The only thing in life that stays unchanged is change...
This is especially true in business today. The business milieu around the globe has become significantly more complex than it was a hundred years ago. To survive, grow and succeed, there are many more internal and external pitfalls (risks) a business owner has to deal with today.
Let me give you only two examples of EXTERNAL threats a small or medium business owner has to deal with (and I am not even talking about internal threats in your business!):
a) Global Competition We are living in a global village today.
For example, it is known that E-Bay has closed some mom-and-pop pawnshops by providing the facility to trade second-hand goods via the Internet (something nobody thought would ever be possible)!
And then there is China. Small and medium businesses in Italy (and in the rest of Europe and the USA) are in a price battle right now with manufacturers in China. For example, small and medium chair makers in Italy cannot compete with chair makers in China. Many are closing their doors. The exception is... the business owners who have done their strategic planning AHEAD OF TIME and did not ignore the new risk (i.e. China) on the horizon a few years ago. These business owners started to concentrate on branding, niche markets and outsourcing of certain manufacturing processes to less expensive alternatives in Eastern Europe and even China.
And do not forget about India! India, again, is perhaps the new business threat to China today. India will change the face of the business world for a long time! According to Time Magazine* India will be the next great economic superpower. *July 3, 2006, Vol. 168, No.1 b) Legislation Around the globe more and more complicated laws are endorsed by governments, making it extremely difficult for a business owner to keep record of what he must, must not, should, and should not do to keep his business running while not paying fines or going to jail.
These are only two examples of external risks (threats) one has NO control over. Just like the weather and seasons. It has become absolutely necessary for us to pay attention to our EXTERNAL risks too. While it is true that we cannot always avoid external risks, we do need to perform some strategic planning to avoid OR deal with the pitfalls on the horizon when possible at all!
And perhaps one might say: "Michiel, I am a small or medium business entrepreneur, the global village and competition cannot and will not affect my business and I really do not need to perform strategic planning as small or medium business owner."
Such a comment would have been dead right twenty or even ten years ago. But not any more.
Why? Among other things, the Internet, e-commerce and technology in general have turned the world into a VERY small planet. The Internet has leveled the playfield for EVERY ONE (i.e. small, medium and corporate business) in every country. Though many entrepreneurs are still cynical about the Internet because of the .com bubble a few years ago, some are not! These entrepreneurs know that the Internet is BUSY CHANGING AND WILL CONTINUE TO CHANGE THE NATURE OF BUSINESS FOREVER, regardless of whether you are sitting in Lhasa, Tibet or in New York City, USA and whether you have a pawnshop, chemical factory, service-oriented or Internet business! The real Internet boom is here now! PERIOD.
So, what are the options and possible countermeasures when dealing with external risks? How can you make sure that your business will not be caught without a jacket in the winter season? Unfortunately, space does not allow me to discuss the answer in detail. Further, I think the world, and especially business people, are sick and tired of listening to theory. We need a change in our thinking patterns or, as some call it, we need streetwise knowledge. But I want to stress the following important points:
1) We need to be CREATIVE.
2) We need to THINK DIFFERENTLY and change what does NOT work!
3) And we should STOP using old solutions to solve new problems!
4) ABOVE ALL, we must be careful NOT TO BECOME COMPLACENT!!! (This is particularly true when it comes to our competition).
Further, you may want to take a look at the following possible strategic solutions (I will use our example of the competition between Europe and the USA versus China and India again):
a) Threat-Weakness Strategy In my business survival manual (Survival Kit for Small and Medium Businesses - Profit from your Business Risks!) I spent a lot of time on threat-weakness scenarios. By addressing, for example, inefficiencies in production or service delivery systems, a business can optimize the input of resources and output of products or services delivered. The business will grow more efficient and productive and will be able to cut prices. Small and medium businesses in Europe, and especially in Italy, will have to grow more efficient to compete with China (a threat to European businesses when it comes to prize).
b) Threat-Strength Strategy It is the opinion of most experts that small and medium businesses in Europe should try to create small up-market segments (niche markets) for their quality products (i.e. their strength). They should not compete on price only (though every one of them should still improve its efficiency). With this goes branding of products to create status in the eyes of up-market customers. An example is “Made-in-Italy” branding, symbolizing quality and uniqueness. While China and India are able to produce on a mass basis (this is their strength and a threat to European businesses), businesses in Europe can produce small quantities of high-quality-products for small up-markets.
c) Opportunity-Weakness Strategy Some small and medium businesses in Europe and USA have already changed from inland suppliers to foreign country suppliers (like China and India), providing resources at lower prices (an opportunity). As a result, they have increased their competitive edge by minimizing their weak points (i.e. expensive inland suppliers).
d) Opportunity-Strength Strategy And finally, if these small and medium businesses in Europe and the USA can utilize their strengths to find and profit from new opportunities, it will help them change direction.
Lastly, something about business opportunities. As I have mentioned, the REAL Internet boom is here... NOW. This, again, is a HUGE business opportunity you could profit from. If you are interested, you might want to check out our web site’s link page.
Business strategies in difficult times - To learn more about this author, visit Michiel Jonker's Website.
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