Uncertainty-based planning

Ali Lashgari – Member of the Board of Directors of the Society of Managers and Specialists Iran Shoes Industry

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Lifestyle is changing; Of course, in addition to the problems that the corona outbreak has created for us and the world, we already had our own problems and troubles. We have had instability in the market before, and with the corona outbreak, it became “high hump.” Both at the macro level of the economy and as the owner of the business, very difficult things are happening, and in this regard, artisans should be given the right to make very difficult decisions in the face of exchange rate fluctuations. Therefore, firms plan according to the existing conditions, but it is not easy for each firm to have a stable plan according to the current volatile conditions. In the current situation, it requires that business owners have their own analysis; That is, in addition to owning technology and capital and knowing the market, it must have analytical power. They should know that they can not continue their activities like a year ago.

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Conditions have become difficult for both large and medium-sized and micro-enterprises, and each enterprise must adapt to its own specifics in order to adapt to the new conditions. For example, many firms have bought the raw materials they need in cheaper currency, and today, when the exchange rate has risen, they need one copy, and another, who buys daily and only provides for his daily needs, wants a different copy. The market and the contracting party of both firms are different.

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A company that has to have raw materials in stock for a month or two and has longer-term contracts has a different version of the unit that buys in the morning equivalent to its daily production. In part, the producer reduces his profit, but if the difference is more than 10%, he will inevitably increase the price of his products. Definitely, this will reduce the demand for it, because the power of the consumer will also decrease. As demand decreases, production capacity also decreases, overhead costs and cost increases, and on the other hand, profits decrease. All of these economic reactions to exchange rate fluctuations and raw material prices are normal.

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Of course, in such a situation, the bargaining power is greater for the larger firm. The Iranian economy was in trouble before Corona, and Corona doubled the problems. As a result of the embargo on money transfers, Corona has also blocked export borders. Although the dollar has risen and the situation is very favorable for exports, but exports are locked. Some have even prepared the ordered goods, but they are not able to export when the border is closed. Part of the dollar is due to the fact that the corona has reduced exports. In addition, oil was not traded. The share of taxes in our economy is 7 to 8 percent and this share in a European country like Sweden is between 40 to 50 percent. On the other hand, the government is pressuring the exporter to return the export currency to the central bank by the end of October, for example. Failure to do so will invalidate his business card, his lifeblood. Inevitably, he buys dollars from the street and delivers them to the central bank. As demand increases, so does supply.

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We have to accept that we are going through a situation of uncertainty, and we have to plan according to this situation, so that we can get through this situation anyway.

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