opinion | Makes inflation return an opportunity to change its “business model”

Posted November 15, 2021, at 14.05Updated November 15, 2021 at. 14.26.

Primarily driven by the rise in prices of services and energy, inflation, which was very subdued for a long time, is back. If we are far from the double-digit rates of the 1970s, the increases in France of 2.2% in September and 2.6% in October will start to weigh on all economic actors to varying degrees. , whether they are consumers, creditors or debtors. .

Of course, companies are not spared, as their profits sometimes shrink significantly, both “from the bottom” (with the increase in costs) and “from the top” (with a growing impact on consumption). And the numbers currently observed (in October) in our German (+ 4.5%) and Spanish (+ 5.4%) neighbors are hardly reassuring to leaders. At a time when the limitations of these developments that could last are materializing, it is still possible, as always, to see some possibilities.

A potentially lasting rise in prices

Considered an “absolute evil” in post-World War II economics, many experts perceive it as one of the reasons for the Nazi takeover, inflation (I am thinking here of what we have described as hyperinflation in the 1920s in Germany) became widespread extensively combated in most European countries in several ways, leading to a reduction in money creation (interest rate rises, development of financial markets to reduce the weight of bank loans…).

The anti-competitive inflation policy implemented in France in the 1990s was implemented by the Governor of the Banque de France, Jean-Claude Trichet, who did not hesitate to sacrifice short-term employment by favoring gains in competitiveness due to tighter inflation controls , which should make it possible to create more jobs in the long run.

Broadly controlled in recent years, to the point that economists fear possible deflationary spirals at the time of recent crises (financial crisis in 2008, economic crisis following the Covid 19 pandemic), inflation needs to be analyzed for its more or less transient Grade. If proven, there is probably no urgency to do anything. If the phenomenon were to continue, it would necessarily require desirable responses from the various economic actors. But it is precisely this forecasting game that seems complicated. The European Commission thus expects a reduction in the inflation rate in 2022 … while acknowledging that a runaway phenomenon is still possible. As is often the case with relative uncertainty, leaders need to put together.

Take advantage of the limitation to develop your business model

Faced with the erosion of margins, it is difficult, risky and therefore inadvisable to do nothing. Inflation should anchor a little stronger the welcome tendency for the environment to consume “less but better”. On the business side, the usual cost-reduction targets cannot be maintained without discouraging employees (I am thinking in particular of buyers) who, due to opposing forces, are unable to meet them.

It therefore seems important to me not only to change the objective (a reduction of ambitions in terms of cost reduction), but rather to use it to change priorities and aim for more qualitative performance. These can go through an improvement in the technical, social or environmental quality of products or services, an improvement that will more easily justify price increases to restore margins, price increases that are then justified and much better accepted and validated by customers. .

Generally perceived economic imperatives often lead to renouncing such developments, practice with work as usualperceived as less risky, eventually prevalent.

Today, these imperatives are due to the return of inflation, which in a no doubt welcome way offers real prospects for the transformation of organizations in search of more qualitative performance.

Hugues Poissonnier is an associate professor at Grenoble Ecole de Management.

Leave a Comment