Marketing tools for Business #2

The inevitability of change

How many times have you heard a business owner say of their sales or profit performance “my business has plateaued”?

We hear it all the time and our reply is simply this:

Be clear – if your business is not actually GROWING, it is in decline!

Why do we say this?  For this simple reason: the difference between success and failure is as fine as a razor’s edge.  In other words, in business, if your sales and profitability, your market share and your margins are not increasing then something in your business is wrong, needing to change.

If you ask yourself these simple questions about the last year, you will get some insight into whether you are growing or in decline:

- Have your sales increased?

- Has your profit increased?

- Have any competitors done anything different?

- Have your costs increased?

- Have there been any legislative changes affecting your business?

- Are there any new products or services on offer now?

- Have you gained customers overall?

- Are your suppliers exactly the same – any changed terms or ownership?

Where there has been change, there is the potential for that change to impact your business – if you don’t understand these changes you are not in control.

A good way to look at this is to use Michael Porter’s 5 Forces Industry Model (Porter, M.E. Competitive Strategy, Free Press, New York, 1980).  It offers an insightful and straight forward way to look at your business in the context of your market.

 

 

 

 

 

 

 

 

 

 

 

 

The model works by looking at the strength of five important forces that affect competition in your market space:

1. Bargaining Power of Suppliers: The power of suppliers to drive up the prices of your inputs – or make it more difficult to obtain them.

2. Bargaining Power of Buyers: The power of your customers to drive down your prices – or to exercise their right of choice of supplier.

3. Competitive Rivalry: The strength of competition within the industry – the others you are up against.

4. The Threat of Substitutes: The extent to which different products and services can be used in place of your own.

5. The Threat of New Entrants: The ease with which new competitors can enter the market if they see that you are making good profits (and then drive your prices down or take your market share).

How can you use it in YOUR business?

Consider each of the 5 forces in turn, evaluate your business against the key factors for each of the 5 elements and get a picture of your competitive position.

You might want to do this by including your key team members in a brainstorm on the subject.

Once you’ve identified the impacts, review these against your market strategy.  Look for threats and opportunities – what do you need to react to and what can you do to get ahead of the market going forward?

In the words of the father of Total Quality, W. Edward Deming:

“It is not necessary to change.  Survival is not mandatory!”

In other words, you have a choice.  What will your choice be?