Seven strategies for ongoing profitability
To retain and gain profit requires good strategy and implementation. This blog includes 7 key strategies to keep a firm strong and prosperous.
Prime Minister Rudd has commenced his new role foretelling a dire future for Australia. He has said: “…the formidable new challenge Australia now faces [is] the end of the decade-long China resources boom and its impact on Australian jobs and living standards into the future”. Whether Mr Rudd’s comments were well considered I cannot say, but if what he says is correct then the challenging climate will continue, or maybe worsen.
So what can a firm do to retain or increase its profitability in such circumstances?
Regardless of whether an economy or sector is booming or declining, there is always money to be made by those firms with well considered strategies supported by good implementation.
Here are seven strategies that build resilience and longevity in a firm.
1. Ego removal
Customers are only interested in their own business, not the business of the supplier. Customers want to be profitable and support their own customers, not support you.
Success comes from designing products and services which have a positive impact on the service and products provided to the customer’s customer not be focused on what is easiest for you.
Systems focus on the needs of the customer, and are designed to maximise the profit of them. The administrative need of the successful firm is recognised as secondary. Egocentricity has no place in business.
2. Knowing what’s best
The customer is a specialist in their product or service only. Knowledge of products and services of suppliers or possible suppliers will be based on assumption, communications and possibly on product information. This can mean that the customer’s knowledge is flawed. Repeat sales come from providing advice, and knowing what the customer really needs, not simply supplying what the customer wants.
3. Future focus
The successful firm fully understands current customer needs but knows that it is an understanding of the future problems of their customer which will keep the firm relevant and long lived. Exploration of the future is unremitting. Innovation and continuous improvement are no longer bywords, they are habits.
4. Agile and graceful
The industry and economy within with the successful firm operates will change over time. The competitive environment can change overnight. The firm’s strategy implementation process holds the outcome of business agility at its heart. It thus ensures that the firm is able and ready to deal with whatever the future holds.
5. Opportunities in competition
An intimate understanding of competition not only enables the successful firm to differentiate itself, and grow market share but it opens the way to opportunities which may be out of reach on its own. Friendly competition is the way forward. Chambers of Commerce are created on the recognition that business grows and develops by firms working together. The successful firm knows the same: Competition starts and stops when the game is on. The rest of the time players look for ways to improve the overall game.
6. Understand implications of seeking new markets
Firms with significant market share are exposed to market vagaries. Any reduction in total market value can hurt. To stay successful, battle readiness is required. Understanding of the battlefield and its opportunities is unremitting. Growth from new markets, whilst protecting current share, may be best strategy.
For firms with small market share it is generally easier to take market from competitors. The strategy is to become better in the areas which truly count to the customer, and constantly evaluate the extent of the advantage held. What can be a competitive advantage today may not be one tomorrow as any worthy competitor will not stand still. For small market share firms a dip in the market will not impact their profitability if the eye is kept on the ball.
7. Provide value at a profit
Any business can provide goods and services at a selling price lower than its competitors. But to be successful it must make a profit. Thus profits and longevity come from providing value at the lowest price possible. A price reduction strategy will work only when it is appended to a strategy of productivity gains and removal wasted effort and resources. Reduction of costs must be a core strategy not a side issue.
The grocery store Coles has shown how cost control results in revenue and profit growth. But it must be unremitting. Competitors will retaliate. Long term success comes from firms which know that cost control is never ending.
It’s all so straightforward
To grow business in a declining market is straightforward. Good strategies and solid implementation can make the ride smooth, and fun. It requires discipline, but it’s worth it.