A consequence of a financial crisis is that the power of buying falls dramatically. Companies cannot sell their products and thus try to reduce costs by cutting jobs, people without jobs do not have the necessary liquidities to purchase different products, and thus the economic crisis enters a domino effect – people without jobs cannot purchase products, companies try to reduce costs by firing people and more jobless people cannot buy products. This can go on and on, you don’t have to be an economy expert to realize this.
Talking about reducing costs by cutting jobs, Sony Ericsson recently announced that the company will reduce the number of employees by 2,000 due to poor customer demand. The company had poor sales in first quarter and their response couldn’t be more damaging to the entire mobile phone industry.
The simple logic that I presented in the first paragraph of this article can be applied here and we might ask ourselves ‘How can people without jobs buy more products?” The domino effect is certain and the 2,000 people fired will not have the necessary funds to be active in the mobile phone industry. If a company cannot come with alternative countermeasures, then it is doomed to bankruptcy.
Sony Ericsson officials said they have a plan to come out of this crisis. They say that the company will focus on revenue rather than market share, additionally they also told the Wall Street Journal that they have ‘the right products’ to do this.
If Sony Ericsson has ‘the right products’ then how come that the company couldn’t sell them? Even more, sales were so bad that they have to fire 2,000 people. Makes sense, doesn’t it?
The giant with clay feet?
Let’s turn our attention to Toshiba, an ‘electronics giant’ as characterized by vnunet.com. Thus far, 2009 has been a bad year for Toshiba, in January the company posted a loss of almost 158 billion Yen. However, Toshiba said that its television and memory device divisions are performing better than expected.
This is not good news for Toshiba employees, especially those in Japan. The company was cited by the NY Times and Wall Street Journal saying they could cut about 3,900 jobs, mostly in Japan. ‘Why Japan?’ we might ask ourselves.
The answer is pretty easy, I think. Sales in Japan fell, and this is extremely problematic. We all know how the Japanese market is – the most advanced technologies are sold there, consumerism in Japan beats every competition. With a mind on this we can say that if you have problems in Japan selling your product, then you’re in big (huge, immense) troubles.
Firing employees won’t get the two companies out of this mess, because eventually they will have to fire more employees, more people without jobs, more Sony Ericsson and Toshiba devices are left in storage houses, more people will get fired and we start again.
My point is that companies, especially in the mobile phone industries, have to come up with serious plans to counter the global economic crisis and not just fire people as this does no good to them and to the economy in general.