Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 5, 1992 TAG: 9201020199
SECTION: BUSINESS PAGE: E-1 EDITION: METRO
SOURCE: By JILL ARABAS
DATELINE: NEW YORK LENGTH: Long
1991 WAS A CASE STUDY IN BUSINESS SURVIVAL TACTICS
Recession, competition, regulation, uncertainty. Running a business got harder in 1991.For many, this was no typical slowdown. The shift to a lower gear was more wrenching than the run-of-the-mill cyclical downturn you read about in economics texts.
Businesses were forced to become more creative, more cost-conscious and more cutthroat to survive.
Consider the case of Houston-based Compaq Computer Corp., famous "cloner" of IBM-type personal computers.
In January, the company reported record sales and earnings for 1990. By October, the founder had been fired and the company was revamping its marketing strategy to struggle back from a third-quarter loss.
Compaq was not alone in its travails. From IBM to General Motors Corp. to Citicorp, much of corporate America struggled through the year.
Responses were varied, and some were familiar. Companies restructured, refinanced, refocused, scaled back, cut the dividend, cut the night shift and enticed thousands into early retirement.
Some businesses diverged from the tried and true, exploring truly unusual approaches to battling back:
International Business Machines Corp. and Apple Computer Inc., former enemies, announced they would share software and other technology.
Six giant banks merged into three megabanks with nearly half a trillion dollars in assets.
McDonnell Douglas agreed to sell 40 percent of its commercial aircraft manufacturing business to a Taiwan partnership.
The New York Stock Exchange ventured into after-hours trading, acknowledging the truly global nature of financing.
Countless companies set up ventures overseas, hastened by world events like the collapse of communism in Eastern Europe and the push for a single European market.
It's not surprising that companies pulled some shockers in 1991, given what they had to work with - plunging consumer confidence, mass layoffs, slow spending by everyone but the government. As a result, people scrimped on everything from cars to computers to dry cleaning, and business felt the pinch.
"It's not like we have a massive depression, but people know people who have been laid off, so people are conservative and careful," said Joseph W. Duncan, chief economist for The Dun & Bradstreet Corp.
"Pharmaceuticals is the only one that's got something to shout about. All the rest are in deep despair - the airlines, the automobile business - you name it and it's rotten," said Gerald Meyers, former chairman of American Motors Corp. and a professor of crisis management at Carnegie-Mellon University's business school in Pittsburgh.
The search for elusive customers forced companies to get more competitive. Airlines and computer companies suffered some of the greatest casualties. Pan Am, Eastern and Midway Airlines went out of business; Compaq and IBM ordered major restructurings.
"Companies are probably in the most competitive mode they've been in in years," said John Cady, president of the National Food Processors Association. He predicted the fighting will only get worse as companies continue to make new products and, particularly in his industry, consolidate into giants that can spend even more on advertising and product development.
Meanwhile, business had to contend with yet another obstacle: the government. From congressional committees to the Food and Drug Administration, regulation loomed ever larger for companies from AT&T to Upjohn Co.
Procter & Gamble Co. took the word "fresh" off its Citrus Hill orange juice after federal agents seized 12,000 gallons of juice from a Minnesota warehouse. Earlier, agents seized 800 breast implants from Bioplasty Inc. because they weren't approved for sale.
Upjohn repackaged and relabeled its sleeping pill Halcion after regulators questioned the drug's side effects. Britain banned the drug altogether. American Telephone & Telegraph Co. was taken to task by the Federal Communications Commission for a major phone outage in New York City.
The FDA proposed food labeling rules that Cady estimated would cost his industry $2 billion to implement. The American Petroleum Institute said it could cost $23 billion a year to comply with 19 new environmental rules.
The timber industry said it would lose thousands of jobs and millions in profits from government efforts to protect the northern spotted owl.
The stock market fell 120 points in a day when Congress booted around a plan to cap credit card rates.
So how did business get through the year?
Compaq, for one, refocused its marketing plan after getting squeezed by the competition and the recession. The company, one of the first to copy the IBM PC, decided the best way to muscle back into the race was to target its computers to low-end users - schools, small businesses, local governments and cost-conscious individuals who can't afford pricey goods in the bad economy.
"We're trying to give people what they really want - a lower price," said Compaq spokeswoman Debra Globe.
That strategy blossomed in 1991 for companies like Gap Inc., Kmart Corp., Merry-Go-Round and Clothestime Inc., whose lower-priced merchandise were relatively recession-proof.
Even McDonald's Corp. brought back the 59-cent hamburger, as companies applied an important lesson in 1991: Tailor your prices to what your customers will pay.
IBM and Apple wrote a new chapter for the business textbook when the former rivals announced they would collaborate toward a new standard for the computing business in hopes of securing an edge in the increasingly competitive industry.
"With this alliance we believe we have the elements of truly a new era," IBM President Jack Kuehler said in October as executives met in San Francisco to showcase the rare agreement.
Actually, that was just one of numerous alliances, as players teamed up either to share expensive research and development costs or shut out a competitor.
"Nobody's big enough to play the game themselves. There are too many large, fast companies out there to go it alone," said Brad Barbeau, who teaches high-tech marketing at the University of Chicago.
Keywords:
YEAR 1991