This week was the first week that my team properly looked at all decisions in a cohesive way- by this I mean this week we literally made a spreadsheet of all our costs and how these can be managed and compared to last week. This I feel was really good as we are now starting to deliver on our goal of high quality yet we actually made a loss this year. In the broadest possible sense our sales were too low (the lowest in our world) we tried last year to cut our costs by slightly tightening budgets, rather than austere decreases, which we somewhat accomplished and yet our sales dipped also.
As Peter ominously mentioned, soon markets will stop growing- this I feel from looking at the Market Summary report is what has happened. This explains our drop in sales, the market is now saturated for our current product offerings. This essentially leaves us with two options for growth: 1. Gain market share, essentially by taking it from competitors. 2. Mergers and acquisitions (Baghai, Smit & Viguerie,2009). Realistically we aren't going to takeover another firm and to be honest I don't think an injection of cash or merger is what our firm needs. We have the products out there which are selling- we just need to sell more of them! I feel this leaves option 1- how do we increase our market share? I feel the point regarding 'granularity' (Baghai et al., 2009) is particularly relevant in reference to the perceptual map- there do exist segments within each segment. This means we could re-design a bike so that it is slightly differentiated from competitors and more in line with our overall strategy- i.e. high quality but not the highest price. Or another option is to exploit multiple 'microsegments' by introducing say a second slightly different Kids bike.We currently only have one bike in each market whilst some competitors have more which likely results in a better bottom line profit for the firm; each individual bike might do reasonably but add those profits together= SHV. Whilst this seems somewhat like copying competitors production strategies- I'm sure we can do it uniquely enough and why not copy a successful strategy?
The dangers of these options to me is the likely cost of R&D, whilst we do have the cash currently, its nice to have enough money for production and for advertising as these are all critical functions of the business. If we spent $1 million on an unpopular new bike, I feel that would have a disastrous effect on our SHV. Even if the launch was relatively successful, do we have enough rollovers left for us to to take advantage of this? I feel that each rollover can make a huge difference, especially as the last 2 rollovers are conjoined, if we had a successful launch then we could enjoy the fruits of the labour. The question then is how to make this redesign/ second bike a profitable one. Given that market growth has about plateau'd, it is quite hard to see which competitors sales can be stolen and how to do it- perhaps undercut on price or beat on quality? 'How' questions like this can be most effective for analysing a hypothesis (Daudelin, 1996). But then again, we must be wary of competitors second guessing us and dropping prices, or markedly increasing advertising, or see a sudden launch of new bikes in the 'microsegments' we have identified.
Baghai, M., Smit, S., & Viguerie, P. (2009). Is your growth strategy flying blind? Harvard Business Review, 87(5), 86—96.
Daudelin, M. W. (1996). Learning from experience through reflection. Organizational Dynamics, 24(3), 36--48