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Rebuilding Business Profitability - Dr. William Lawrence

There is an urgent need for more information to guide managerial decision-making on how to breathe fresh life into a commercial entity for recovery from profit decline.

During 2010, most of the firms listed on the Jamaica Stock Exchange (JSE) reported profit decline or losses relative to the prior year, 2009.

The Global Entrepreneurship Monitor Jamaica Report 2008 revealed that less than two per cent of small business owners believed that their ventures would grow and create jobs over the next five years.

Many business executives and entrepreneurs blamed economic recession for the misfortunes of their firms.

The recent global financial crisis, regarded by some economists as the worst since the Great Depression of the 1930s, created liquidity shortfalls in banking systems around the world, triggering substantial contractions in credit and international trade.

A changed environment, called 'the new normal', has emerged with features such as more volatile consumer demand, heightened competition and greater propensity for business failure.

However, analysis done by Mona School of Business at the University of the West Indies showed that real growth of gross domestic product (GDP) explained only 18 per cent of the variability in losses reported by firms on the JSE.

Therefore, company leaders need to be alert to not only economic recession but also other possible causes of decline.

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