Is it a good business strategy to utilize leverage and maintain a high level of competitiveness?

Using leverage to maintain competitiveness in a highly competitive environment should only be resorted to when your product or service has a competitive advantage over others.
I have seen companies get into serious trouble when trying to gain a competitive advantage by reducing prices and margins to below sustainable levels. Such companies seek to use leverage to outproduce competitors. The margins being low in such cases drives such companies to serious indebtedness. These companies, in time, fold up and disappear.
Leverage has to be used with a lot of care and thought. Many tech startups adopt the strategy of buying growth with leverage. The thinking is that let us increase our market footprint and gain market share.
Investors also encourage them to adopt this strategy. Many of them are interested in cashing out when euphoria for a fast-expanding company is high. Exits in such conditions are generally profitable. However, if the strategy and operational models are unsustainable, it won’t be easy to survive.
Conservative strategies require you to keep leverage under control. It may not appear fashionable, but it is a good strategy for most.Similar Posts:

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