When I checked the sales of Maruti Suzuki Kizashi and Grand Vitara I knew that some thing is definitely wrong. Since last 6 months a total of 5 MS Grand Vitara has been sold. Kizashi has been selling 1 or 2 each month for last 4 months. Although these products have good specification but they are hardly successful. Why? Consumers expect a different value (low cost) from the Brand that Maruti Suzuki has created. However positioning the products in a premium segment created a confusion for the consumer. The obvious reaction is low sales. This tells that strategy is an important ingredient for the business which defines what activities are required for a successful business execution.
Every business operates in an ecosystem and here are few things to watch which can influence a business profit.
Relying on one supplier or partner
A renowned mobile company entirely focused on a multi-core chipset product from a semiconductor company for for years and could not come up with a quality product due to a number of issues in the chipset software. Message is obvious. Always look for multiple suppliers or partners to mitigate risks arising out of deliverable from them.
Too much focus on one customer and ignoring other potential high value customers
A global semiconductor company focused too much on a Mobile company to sell its smartphone chipset. It did not consider other upcoming customers or did not consider other markets to explore. Due to inherent issues in the Mobile company and stiff competition from Software Giants like Google and Apple, the Mobile Company lost a lot of market share. This reduced the volume order from the semiconductor company and eventually forced the company to close the smartphone business unit. Every company needs to assess the market periodically and should keep an eye on the growth potential of existing customers as well as that of rising players.
Lack of understanding of market and customer
Mahindra & Mahindra Auto clearly identified that Indian consumers can pay more if the quality is good. M&M XUV 500 is successful because it adapted a fresh look and urban design to attract the consumers. They particularly like the aggressive outer body and comfortable interior at a reasonable price. TATA who was once a leader in this segment is not able to compete with its Safari product since the Safari still has an old fashioned look. What TATA needs is to build a product that has a new age look and doesn't have the niggles of old product.
Unable to identify what is urgent and what is important
Companies argue a lot on how the product needs to be made but forget to identify what is the need of the hour. A company in India sells smartphones. During the development of the product it identified a flaw when a game application is active the battery is draining at a higher rate than expected. However the launch date is in the corner. The company should prioritize the launch and focus on fixing the issue through software update. Many a times companies focus too much on fixing trivial issues. Every requirement should have a business value proposition. For example if a specific issue is fixed how much revenue loss will it save should decide the priority. If it is not correctly identified then the internal divisions often loose focus on what is important and what is not.
Relying on one product and ignoring the ageing process
Products mature and eventually become commodity. The companies should always identify the life time of the product and should take business decisions based on that. For example display technology has shifted from CRT to LCD and now to LED back lit. If a CRT product company has adopted the new technology it will sustain in the market. Kodak struggled financially in the late 1990s due to decline in sales of photographic film and its slowness in transitioning to digital photography. Last year it filed for bankruptcy. It sold its patent portfolio to other businesses.
Lack of understanding in holistic approach of product delivery
When competition is high the competitors will do anything to steal the order. It is important to build a relationship with the customer. In holistic approach it needs to be identified how the customer uses the product and how it needs to fit the purpose of the customer. For example A company delivers cakes online and has an expert chef. However some customers want to gift wrap it and also want a special message to be printed on top. Hence to offer better service the company should also invest and add these necessary activities into the its operating process. Inability to do so will attract competitors identifying the gap and bridging it.
Ignoring employee welfare
Some times companies focus too much on customers and forget the employees. The managers chase developers for meeting customer delivery deadlines and penalize them for not meeting it. It makes the working environment extremely stressful. Eventually it leads to degrade of moral values and ethics in the company thereby decreasing productivity. Although the competition is cut throat the business should always create processes to handle delays and forecasts. For example during planning clear risks and capability of delivering must be identified and should be agreed with all stakeholders. In fact the most important message is businesses should know where to trade off and the reason behind it. Otherwise the business itself doesn't become sustainable in the long run.
Lack of understanding about skill set requirement
Many a times companies do not understand the right skill set required to do the job. For instance a company in India sells DVD player by assembling imported components. However it doesn't know how to enhance the quality of Audio, video through electronic design. Hence it can't compete eventually with companies like Samsung, LG who have good expertise in that domain. What the company needs is to build expertise in the area of Audio and Video to sustain. The assembling expertise is simply not enough.
Lack of understanding of operating practice
Internal organizations within a company should create an operating practice which works. Absence of it creates a lot of confusion in execution. For instance A company in India sells customized POS terminals for each Customer. To build and customize a number of activities are performed including talking to customer for getting requirement, customization in the software, communication with the factory for production. Sometimes the marketing division off loads certain product showcasing work to engineering division and focus on another customer. In this approach the engineering division many a times misses to capture critical requirements of the customer as by nature this division is focused to deliver not to foresee the hidden opportunities. Eventually the company faces lot of difficulty to compete as the competitors cleverly capture all future requirements and become ahead in the market.
I will talk about few important aspects of strategy in detail in my next post.
No comments:
Post a Comment