Let’s face it, business all around the globe is getting more highly competitive than ever. The problems we faced 10 years from now are not all the same as the problems we have today. Here are some problems every business will face:
- Increased Availability of Alternatives in the Market: The increase in digitalization has decreased barriers to entry into most businesses. The access to information on opening and operating businesses has increased more than ever and this has caused increased competition, thereby raising the difficulty in running a business. For instance, personal services like hair styling and makeup used to only be sold through physical salons. Now, people can just post their works of art online (like Facebook) in order to increase awareness among clients. Clients can now contact these stylists through a phone call to schedule a service they want or need to avail.
- Funding Options: It is easier to improve businesses on the back of cheaper source of debt as it decreases the weighted average of capital. Given this and the fact that loans are becoming increasingly cheaper, businesses are thriving and are growing at an unprecedented level. The cheaper capital is being offered by the banks to potential businesspersons the more opportunity of the latter to put up their business thereby increasing the number of potential competitors in different industries.
- Human Resource Optimization: The trend among employees a couple of decades ago was to stick with a company and work for an extended duration with the same company. But with the advent of industrialization and digitization, the number of opportunities for people have increased significantly and the practice of changing companies frequently has become common. While this is good for the employees, it increases the uncertainty of the employees from the perspective of the senior management. Therefore, it is critical for a company to understand the requirement of employees and ensuring that the employee attrition is reduced to the extent possible. In addition to the above, finding new talent is that much more difficult and more focus than earlier has to be applied in finding good talent.
- Leveraging Brand Equity: In this age of increased competition, it has never been more important to differentiate the value offering of a company. In addition to improved value, it is imperative to communicate the appropriate message to the appropriate audience. The target group of customers should clearly understand the USP of the company which would thereby enable continued sales for the company. Apart from the above, it is important to build the brand and ensure that what the brand stands for is effectively communicated to the consumers. This will then allow the company to leverage the brand to ensure the required returns.
- Growing Revenues with effective management of profit and cashflow: A steady growth in the sales of a company is the cornerstone of a company’s long term sustainability. While sales growth is important, it should not be at the cost of long term profits. Sufficient focus has to be placed in operating and financing costs to ensure that the profit margins are maintained. A common mistake committed by companies in pursuit of sales and profits is to place reduced focus on cashflow management. Improper cashflow management can directly imply high costs in terms of working capital costs ultimately affecting profit margins. Therefore, a correct balance in sales, profits and cashflow will need to be maintained for the development of a successful business.
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