How businesses come through tough times stronger than before
What are the practical steps a business should take when faced with intensifying competition or a market downturn? There is no magic formula, just seven areas where practical action will help ensure continued success.
1. Develop the right strategy
A strategy has three elements: development, implementation and selling (gaining commitment and buy-in). Underpinning all three is choice, in particular the need to choose a distinctive, competitive position with three dimensions. These dimensions are:
1. who to target as customers (and who to avoid targeting)
2. what products to offer
3. how to undertake related activities.
2. Focus decisions on the lost profitable areas
Concentrating on products and services with the best margin will protect or enhance profitability. This might involve redirecting sales and advertising activities.
3. Strengthen customer focus
Customer focus matters because this is how firms retain existing customers, sell more to existing customers and attract new business (from the market and also from competitors). This means segmenting markets and using data mining and the Internet for decision-making.
4. Increase sales revenue
This can be achieved by increasing the effectiveness of your pricing, sales teams, sales process, sales activities and channels – or a combination of all five. An invaluable technique here is measurement.
5. Manage the money
The financial issues that influence success are cash management, costs, revenue and investment. Keep control of costs, reduce them aggressively wherever possible, and manage your cash by controlling suppliers’ and customers’ payment terms.
6. Develop profitable new products
While it may be risky to develop a new product in a downturn, inaction may be riskier the momentum of innovation is what will carry you beyond the downturn. If you stay the same during a period of increased competition and falling demand, you will fall even further and faster behind your competitors.
7. Remember the basics of sales, finance and leadership
• Match customers’ needs and wants with your product.
• Meet with customers, gain their trust – and sell.
• Choose the best pricing strategy and consider using price innovations.
• Review past sales techniques and refine your approach.
• Make your product easy to buy.
• Develop an awareness of competitors and build your competitive advantage.
• Evaluate and develop the performance of sales teams.
• Review costs and understand cost structures.
• Manage debtors, purchasing, overheads and creditors.
• Demonstrate a desire to learn, not blame.
• Encourage people to find cost savings.
• Keep people informed.
Above all, keep your head. There is no silver bullet to surviving a downturn. It is a time for sound common sense, energy and calmness, and the business basics.