PROFITING FROM THE CRISIS

The worldwide financial and economic crisis has shown that good management is the most important element in the sustainability of any business. It is possible to operate profitably and without redundancies, even during these difficult times, if the personnel management strategy is the right one from the very beginning and primary expenditure is kept to a minimum. Yes, Azerbaijan has not suffered from the crisis so far thanks to the state's well thought-out economic policy overall and the National Bank's financial and credit policy, in particular. There are no alarming reports about serious problems in the banks and there's no problem in repaying the country's foreign debt. The effort put into the development of the non-oil sector in recent years and the creation of new areas of production in a wide variety of economic sectors have begun to pay real dividends.

It's true, however, that sometimes reports leak into the press about a fall in production volumes and redundancies in a range of enterprises. But experts say that this is the influence of the negative situation in the world, on the one hand, and on the other directly highlights the shortcomings in the business method of the owners of the enterprises. The crisis is a test of sustainability from which only the strongest will emerge unscathed, so it is possible that the new market conditions will prompt many of the country's less viable enterprises to merge and consolidate which in turn will raise market relations in Azerbaijan to a qualitatively new level. 

It has to be said that in the current situation the riskiest type of business seems to be in food-processing. The sector is experiencing hard times in the rest of the world, taking into account the drop in the income of some social groups, who have been directly affected by the crisis, and the fall in export opportunities. 

Meanwhile, the situation in this sector in Azerbaijan can be considered wholly satisfactory. Moreover, one of the country's major holding companies, Azersun Holding, which encompasses a whole range of food-processing enterprises, says that the crisis has opened new export opportunities to European countries. Most probably the secret of this success lies in the creation of a total production cycle, from growing the raw materials to harvesting, processing and packaging the end product. Everything is produced within the holding company and this reduces expenditure and at the same time plays an indispensable role in developing farms, which, in the end result, affects the overall development of the regions of the country and the flow of the work force from the periphery to the capital.

As for a possible reduction in production volumes because of the crisis and a fall in demand, this is highly unlikely to happen to Azersun. This is because the products aimed at the higher end of the market account for a small proportion of the overall output. Let's say that if 20 out of 100 products used to be high end, 60 middling and 20 at the lower end, then now there may be changes within the composition of these 100 products. That is, the crisis might change the percentages for consumer categories. For example, the consumption of Vega oil may fall, while demand increases for cheaper brands such as Gulum and Mocuza. The same thing will apply to tea and other products.

Now for price policy. The crisis prompted a near collapse in prices for some products. This is after last year's sharp rise on the markets and not only for oil. For example, the same happened on the market for food and other oils when the introduction of new, ecologically clean types of fuel was announced. Prices soared to fantastical levels, but the process had hardly any influence on the Azerbaijani domestic market. Local producers, in particular Azersun, went another way: by increasing the area sown to crops and the volume of production - a new factory was built in Imisli to process vegetable oil - prices were kept stable. When they fell on the world markets, there was no problem of reducing costs on the domestic market.

This does not mean, however, that no changes for the worse await Azerbaijan's major enterprises because of the crisis. The precedents of lay-offs and the shutdown of a range of production lines should make any entrepreneur work on their own anti-crisis strategy. The number one task for Azersun in this case is not to allow the loss of a single job, even if it means a reduction in profits. In principle it won't be all that difficult for the holding company to do this, as this year four new enterprises are to come into operation - a factory to produce iodized salt, a dairy in Kurdamir, a factory for the secondary processing of waste paper in Sumqayit and another enterprise in Imisli. So if the worst comes to the worst, workers can be transferred from old enterprises to the new ones. 

State support for domestic producers is expected. The country's major companies think that the adoption of new legal acts could further stimulate growth in this sector. For example, at present the tax burden is the same on companies that try to tackle social problems and those that show no interest. The introduction of a differentiated approach in this respect could boost companies' interest in social affairs. 

But once again, with the right management, it is possible to profit from the crisis. For example, some export opportunities have opened up for Azersun - the holding company has begun to deliver to Eastern Europe and specifically to Bulgaria, where there is demand for Azerbaijani products because of their advantageous terms and quality. 

While the holding company began its work in the hungry 1990s with the objective of "feeding the people", to put it simply, of providing them with the basic necessities, the objective today is much more complex - to stand up to domestic and foreign competition. Nineteen-star standards of quality are applied at all the holding company's enterprises; the region's only special laboratories check the quality of production. These standards and the application of the ISO standard allow the company to export not only to the CIS, but to Europe and America. Azersun's olive oil, as recommended by the Azerbaijani Culinary Association, won first place in a competition in the home of olive oil, Greece, while sugar produced at the Imisli refinery is bought by companies that make famous cold drinks. The holding company is now working on more attractive packaging for its products which will also boost its export competitiveness.