After two years of a sanitary crisis and amid political turmoil, it is only natural for inflation rates to increase around the world. Such is the case in Mexico and in the United States, where as of 2022, both countries have reported their highest inflation levels in decades, at 8.6% and 8.3% respectively. High inflation can cause sustainability problems for any business, as it increases production costs and jeopardizes market positioning. The Bank of Mexico reported that 29.8% of business owners in the country believe inflation to be the main obstacle to their growth. In this situation, it becomes necessary to brace your organization for the impacts of high inflation and even prepare for a potential recession.
Many companies opt for increasing their prices to match rising costs, but this solution is temporary and may lead to a loss of clients. This is why economists recommend diversification and expansion as ways to prepare for inflation. Although high inflationary periods may seem like times of great risk, they can also present an opportunity for change. Economic studies have shown that businesses that innovate their strategy are the most likely to thrive during these times.
Here are three things your company should focus on to minimize the impacts of inflation:
Process efficiency: more efficient processes can save time, energy, and money. Implementing a successful process reengineering effort can increase productivity, cut costs and improve cash flow. Aiming to standardize and automate processes can be an intimidating investment, but with the right strategic partnerships and suppliers, it can become a viable option for developing your business.
Sales strategy: during unstable times, it is fundamental to maintain a stable client base, ensuring a consistent flow of revenue that facilitates diversification of products, services and markets. Additionally, given the volatile nature of inflation, scenario planning and increased flexibility can help your company react quickly when these periods come about.
Supply chain investments: companies must be strategic about transformative investments that directly impact their supply chain. Involving suppliers in diverse geographies, stockpiling critical materials, and factoring in potential impacts from exogenous factors, will always be an advantage under periods of high inflation.
By considering these key areas in your business strategy, it is possible to avoid the harmful impacts of high inflation and seize the new market opportunities that come with it. While it is important to preserve company stability, successfully adapting to economic change is equally essential for the survival of both Mexican and American businesses.
Don’t know where to begin? At Nepanoa, we are committed to providing you with the best expansion strategy for your business, so you can continue growing through adversity.
Read more: How to become agile in uncertain times?