Inflation is being felt across the globe, with Malta being no exception. Many businesses are forced with no other choice than to raise their prices to compensate for increased production costs. On this note, Franco Azzopardi, CEO at Express Trailers reflects on the many “levers and pedals” both private and public organisations must navigate to navigate through this latest storm of inflation.
“Companies lose purchasing power, and risk seeing their margins decline, when prices increase for inputs used in production,” he said, citing a recent article that was published by McKinsey. But who suffers these costs? At the end of the day, an increase in production costs for business typically ends up being inflicted upon the customers, which is why there comes a point when companies might see a drop in demand.
Apart from the rising costs of raw materials, shipping costs have also been high for many months due to global bottle necks and severe disruptions across the global supply chain. This makes shipping companies servicing the island, and local businesses depending on shipping services, extra vulnerable to increased prices.
“The risk is that price increases may suppress demand,” Mr Azzopardi added, however, there is also an upside. In fact, the Express Trailers CEO argued that the “upside of inflation is that it reduces the real value of debt due to the erosion of the purchasing power.”
“Central Banks typically raise interest to reduce money supply and increase cost of capital to dampen demand,” he went on to say.
It is a cycle, and as in every other aspect of life, when one thing goes up in a cycle, another must come down. “Enter the Business Plan,” Mr Azzopardi suggested in conclusion.
Established in 1963, Express Trailers is a household name in the field of logistics and transport services in Malta.
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Some interesting insights were also shared by Switch Marketing Manager Luke Azzopardi in the post’s comments section.