Business closure is not necessarily bad. It is better than bankruptcy, loss of relevance, and to an extent, stagnation as well. Suppliers, distributors, financiers, and those who have shares, are vital considerations, apart from employees, when it comes to closing a business (this may not be an issue with the UB Group as a whole, but all enterprises that close down do not have branches to absorb people from a failed business).
It is popular to think of conservation in terms of the environment, but the long-term viability of a business is also important from society's perspective. What can a management team do to ensure that a business for which they are collectively responsible, thrives in to the foreseeable future?
1. Profits and reserves: it is tempting, even justified in some circumstances, to incur losses in order to enter a market. However, it is not a viable approach for any significant length of time. Profitability comes from high unit margins, volumes, and cost effectiveness. All legal approaches to protect and grow are worthy of consideration. Profit appropriation should also be conservative, building reserves in preference to the short-term gains of dividends.
2. Environment scanning and potential problem analysis: these processes are best left to independent domain experts. Environmental scanning and reviews of preventive and contingent actions against serious business disruptions should be annual if not ongoing. Environment scanning should be as broad-based as possible, searching for trends in politics, society, education, and international relations, to mention a few areas.
3. Regulatory relationships and compliance: cronyism and corruption cannot sustain business advantage. Politicians tend to fall from grace over time, and their eclipses can be unexpectedly rapid. There is a general impression that capitalist systems based on free enterprise are free from the influences of caucuses and other subtle forms of liaison, but the reality is that cunning people in power may wield their discretionary powers without obvious exposure. Politicians with legal acumen are especially adept in such matters.
4. Fixed commitments: permanent employees tend to become sinking stones around the necks of their organizations. This is glaring in the case of bureaucracies of poorly administered countries, but large and aging corporations can be just as negligent in keeping their fixed costs under control. Establishment and hospitality costs are other insidious areas that leak cash disproportionate to the net and combined values for all stakeholders. Anytime is right for a cost-effectiveness exercise: a management team should not overlook this aspect of long-term business viability during the 'good times'.
5. Life-cycle management: people, products, and services have phases of initiation, rapid growth, stagnation, and decline. Organizations revolve around people, whether they are in sales, research, manufacturing or general management. Customers also change over time, and are notorious for fickleness in their choices. Corporations have to juggle positions to keep streams of new people, products, and customers flowing. This does not mean that older cogs of an enterprise should be abandoned. The case of older aircraft cabin crew is typical of the conundrums management teams must confront.
Business viability is not limited to large corporations. Here is a picture from an evening in Saharanpur, a small but bustling town in Northern India:
Is this business viable in the long term? What if neighboring shops copy? The picture is from a chilly winter's evening: what can the establishment do to retain custom during the hot summer nights that Saharanpur experiences? There are droves of questions and ideas that come to mind as one contemplates the pleasures, profits, and future of retailing fresh milk.
As always, I would love to hear from you!
No comments:
Post a Comment