures, Acquisitions & Divestitures, Human Resources Management, Production & Inventory Control, Marketing & Pricing, and Risk Management.

Obviously, not all these topics matter in every situation or for every business. But the Master Cyclist understands which matter and when they matter. He knows when to acquire cash and lower debt. She knows when acquisitions, no matter how attractive strategically, are not worth the price. He knows when to add staff and cherry pick talent from the competition when the competition is shedding staff. She knows how to manage capacity and inventory to not get caught short as things take off and to knot let inventory build up that is not only eating up cash, but is becoming obsolete. She knows how to price for market share and profit and to not pretend they can set prices when they are really are price taking enterprise. And especially, he knows how to manage risk in the best way so that price swings in core commodities don't eat up profits, and when profits are at risks from exchange rates.

This is a very fine book and I recommend it for anyone interested in corporate strategy. It isn't just about doing the right thing, it is also about doing the right thing at the right time and to the right degree. Pulling that off more than once is evidence of real management talent. The only thing I would encourage you to do is to dig into the illustrative stories provided in the book to be sure you understand ALL the details. You know what is in the those pesky little facts....