Mehmet Gumus
and
Saibal Ray
and
Ramnath Vaidyanathan

ABSTRACT

In this paper, we empirically analyze the operations-based strategies pursued by firms during and around
a recession with the objective of understanding what role (if any) such strategies play in successfully
surviving a recession and thriving once the economy picks up. In particular, we explore the performance
of inventory based strategies (e.g. lean on inventory) vs. non-inventory based strategies (e.g. price) in this
context.

We focus on the retail sector given its close proximity to the demand side shocks perpetuated during a
recession. To address our main research question, we use data from financial databases COMPUSTAT,
CRSP and the Monthly Retail Trade reports to track various operating metrics including GMROI, Inventory
Turnover etc. at the firm level across years, and connect it with financial performance over the same
period.

In addition to the cross-sectional study of firms during the current recession, we also carry out a longitudinal
study of strategies and performance across the four recessions during the last thirty years (1980-82,
1990-91, 2000-02 and the present one) to investigate whether the role of operations-based strategies have
changed over time and whether there has been any firm-level learning.