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Global Economic Uncertainty and Slower Growth

The way to increase profits is to become more efficient.
By Mark Roberti
Oct 01, 2011—The year started off with considerable optimism in the business community. Profits were strong, the global economy appeared to be gaining momentum and consumer confidence was on the rise. What a difference a few months make. The U.S. economy is growing at an anemic rate, and partisan bickering in Washington has thrown into question whether the United States has a stable government. European countries are also struggling with financial challenges. Greece has already needed a bailout, and concerns abound that Spain and Italy will not be able to meet their financial obligations.

The negative news has businesspeople worried, and the unfortunate reality is the global economy will face slower growth over the next five to 10 years. U.S. consumers are loaded down with debt, including credit card debt, car loans and student loans. In addition, many homeowners are still underwater—the value of their mortgages is greater than the value of their houses. Consumers in many European countries are in similar situations.


Illustration: iStockphoto

This means businesses can't count on consumers, struggling under the weight of all the money they've borrowed over the past 10 years, to start spending aggressively again until they've paid down their debts and the housing crisis has stabilized. And business can't count on governments to increase spending to partially offset the reduction in consumer spending. Both national and local governments in Europe and the United States are cutting spending, which is increasing unemployment and slowing economic growth.

So the question businesses now face is, how do we increase profits? The answer, of course, is to become leaner and more efficient. But that won't be easy. In the wake of the financial meltdown in 2008, companies undertook drastic cuts. Many laid off workers or reduced salaries. They moved some departments to low-wage countries, and closed or sold off business units that were a drag on profits. In other words, most actions that could dramatically decrease costs have already been taken (which is why corporate profits have remained healthy even as the global economy has shrunk).

With costs cut to the bone, where can companies turn now to increase savings? The answer: New technologies, including RFID.
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