Can Risk Taking Strategies Lead To Survival of Manufacturing Firms Operating in an Economic Crisis? Lesson from the Zimbabwean Economic Crisis

Abstract

Firms may use several strategies to survive in periods of economic crisis. The effectiveness of these strategies however varies with the nature and scope of the economic crisis. The purpose of this study was to examine the influence of the risktaking strategies on the performance of manufacturing firms during the period of the economic crisis in Zimbabwe. In addition, the study examined how the risk-taking strategies influenced profitability and growth of manufacturing firms during the period of the economic crisis. Data was collected from 86 manufacturing firms that exercised risk taking strategies to survive. The study used a survey data collection method based on the positivism research philosophy. The study revealed that while risk taking strategies may be effective in some economic crisis context, they all proved to be less effective in improving performance in periods of economic crisis experienced in the Zimbabwean context. The study indicated that firms that take on high risk business operations and ventures in periods of economic crisis experience negative profit margins and negative growth. It was noted that the adoption of limited conservative approach in major business decisions in periods of economic crisis leads to negative profit margins and negative growth. The study noted that firms that the adoption of new projects without due diligence in terms of the return and sustainability of such projects in periods of economic crisis will lead to negative profit margins and negative growth. Firms that make use of new and less "tried and tested production, marketing and operations experience negative profit margins and negative growth in periods of economic crisis. The study recommends that firms must not use risk taking strategies to survive in economic crisis like the one experienced in Zimbabwe from 1996 to 2014. In addition, where firms decided to use risk taking strategies to survive in economic crisis, it is recommended that that adopt risk management approaches. It is also recommended that manufacturing firms operating in economic crisis must use other strategies which are analysis oriented to reduce exposure of their firms to risks. Firms may also adopt other strategies that proactive, defensive, or innovative oriented.