Survival vs. Success
Inseparable; survival and success are two different things, on the long run. In fact, merely surviving may very well be the path to extinction for small and medium size companies operating domestically in a new emerging free market economy like Jordan for example.
However, Strategizing for long term success can be the lifeline of your business.
In emergent free market economies, the survival syndrome becomes an epidemic among local businesses, as they try to compete with global and foreign companies expanding into their local spheres, acquiring competitors through take downs, partnerships and mergers, and in many other cases, simply driving them out of the market.
And because many managers are often sunk in the mundane and draining endeavour of making it through the day —everyday, global firms with their resources, expertise, and facilitations end up taking over and out, most of their local competitors, that so very few survive.
Most of us know that. But what to do about it? How do we prevent our falling behind as domestic businesses in a developing free market in such a time of exponential and explosive cut-throat competition?
Marketing isn’t exactly it; if at all, even though it helps create a strong brand, coupled with a worthy value proposition of course. Two main tips; realise your capacities, and realise your industry. Simple; no?
It should not be that hard.
First, “Know Thyself”. What have you achieved? What is your standing ground? Your position? Not as a brand, but your situation as an entity; what is your capacity to take on the future?
Next to Porter’s Competitive 7 and 5 forces framework and the good ol’ S.W.O.T., which can provide very effective qualitative instruments in your endeavour to understand your competitive environment, as well as your own organisation. Put together a comprehensive scope; here are a few thoughts on how to straight on evaluate your company and its position towards the near future in numbers (quantitatively):
1. Comparative Profitability Ratios: These ratios include Return on Investment (ROI), Profit Margin (PM) and Return on Assets (ROA) ratios, and show mainly the company’s overall performance and profitability. However, they can be misleading were they not compared to the industry average.
2. Comparative Solvency Ratios: These show the company’s financial and asset positions in ratio to its debts, and whether the company is capable of paying off when they’re due. These include the Debt to Total Assets ratio and the Time Interest Earned, and can be powerful indicators on whether the company can afford to invest or divest finances on debt, obtain new financing and creditors or flag a critical situation that requires immediate intervention. These ratios are also useless to an extent if not within an acceptable range around the mean of industry ratios according to industry standards.
3. Comparative Liquidity Ratios: They include the Current Assets, Acid-Test, Receivables Turnover (T/O), and Inventory T/O, and should also be compared to industry averages. The Current Assets ratio measures the company’s ability to pay off its debts within the short-term. Acid-Tests measure the company’s assets immediate cash acquisition or liquidity ability. Receivable Turn Over ratio can show whether the company’s consumer market is worth the company’s trouble and Inventory T/O can also indicate the supplied demand of its products.
These ratios help managers or decision maker construct a realistic grounded understanding of the company’s quantitative position; it’s measurable strength. Keeping them in check can be of great benefit to understanding your financial situation and grounds for future plans; forecast demand, supply, cash flow and a variety of other useful tips.
Second, strategize for value; not money.
I know this may seem like a contradiction, but it really isn’t. Revaluating your financial position helps shed light on whether you can and/or should play ball. It also helps you highlight huge problems that may have been impossible to identify by simply reading through or auditing your accounts.
In this aspect, you pretty much either drive your business to success or crash it. Driving value means that you arrive in the best possible condition; no scratches, no leaking oils or fluids, no burnt out discs, and enough fuel to take on yet another long drive.
In this discourse, value can be defined as either “added” in the sense of profit margin off which a company makes its yield, or as “perceived” by customers.
Accordingly, every company has its value chain, which includes “Value Centres” as opposed to profit, accountability, investment and cost centres. To be able to identify your Value Centres you will need to take a new look at your operations and products from a new perspective.
I call this the “Total Value Perspective”;
Realise Partnerships — your customers, suppliers and employees are your partners. Their every input can be crucial to the success of your business.
Realise your value chain — Analyse and identify the sections, departments and/or operations directly related to creating value within your firm and delivering it to customers.
- Realise your supply chain — and keep in mind that this chain is only a stream in a massive organism.
- Realise your Marketing/Distribution Channel — understand and bear in mind two main things: (a) You are part of a much larger value chain: The Market or Industry itself, and (b) You want the best for your Suppliers as well as your Clients.
Combine your value chain with your overall supply chain, and you’ll be able to identify with more clarity which parts get what.
Realising you’re a part of a bigger value chain means that you recognise you’re a link between source or raw material through processing to customers. One of many within the market.
This realisation allows you to envision a greater value scope for your value chain, enables you to realise the benefit of sustaining good relationships with your suppliers as well as clients. Moreover it allows you to identify your Value Centres.
Now, to get all that done, you need to explore your industry, understand its standing MC/DC dynamics. Devising the structure or ‘‘architecture’’ of the marketing channel system entails mainly three key channel design dimensions: [1]
Number of levels in the channel; i.e., the number of intermediary levels between the manufacturer and ultimate users,
- Intensity at the various levels; i.e., the number of intermediaries at each level,
- Types of intermediaries; these foregoing dimensions typically produce a number of possible channel alternatives. These alternatives must be evaluated in light of an array of variables, such as served markets, product types, and germane environmental and behavioural factors.
In various occasions, the added value to your products; according to your consumers, can very well not be cored within your own organisation. It may be a little different when it comes to services, however, if you’re an online food ordering platform, the time it takes for the food to be delivered to your client who placed their order on your website can be crucial to your own image.
That said, a good illustration on how businesses fall in place would be Deutsche Post DHL’s model inspired from Porter’s own cross-company chain sequence model of 1986:[2]
The inception of the concept of a marketing/distribution channel draws a new perception from the heart of traditional business schemes and disciplines, to form an integral part of your total value perspective.
Which is what we are here to talk about.
The American Marketing Association defines A marketing channel as the set of practices or activities necessary to transfer the ownership of goods, and to move goods, from the point of production to the point of consumption and, as such, which consists of all the institutions and all the marketing activities in the marketing process. By incorporating your supply and value chains into the market’s own, you can easily identify your Value Centres; whether or not they lie outside your own organisation. It also allows you to identify possible and prospect value centres you can use. You can identify a variety of possibilities within your market sphere that will allow you either to eliminate or lower costs, increase value, profit or market share.
Constructing such a holistic view allows you to identify the source of your products’ value: Why is it your customers buy your products in particular? Or why should they? Why, also, would they pay more for your product? How can this value be increased?
If you take the time to realise that what you have with your suppliers can in fact become a partnership based business model of some sort, you can come to learn which operations contribute to the success of core products and services, and how to jointly better them.
What is known as an Integrated Supply Chain (below) helps you identify the point at which your business intersects with other business within the dynamics of a market:
Based on your understanding of your partnerships, your place and function within the market dynamic, bearing in mind that you’re delivering value to customers you perceive as stakeholders or partners, the Griffen’s Supply chain model illustrates the benefits of integrating a sustainable supply chain in delivering target quality to target consumers at the lowest possible costs; value added: [3]
As can be seen from figure 3, the prospects to maximise on value are close to endless.
Combined, understanding your current position and grounds, and realising your position within the market dynamics and possible opportunities for value can immensely aid in formulating for a brighter tomorrow. Apply them, Understand them and Use them.
The sooner you realise you’re a part an overlapping interlacing market dynamic with a lot of potential, the sooner you realise you have a stakeholder partnership with your suppliers and clients; the sooner you start seeing things the way the big fish see it, the more aces up your sleeves, the more possibilities, the greater your chances of success given you formulate your strategy with the knowledge you need.
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References:
[1] Marketing channel management and the sales manager (2002), Mehta, Bubinsky, Anderson, (p. 431), New Jersey Institute of Technology, School of Management (New Jersey, USA)
[3] Sustainable Business Council – https://www.sbc.org.nz/resources-and-tools/guides/sustainable-supply-chain
Additional Reading and Resources:
[1] Contemporary Strategy Analysis 8th Edition (2013), Robert M Grant. Published by John Wiley & Sons Ltd.
[2] Sourcing and Supply Chain Management 5th Edition (2011), Handfield, Monczka, Giunpero, Patterson. Published by South-Western CENCAGE Learning (USA).
