Company strategy

The recent global economic and financial crisis has generated challenges at all levels
of economic policy decisions. Most of the companies in advanced countries and
emerging markets have faced an urgent need to act concurrently on different fronts:
systemically or politically sensitive economic sectors had to be bailed out; the general
downfall in economic activity had to be counteracted; vulnerable population groups
had to be protected from declining incomes. These costly actions were taken in a
context of falling of crude oil price.

1. Most companies cut up to 15% of capital expenditures (capex) and up to 30% of

operating expenditures (Opex)
Capital expenditures, or capex, is money used to purchase, upgrade, improve, or
extend the life of long-term assets. Long-term assets are typically property,
infrastructure, or equipment with a useful life of more than one year.
Many companies set minimum dollar thresholds for capex, meaning that capital
expenditures below the threshold are simply expensed even though they exhibit
capexcharacteristics. This is done to simplify the accounting process and avoid
having to record insignificant depreciation expenses each period for small-value
assets.
Capital expenditures generally takes two forms: maintenance expenditures,
whereby the company purchases assets that extend the useful life of existing
assets, and expansion expenditures, whereby the company purchases new assets in
an effort to grow the business. It is important to understand that money spent to
repair or conduct ongoing, normal upkeep on assets is not considered capex and
should be expensed on the income statement when it is incurred.
2. Some companies has laid off staff up to 15% to reduce Opex, and increase
profitability
The lower layoff rates observed during the last recession mirrored the relatively
small peak-to-trough employment decline observed in recent years. During
periods of economic downturn, companies may need to reduce their staffs through
layoffs. Both hourly workers and exempt employees may face layoffs due to lack
of work; however, companies use layoffs as a last resort, utilizing other methods
for reducing their payroll expenses, such as furloughs. These payroll saving
methods apply differently to exempt employees than they do to hourly workers.
Individual employees may also be covered by contracts dictating whether they can
be laid off. Consult with an attorney specializing in human resources issues with
questions regarding this matter.
3. Recruitment of new staff has been frozen and staff in contract basis are not
renewed

The effect of long-term hiring freezes is particularly damaging to the recruiting

function, because no hiring generally means that a majority of recruiters will be
laid off. Historically, budgets for recruiting have been cut so low that the function
is literally decimated, making it rather difficult for companies to resurrect a decent
function when the economy swings up.
4. Technical staff are redeployed to focus on cash generating projects
The redeployment of staff from one activity to another has a key part to play in
helping to ensure a balance between the need for continuity and the need for
change. Redeploying workers is a critical workforce planning tool that most
companies with multiple operations can use to build strategies for managing
fluctuations in both economic and production cycles. During an economic
downturn, organizations must streamline their workforces and during upswings,
organizations race to increase their workforce to capitalize on growth
opportunities. Through redeployment, companies can offer employees relevant
employment opportunities at specific locations based on current and forecasted
workforce needs.
5. Maintenance and production expenditures are cut to minimal. This in turn may
affect the integrity of the facilities in the long run.
The slump in the prices of oil and other forms of energy resulting from weak
demand, together with expectations of lower prices compared with several years
ago, have made new investments in production facilities generally less profitable,
as costs, while starting to fall back generally remain high. The price collapse has
also cut the production expenditures to minimal and plant operation are also
minimal.