Sudhir Ahluwalia's Blog, page 16
July 21, 2022
Why do businesses fail during a recession?
A recession is characterized by depressed demand. Customers are not willing to buy, and investors are not willing to invest. Lending institutions are reluctant to lend.
Businesses that do not have cash on their balance sheet cannot meet their day-to-day operational expenses on staff, rentals, utilities, etc. Customer payments are also delayed. With receivables not coming, existing debt in the balance sheet begins to bloat as the company cannot service its debt obligations.
Overall financial stress leads to the failure of companies.
Who survives is the logical question? Companies with cash on hand have space to ride the depression in demand for goods and services. They restructure, operations are scaled down, workforce burden is lightened, and an attempt is made to establish an equilibrium between demand and revenues. The faster a company can achieve this state, enables the business to stay healthy.
Recessions are opportunities for well-managed companies to restructure their balance sheet, strategy, and operational efficiency gets a focus. Changes made during a recession prepare the corporation to be ready for the next level of growth that is inevitable once the recession comes to an end and development comes back.
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July 20, 2022
Why are public bureaucracies possibly less efficient than businesses?
Yesterday, it so happened, that I was invited to speak to a group of senior government bureaucrats on this very subject. Most questions concerned the nature of the private sector and how bureaucracies should evolve to meet citizen needs.
Public bureaucracies, better known as government bureaucracies, provide government continuity and stable governance. These operate in a system of rules, regulations, and procedures that have over time been perfected to give the two objectives stated earlier- stability and continuity.
Imagine living in an environment where one day you are driving on the right side of the road, and you are told that for efficiency and streamlining of traffic on road x, you are required to drive on the left side.
Governments come and go, but the country has to keep running and functioning. The country is governed by rules and regulations that everyone understands and observes. The bureaucracy provides this framework of governance of a society.
Business firms operate on completely different principles. Efficiency, outputs, profits, quality, and speed are some of the paramount requirements. Businesses, therefore, must be agile, responsive, and rapidly responding to their customers’ needs.
Companies will change their products, processes, organizations, strategies, and even business models to attain a competitive advantage over their competitors.
If measured from the parameters of businesses, government bureaucracies worldwide are inefficient and unresponsive to citizen needs. For this reason, citizens worldwide constantly blame governments for poor agility, slow decision-making, and poor quality services.
Government bureaucracies and private businesses have different roles and requirements.
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July 17, 2022
Can a company be profitable but at the same time has no cash?
Can a company have profits but no cash?
It is a problem faced by many companies. Delayed receivables from clients are one common reason. In such cases, cash on the balance sheet has already been invested in existing projects. One of my clients got into serious financial difficulties because of cash flow-induced stress.
Wage payments routinely get delayed in such cases. Quality human resources tend to leave, and the revenue-generating capability of the company gets impaired. Your best contractors exit because you do not have the cash to pay them in time. The company was forced to borrow at high-interest rates.
Cash flow challenges, if left unattended, have caused many profitable companies to go bankrupt. It is something that the corporation should immediately address before these threaten the company’s survival.
If your company cannot dig itself out of cash flow-related problems, it is best to consult with a turnaround consultant. Please do not delay.
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July 14, 2022
How do I start a quality control/assurance business in the food and beverage industry?
Many jurisdictions worldwide have defined quality control/assurance standards for the food and beverage industry. The challenge everywhere has been educating and convincing entrepreneurs to observe these standards.
The first step to starting a business is to check its feasibility. Explore feasibility from the following angles:
TechnicalFinancialMarket fitnessOperationalI like to begin with market fitness. It entails profiling customers, sizing the market, looking at competitors, available distributional channels, and pricing.
Pricing takes me to financial analysis, where I look at business models, costs and revenues.
It is important to look at staffing, tools, and business processes in operations.
Technical feasibility in your type of business is pretty straightforward. Standards are available, and prima facie, there is a market need.
If the feasibility is a go, you can begin preparing a business plan to kick-start your business.
All the best!
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July 13, 2022
How do I make the winning pitch to investors?
I receive many emails daily that I regularly delete without opening them. I do a MOOC course from Harvard, and I start receiving emails about their courses. I still do not open them. I ignore them even though they come from one of the premier educational institutions in the world.
I need to change my toothbrush. I receive an offer to home deliver the toothbrush. I am more likely to open that email and order one.
These are common everyday examples that we encounter but rarely notice. Pitching an idea to an investor is no different. The investor is the buyer, and you are the seller. Even if you create a killer pitch, a summary, an elevator pitch, or use any of the gimmicks experts recommend, you are unlikely to succeed.
Please stick to the basics of marketing. Segment your investors, target the right segment and position your product sensibly, and you will likely get a response.
Every day on the many job platforms, you find startup founders posting job posts that seek to hire a business writer to help them create the magic pitch that will interest the investor. It doesn’t happen like this in real life.
Don’t waste your time and money. Get a marketing expert to do a standard customer (investor) profiling. Target the right investor market segment now with a simple mail. The investor will invest in you. When given an opportunity, it would be best if you convinced him that you have the energy, dedication, and desire to build a great business.
Brian Chesky and his two other colleagues did not know how to create a PowerPoint presentation, but they made Airbnb. They had the silver bullet in them. It was dedication, persistence, and the desire to win.
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July 12, 2022
How can I start to lose weight?
Three factors are externally responsible for obesity and obesity control. These are:
Nutrition: Certain foods, such as refined carbohydrates and unsaturated fats, contribute the most to obesity
Medicine: Certain prescription medicine, including anti-depressants, steroids, contraceptives, medications for diabetes, hypertension, migraines, seizures, bipolar disorder, allergies, insomnia, and a host of others, are associated with weight gain.
Sleep: Disrupted sleep or sleep less than 7 hours or more than 9 hours can lead to obesity. Difficulty in breathing can also be a reason for disturbed sleep.
Obesity is a complex disease. It appears as a polygenic condition. It is affected by environmental factors (mainly unbalanced dietary patterns and physical inactivity). We will have to consider genetic factors in the fat reduction process. These are associated with a negative energy balance. (Martinez et al., 2008)
Weight loss solutions, therefore, should be recommended only after a thorough clinical review. My research does not support instant solutions- like vigorous exercises, diet plans, medication, and herbal solutions.
To my mind, the role of the dietitians comes into play only after completing a thorough clinical examination. Remember, obesity is a disease that requires full attention and treatment. Before starting any exercise or diet regime, it is essential to address the causes of the condition first.
Diet planning is best done in consultation with an expert. The expert should not just be able to recommend a weekly diet chart for you. The expert should be able to help you fix short-term and long-term goals and help put a self-monitoring mechanism in place. Behavior and motivation are critical to achieving weight-loss goals and require integration into a weight loss regime.
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July 11, 2022
How can you create a business that is resistant to recession?
Recessions occur regularly. Despite that, many businesses survive, and a few die.
Let us look at the last downturn that shook the world in the wake of the US financial crisis, in which almost the entire financial sector collapsed. It was a period in which Lehman and Bear Sterns went down. To prevent the total collapse of the financial system, the Federal Reserve handed out massive bailouts to shore up the balance sheets of the leading banks and major auto companies. The effort was to prevent the collapse of the US economy, which was the engine of the world.
The mortgage industry and, with it, the housing market collapsed. Properties were foreclosed in their thousands. There were no buyers left, and despair swept through the country. The purchasing power of the population was collapsing.
How did the companies survive in this period? They did it by:
Shoring up balance sheets.Undertaking a massive across-the-board cost-cutting.Smart companies used the downturn to resort to automating business processes, improving efficiency, and reducing recurrent workforce costs to the minimum.
No company, country, or individual is recession-proof. Those who have managed their businesses well in good times accumulated a war chest and kept debt down to within limits to survive. Stick to fundamentals, and you will be fine.
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July 10, 2022
Why do business enterprises continually demand growth?
Any enterprise’s success depends on its ability to maintain a competitive advantage over its peers. Growth is the essential ingredient to maintaining a competitive advantage.
Competitors tend to copy the practices of successful businesses. They will hire experts and employees who will help them replicate successful enterprises’ practices, products, and systems. Rapidly, there comes a time when there is little to choose between competitors.
Businesses in this state are stated to reach the condition of strategic convergence. In this state, customers tend not to prefer an individual firm’s products and services.
It will be wrong to assume that in the condition of strategic convergence, businesses do not see growth. Most IT service providers worldwide can be described to be in a state of strategic convergence.
Customers are happy to pick any of the several IT service provider options. The customer’s choice depends on individual brand preferences, convenience, and marketing in these cases.
Even in these cases, growth is required because provider businesses have to be agile enough to pre-empt and be ready to meet their customers’ emerging and future requirements. Enterprises that can keep themselves prepared for the next wave of customer demand can flourish.
In the above example that I have presented, it is not growth driving business but customer preference, market size, business strategy, and business models. Growth results from appropriate business strategies, business models, and marketing; it is not the driver.
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July 7, 2022
Is the vertical integration the secret sauce to Apple’s success?
The secret to Apple’s success is its focus on design and customer-centricity. The design concepts of Apple products focus on ease of use and elegance. These are products that are simple on the outside and complex inside. In the design process, that is done if the need is for vertical integration.
The organizational structure of Apple gives prominence place to the design team. The design head has direct access to the Board and the Apple leadership. The rest of the Apple organization is traditional.
Apple operates on a scale. Apple products have other unique features of economies of scale, strict product monitoring, and insistence on perfection.
Look at the Apple-owned stores. These are located at prime locations. They are designed to provide the customer with a 360-degree service.
You can see these same features of perfection, elegance, simplicity, and easy to use in all its brand positioning, advertisement, communication, and marketing activities.
Above all, customer-centricity is the key feature of the Apple strategy.
These features have made Apple the company and brand it is.
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July 6, 2022
What is the reason for McDonald’s success even though many brand its products junk food?
McDonald’s success is because its customers love its products. That is true for any successful company. What are the reasons for the success of the company despite bad press? If you enter any McDonald’s outlet anywhere in the world, the food will taste the same, the pricing is consistent, and the service is quick. It serves no-frills instant ‘junk food’.
Children love the food, and parents are dragged grudgingly to its outlet. In many of its outlets, you have a venerable chubby figurine of the gentleman perched on a chair. Many kids want to take pictures sitting on their lap or posing with the image. It is a classic example of branding consistent with the ethos of the product.
The company understands that those who categorize its products as junk food are not the customer segment that it wishes to target. It is not to say that the company does not hear or understand that it too has to change with time. You would observe that its menu is also now containing some healthy food options. But the fries continue to sell like hot cakes.
The company understood the need to expand its customer base and moved to international markets much earlier than its competitors. The closure of McDonald’s in Russia post the Ukrainian invasion was global news. Please note the power and reach of the brand.
McDonald’s is a classic case of a company where strategy, business model, and marketing are all perfectly aligned. As long as it continues to produce and service products that its customer segment appreciates, it will thrive.
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