Instead of following a strict plan, managers must help organizations to respond to unpredictable market conditions. Market flexibility is important, and when done prudently, can deliver high returns.
To get a better idea of how market flexibility works, take note of the following three points:
- Markets change rapidly and unpredictably.
- As a result, managers must constantly adapt their decision models and plan.
- Managers must identify their market objectives and adjust their plans in response to unexpected market changes.
Each point requires some thought. Let’s look at each of them now and work out the answers before moving on.
Let me make it clear up front: market flexibility is not to be confused with market stability. By market changes we are referring to changes that occur within a certain time frame or within a certain geographic region that are driven by the economy or some particular company.
The following are some examples:
- The housing market is up and down throughout the year.
- Some companies are doing well and some are not, so a change in demand for a product caused by this is not surprising.
- Some companies are down while others are up, but these changes don’t occur on a regular basis — a short-term boom or bust.
Market flexibility is an essential part of any market plan and must be put into practice. The same market flexibility that delivers high operating returns (from both the bottom-line, bottom-line cash flows, and total assets) also delivers a great deal of flexibility to the market, thus helping managers meet their goals.
As we have discussed, market flexibility means that the market changes quickly and unpredictably, with no plans or predictability. It involves working through changes that occur unpredictably and as such requires a much greater amount of market planning than we have already discussed.
I hope that you have picked up a few important observations from our earlier discussion of market flexibility:
- Market changes occur very quickly and unpredictably
- In order to anticipate market changes, managers must constantly change their thinking
- Managers should be concerned with what may happen rather than thinking about what is out of their control
- Markets don’t last very long
As a result, it quickly becomes obvious that market flexibility is going to have a significant impact on your plan — both short-term and long-term.
Market flexibility means that there are no specific plans or targets in place. The market changes quickly, so managers have to react and adjust to market changes. It also means that a manager’s plan, target, and plan targets will be set on a short, medium, or long timescale. These timescales need to be considered but should not be so inflexible that they can’t be adjusted as the market changes. Remember, market flexibility is important.
Market Flexibility Requires Much Thought and Planning. This is the point that makes you question the relevance of market flexibility. Market flexibility requires many decisions and a great deal of thought. There is simply no way around it and there is simply no formula for deciding a market plan that will give the best bang for the buck.
Remember that market flexibility is important. However, market flexibility doesn’t happen because plans are not there. There has to be some sort of planning, and you have to know how big you need to be, how long you need to hold it or how long you can retain it.