FingerTec Newsletter

The Impact of Economic Slowdown on Businesses
and Benefits of Diversification

by Batyr Komurzoev, Sales Manager (CIS Countries)

(An avid economist who is pursuing his PhD in Monetary Economics)

The current ongoing financial crisis in major countries is showing no signs of recovery and the prospects for 2009 are not encouraging. According to recent UN report, the 2009 forecast of economic growth rate for developed economies is -0.5 percent rates, while growth rate in the developing world would be slightly over 5 percent. Many businesses have been affected by the crisis mainly through the fall in the demand of their goods and services. At FingerTec, however, the effect of the crisis is felt at a lesser extend due to its well diversified market and product range.

Batyr Komurzoev

Most of the developed economies entered into recession during the second half of 2008 when an increased amount of sub-prime defaults caused a financial meltdown in the US banking sector. The financial crisis quickly spread to other parts of the world leading to the collapse of major banking institutions, precipitous falls on stock markets and a credit freeze whereby banks stopped lending to individuals, companies and financial institutions. As a result, businesses faced a fall in the demand of their goods and services in addition to not being able to obtain credit to finance their operations. Individuals accustomed on purchasing on credit, reduced their consumption of goods and services and companies relying on credit to carry out their operations could not borrow and, therefore, reduced production and laid off significant amount of employees. This in turn reduced incomes of people and further reduced their consumption of goods and services.

Companies that have been concentrating solely on the markets of developed economies have been hit the most during the current crisis. Induced by the strong demand from the developed countries like US and European countries, mainly due to the widely used practice of buying on credit, most companies concentrated their marketing and sales activities in those countries while ignoring the other parts of the world. As the current economic slowdown and credit crunch occurred in those countries, the companies that relied solely on the demand from those countries are now having losses.

At FingerTec, the impact of recession in major economies is felt at a lesser extent due to its well-diversified market and product range. The word diversification is mostly related to finance and investment and

closely associated with hedging. The main purpose of diversification is to provide investors with an optimal mix of investments that have the potential to produce the desired returns with the least amount of fluctuation. Portfolios can be diversified based on asset class, economic sector, country or investment style. For example, an investor might diversify his or her funds by investing in various types of assets like shares, bonds and property. Similarly, within each class of assets, a further diversification can be done by investing different assets with varying risk and returns. A well diversified portfolio will give consistent returns even if some of the investments are not performing well.

The market expansion of FingerTec is carried out on the concept of well diversified portfolio. FingerTec products are sold in more than 100 different countries through its global network of resellers. From the beginning, the emphasis was to reach each part of the world. The recently initiated activities of expanding into Russia and other CIS countries are yet another milestone that would expand the presence of FingerTec globally.

At the same time, FingerTec has a well diversified range of door access control and time attendance products that meet the needs of customers looking for systems with basic features as well as high-tech multifunctional systems. FingerTec systems are well designed to meet specific application requirements. For example, in developing economies, the demand is more towards time attendance systems like TA 100 series since the

At FingerTec, the impact of recession in major economies is felt at a lesser extent due to its well-diversified market and product range.

industries there are more labor intensive with output highly dependant on the number of hours worked. On the other hand, the demand in the developed economies is more for systems that include door access control function as well like AC 900 and for multifunctional high-tech systems like i-Kiosk 100 Plus. Understanding the markets and offering systems which meet specific requirements is also part of the diversification policy adopted by FingerTec.

The diversification strategy adopted by FingerTec is indeed a major contributor to steady growth and market expansion with minimal effects in times of economic slowdowns in some parts of the world.