A study done by consulting firm Bain & Company found that more than a fifth of companies in the bottom quartile in their industries jumped to the top quartile during the last recession. Meanwhile, more than a fifth of all "leadership companies" - those in the top quartile of financial performance in their industry - fell to the bottom quartile.
This makes the case that recessions, while hard on companies, also provide a window of opportunity to move ahead of the competition. According to the study, "Only half as many companies made such dramatic gains or losses before or after the recession."
Arrow Electronics (Melville, N.Y.) offers a striking example of trading places when times are tough. "During an industry downturn in the late 1980s, the financially troubled distributor of electronic components and computer products launched a series of audacious but smart acquisitions that allowed it to increase sales by more than 500%, turn operating losses into profits, and seize market leadership from competitor Avnet (Phoenix, Ariz.), which was once twice Arrow's size. During the recent recession, Arrow has been acquiring again and widening its industry lead."
How companies manage themselves during a recession often sets the competitive landscape for years to come after the recession is over.