Corporate Darwinism: Who Will Survive the Slowdown?

The financial crisis will result in a bout of corporate Darwinism, with stronger, leaner businesses emerging from the downturn.

Media Week blogger Steve Barrett predicts cashflow constraints will continue to influence the media sector, particularly among agencies whose business model is reliant on debt or whose clients are in the financial sector.

Today's ad spend predictions have been revised downwards -- Zenith Optimedia's figures show a market decline of 2.1 per cent -- or 5.8 per cent, if you exclude online advertising.
Global ad spend will drop to 0.9 per cent of global GDP, compared to 1.05 per cent in 2000.
Media agencies are already streamlining to target the two growth prospects -- online, which is on target to grow 21 per cent this year, and cinema advertising.

But brands that keep spending on advertising, and media agencies that focus on quality, will emerge stronger. "Avoid the temptation to cut the engines of sales growth," says Barrett, and you'll come out fighting.

In retail, the message is similar -- Iceland's Baugur's under pressure to restructure or make a deal with Arcadia's Philip Green, who is demonstrating the sort of opportunistic instinct you'd expect from an entrepreneur. Likewise, Sir Alan Sugar's been called a 'bottom feeder' for buying up shares in troubled retailer Woolworths (in which Baugur has a stake). But, even with an estimated Â£830m in the bank, he's taking a gamble on a retailer whose share price has dropped over 80 per cent in the last 12 months.
Less so for Sir Philip Green, whose offer to buy Baugur's estimated Â£1bn to Â£2bn debt would give him a say in the running of a raft of high-street brands in which Baugur's invested -- Karen Millen, Debenhams, frozen foods chain Iceland and French Connection.

It's more a case of enlightened self-interest, judging from Sir Philip's comments: "I'm not interested in these businesses falling over at all, that will not help... This is 10 weeks from Christmas."

If necessary, he said he'd lend the business money -- under "certain circumstances" -- and he called for everyone to "get supportive" to "calm the waters".

But it's likely he may be one of a smaller group of retailers by next year. In its September white paper, the Retail Think Tank predicted that "good retailers will get better, whilst the weaker ones will not survive."

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