Why quirks make better business strategists?

Let me pose a question: Between a well-dressed person and fancy dressed guy who can fit as a great strategist?  I know you will say first one, but get this tip appearance is always misleading. Quirks do not appeal to you as does normative rule conscious and conventional person. But quirks are the guys who innovate upon everything including business strategy.

Quirks are rarely seen but commonly misunderstood for their eccentric behaviour, bizarre manners, weird looks and strange qualities. But the fact that they are like this because they are not afraid and are willing to take risk. Mark Zuckerberg says: “The biggest risk is not taking any risk”. In formulating business strategy the first and foremost factor is taking the right risk.

Second aspect of quirks is the quality of being exploratory nature that is necessary for any business strategist. Miyamoto Musashi, legendary samurai known for his art of strategy says succinctly: “It is difficult to understand the universe, if you only study one planet”. True to form, many specialists in corporate planning fail as strategists because they know only one planet.

Quirks not only behave in eccentric manner giving you feeling of apprehension, but ask you uncomfortable questions, say, about your business and where it is going. You are glued to facts & figures of your company to judge success or failure of your present business strategy as you believe the adage “seeing is believing”. Quirks on the other hand, are instinctive they get a different view of your strategy. Understand what Miyamoto Musashi says: “Perceive that which cannot be seen with your eye”.

Finally quirks are unique, they want to be different and act differently. Michael Porter comes to their defence and says: “Strategy is about setting yourself apart from the competition. It’s not a matter of being better at what you do – it’s a matter of being different at what you do.”

Need I say anything more?

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Startling facts about loss leader business strategy, you haven’t known yet

Companies have got lot of hat tricks. One such hack is loss leader pricing adopted as business strategy. On appearance nothing wrong in this strategy; it is legitimate but it takes out the level field competition in a market. You will be startled to learn about loss leader business strategy as shown below:

This strategy is basically of competitive as well as cut-throat nature. Firm sells it product below the prevailing market price and in some cases below the cost of production. Is it a saner action? In the business calculus it is. Any loss incurred is recouped from the sale proceeds of associated or allied products.

In an existing market the pricing method stimulates sale of the loss leader item along with exponential sale of related items. For example, printers are often sold at sub-prices whereas range of cartridges required to be used therein are marketed at premium prices.

In new market loss leader product such as game console is introduced with a big bang and at much cheaper price to up-build customer base at faster phase. However the videogames that are to be played in that console are sold at exorbitant prices.

It takes a different turn in a captive market where the dominant player attempts to force out its nearest competitors who use no-price differentiation. Another turn of event is when established firms gang up against the arrival of a new entrant in the market with similar or improved product.

Companies that resort to loss leader strategy are generally found in large or multinational concerns. Supermarkets use loss leader business strategy to promote customer loyalty and to increase purchases of other products on the display, by customers visiting their stalls. In some cases certain products are given free as promotional pieces to stimulate momentous buying of visitors.

Reaction to loss leader pricing is mostly negative from firms that are competing in the market with the same product line. Small business treats this as predatory practice. Buyers have mixed feeling when faced with loss leader products. On the positive side some consider it is a good thing while on the negative side they feel either the product is of low quality or the firm producing it is in some kind of distress.

In the supply chain, partners who supply raw materials for the product feel the pinch when the firm asks them to reduce purchase quotes. Similarly in the demand chain, distributors, wholesalers and retailers are strained when their commission or margin is drastically reduced.

Cheers!

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

 

Five types of defensive business strategy you should care about?

Even a strong business has to adopt offensive business strategy if circumstances warrant it. If sales are dipping or dominance in the market is slipping a business has got to choose one or more ways to fight back. Here I am listing the commonly known and usually explored defensive business strategy:

1.        Innovation is ranked number one. Not only firms but even ordinary people are talking about innovation as survival tool. A brand new idea, method or product that comes out from the sharpest business minds can over take competitors in shortest time possible. Technology is the key input that makes innovation happens. Before innovating a firm must understand how the market will react and how its internal competence can make such innovation successful. Mobile technology is a case in point

2.        Re-engineering is considered as the second most important defensive strategy because a firm continues with the same product line but transform or alter in such a manner the product gets not only face-lift but offers different uses of the product. Often re-engineered items can be manufactured at lesser cost than previously done. This allows a firm to lower selling price or in some cases on the opposite side of premium price extolling the virtues of the new product. Laptop is a good example

3.         Expanding to overseas market is yet another defensive business strategy for a firm that experiences stiff competition and falling volumes of sale either due to its price is not tenable in the domestic market or technology used is higher or lower than the one sought after in domestic scene. Manual drive car as well as luxury car such as Lamborghini fit here

4.        Downsizing as a defensive business strategy is selected only by weak companies that have symptoms including spiralling cost of production and frequent gaps in the marketing chain. Once adopted this strategy can make the bottom line better but it also gives negative image to a firm. In order to make downsizing effective the firm must be able to invest cost savings in better alternatives to re-polish its image in market place

5.        Divesting the last one, though unpalatable to many firms in distress, can save the skin and allow cooler heads to prevail in the top management who can find avenues to invest proceeds of divesture in profitable ventures. It is a common fact that any delay in making decision on divesture adds more flesh to already existing cost overload. Hence, cutting loss at the earliest signs of failure is always advisable in competitive business environment.  

Cheers!

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Attack! Here comes offensive business strategy

Like in military warfare, business also has offensive strategy that seeks to attack competitors to undermine and get better of them. These strategies take the fight straight into the marketplace where the purpose is to inflict severe damage to the competitors.

Offensive business strategies arise in two ways: one is from internal competence and the other is from external strength. Let me first talk about internal competence where firm has two sets of competence spectrum: one is resource availability and the other is cost advantage:

Resource availability is key point giving a firm massive competitive advantage. Resources include availability of materials for processing; assured supply channels, trained staff and focused management. If a firm has superior resource availability it can easily outsmart competitors and weaken them even before they get up to compete.

Cost advantage is where internal competence is used to obtain reduction in ex-factory cost. When in the production process, the staff and the systems ensure that final ex-factory cost is much less than that of competitors. This cost reduction can come out of direct cost or indirect cost or both.

Let me explain bit of external strength of a business. This can arise from price leadership and market dominance.

Price leadership comes about when the firm decides the price and all other competitors follow suit. Here, the prevailing sales price is same for every player but the firm with lesser ex-factory cost gets the plum and its competitors get only the icing. Incidentally a firm that is able to identify & satisfy buyer want & demand is in better position to obtain price leadership.

Market dominance is basically a dependent variable. This is because all the three aspects, that is, resources availability cost advantage and price leadership combined together facilitate a firm getting its market dominance. Consequently firm’s internal competence & external strength are optimized to such an extent that it fawns specific product department, say for example luxury items. Another result is firm is in now a dominant market player who can acquire one or more competitors via mergers & acquisition. 

  

Cheers!

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Warren Bennis: Core competency for leadership

Leaders come with vision that nobody thought of. Such visionaries make good leaders and good strategists too. What management qualities you need to become such a leader. Here is the four point recipe for success as strategic & visionary leader:

1.        Management of attraction: The famous quotation by Warren Bennis gives the gist of primary quality of a leader. “Leadership is the capacity to translate vision into reality”. Just having a vision is of no use. An effective leader makes his vision as path towards success. In that path there are few mileposts. A leader views the vision in broad canvas and plots the mileposts as stations to review and evaluate his progress in journeying towards ultimate achievement of the vision. For that he cannot just appear to be a leader but do what a leader does.  This is attraction or charisma that he requires to make him outshine others

2.        Management of meaning:         Strategy is vision; there is no doubt about it.  But how this vision can go down the line to operational managers? The bridge between vision statement and its implementation is right method of communication. Leader must not only chisel a vision but work for its implementation by articulating it in precise and clear language to everyone who is involved in putting vision into practice. By doing so leader gives the vision meaning and purpose

3.        Management of trust:     Confidence building is an art, definitely not a science. Leader may have qualities such as charisma, personality, ability to getting things done and so on. Never the less, the only quality that can bring awe and admiration for him from his peers and subordinates is the quality of trustworthiness. Justice, fairness and integrity together is a trident that penetrates the heart of most recalcitrant followers. An honest leader binds his followers in dedicating themselves for the achievement of his vision

4.        Management of shelf:     Vital ingredient in a successful leader is his ability to manage himself in his thoughts, communication and conduct. Such leaders tend to minimize their weaknesses and maximize their strengths and in doing so become a role model. Control of emotions, channelling personal energy in directing others and the sheer ability of command & control bring everlasting results.   

Cheers!

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Key takeaways on leading and managing

Warren Bennis came out strongly on the lack of leadership in American society. In his book “Why leaders can’t lead” published in 1976 he questioned the ability of leaders as to why they cannot deliver. He found that the crucial cause is the lack of connection between leading & managing

He went on to define leaders as people who do the right thing but managers as doing the things right. The pithy statement can be elaborated in the following manner: Leaders make the right decision but in order to implement such decision there is a need for managing it to its completion.

If you allow managers to make a strategic decision they cannot proceed much longer because managers are trained to accept the status quo as they are in the operational floor that mandates them to strictly adhere to a set procedure. Managers tend to ask questions from their subordinates in the line of “how & when”. Whereas leaders, challenge the status-quo by asking questions “what & why”.

But every effective leader needs to be an efficient manager too. It does not mean that he gets into nitty-gritty of everything under his watch. What he needs is asking the right questions and getting the right answers so that system can take care of how to proceed with.

In business strategy it is indeed necessary that firms have a proper mix of leading and managing abilities in their cadre. In sum, it means there is a balance between both leading & managing. When this balance goes haywire we have two situations:

1.        Over-led & under-managed:  This scenario happens in military campaigns, corporates and also in countries that are of totalitarian in structure

2.        Over-managed & under-led:  This situation is often seen in large corporates with huge bureaucracy, developing countries and in US Administration.

Cheers!

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist