The most fundamental problems that your business faces in catastrophic situations, at times, push the management and business owners to take the stance, whether to fight or flight.
Being an entrepreneur, you will try to fight as you have struggled since the inception of your business, but the catastrophic situations will force you to move otherwise. The proactive businesses and professionals take the necessary steps beforehand to have a shield against major challenges. Most of such situations are based on external factors, which are uncontrollable. However, great businessmen have a backup to fight in such situations for their existence.
All new and existing businesses have to face such circumstances:
Shortage of Funds
Shortage of funds is one of the chief issues a business ever, and many times, face. No matter whether you have brought huge funds from your own pocket, have taken loan or have borrowed for investment, all businesses have faced this problem. At the time when you have no doors open, leaving everything and running away may seem the best option but the fighters take the stance as go as far as borrowing fund from the market. There are a number of options in case of failure; amalgamation or merger. You can also opt to let other firm acquire your business, but disinvest your dog products and services.
According to BCG Matrix, the dogs are the products and services that have low market share and low growth. If your company has strong cash cows than hold them and stop investing in new products. Study external environmental factors, if there is a trend of downfall in your specific industry than reduce your portfolio by selling them to other business or dis-investing and investment in diversified business. For diversification, keep a backup proactive as at time of catastrophic situations you will be mentally disturbed and most of the businesses have taken the wrong step of dissolving their businesses.
Fighting within the ethical confines is equally important as fighting itself. Instead of using black hands or indulging in fraudulent activities, it’s better to move back. Simply dissolve your business; a business’s major foundation is its reputation so make sure that people remember you with good words. In future when come back in the market, you will be known for the trust and people will respect you, choosing the wrong path will end you up in sand. Be courteous, positive and believe in yourself, things will turn around and you will get everything again like Steve Jobs.
Deceiving
One of the core problems businesses face is deceiving as no one knows who will deceive at what time. Sometimes your employees deceive you, sometimes your suppliers and sometimes others. Businesses should have back up and strategies of deception so that if any of the stakeholders betray them, they can use that at the time of need. Defensive strategies must be prepared by businesses against bigger and aggressive competitors. These defensive strategies are the methods of countering harmful actions of competitors related to your business.
Competition
The fight to take the highest market share in particular environment is the major constraint that every business faces. A proactive business approach is to have a protected shield and an eye on latest developments competitors are having, it can be related to technology, social work, new product development, aggressive marketing strategies and a lot more. Remember, your competitor motivates you to fight for your existence and bring new changes for the betterment of your business and society.
On the contrary, some competitors go to the highest extent of aggressiveness and they may attempt to take over your business. Be careful and know the strengths and deficiencies of your business and act accordingly.
Uncertainty and Risk Management
Every business faces problems that are uncertain. Even in our lives we are not aware of the fact that what new is going to come. The world is uncertain but the risk related to uncertainty can be managed to some extent. The businesses being in particular business for several years have learned through experience that what are the risks associated with their business and in their specific industries. They have designed their strategies along with the passage of time. They know how to fight for the best interest but for new businesses it’s the difficult one to fight and due to lack of experience they usually give up and fly away.
In business cycle, businesses are aware to go at what stage of productivity during recovery and boom phase. At the time of recession, it’s better to hold onto things and wait for better opportunities. New start-ups should also plan and manage risk, which will reduce the chances of uncertainty up to some extent. For this they must hire professional management staff that has already went through such situations previously and are aware of how to manage risk related to businesses.
Government Regulations
There are some external environmental factors that directly impact your business. One of them is government regulations, if government of particular country has passed new acts or rules; it is important to observe them. Factors like latest budget reviewing, increase and decrease in taxes and imposed restrictions like ban on the sale or manufacturing of particular products and services will directly impact your business.
Sometimes government impose ban on import or export of certain products, if it’s related to your business than it will harm your business and you have to face the consequences. Therefore, understand the rules and regulations of the country you want to start your business in. For example, in Kenya, export of Diamond is banned. In India, multinational businesses are restricted by law so that their local markets can boom while in Muslim countries, manufacturing and selling of pork and wine is illegal.
The government, to encourage foreign investment in the country, allows foreign investors to bring huge investments. For example, most of the pharmaceutical products are also prohibited in many countries. Therefore, understand the industry, plan accordingly and then take the decision. The government protects their local industries, be careful because if they impose restrictions on the import of any product, which is very crucial in your business or is the core ingredient, than you will face loads of catastrophic challenges.
The decision of fight or flight in this case will solely be dependent on government regulations, so, go for diversification and strategically plan things beforehand.
Economic Conditions
Economic conditions of a country or a region is a critical aspect of business existence. At the time of recession, we have seen multinational and giant companies, banks and other businesses dissolving and were bankrupted.
Economic conditions are external factors and are uncontrollable. In last recession, we have seen that most of the entrepreneurs were able to survive. The business cycle has four stages; boom, recession, slump and recovery. The stage of recovery is the most important where most of the businesses are developing and starting new businesses. Businesses do not start new entities at the time of recession as overall market is down, funds are not available and businesses resist from investing.
Human Resource Management
Every business faces human resource problem, if new competitors are entering the market and offering high compensation and benefits to experienced employees for hiring, there are fair chances that your staff will move.
Your business must provide market competitive salaries, better environment for growth, define clear career path and provide benefits that are necessary for the sustenance of your employees. Than you can easily fight at that time but what if your HRM deceives you or move to competitors business? It will definitely hurt your business. The chances of your business’ secrets and confidentiality leakage are high.
In today’s competitive market, the employee retention rate is low, all the industries are fighting to get the best people but few, actually, succeeds.
Industry Norms
Due to advancement in technology and changing lifestyle of people, industries are developing new products and services to cater to their growing needs. If your business does not accept latest developments in specific industry, you will face major catastrophic situations that would force you to dissolve your business and take a flight.
For businesses, to hold strong positions in the industry, they must understand and follow industry norms. Organizations have their own identity like human beings have; they have certain life, face uncertainties and catastrophic situations for that they have to be proactive rather than being reactive.Customer Relationship
This is the situation when your customers leave you. This is the highest level of catastrophic situation because you are working for them; you are manufacturing products for them, you are investing in research and development so that you can cater their needs in better way and make their life comfortable.
You have to make your customers happy by providing superior quality goods at affordable price and above all, the environment must be welcoming. The stronger your relationship will be with your customers, the more it will increase customer’s retention rate. At the time of difficulty, your reliable customers will support your business. Otherwise, you have to close your business, no matter how much big or small business you have, always keep in mind that your customers are the very life line of your business.Marketing Activities
Today, the major fight in the ring is that what marketing strategies are fruitful for your target audience. For this, you should research the target market, understand their needs and plan accordingly.
Spending huge funds in wrong marketing activities will definitely hurt your business. Therefore, take decisions based on proper data or information and plan ahead of time, take decision and implement on small group first. In case of success, implement on the whole group.
There are hundreds of situations, small and big, that may be catastrophic for your business. Businesses, whether new or existing, must study and understand the latest developments in environmental factors and within the organization. Please adopt proactive strategies and take calculated risks to prevent your business’ dissolving and bankruptcy. I have tried to bring some of the major catastrophic situations or challenges that businesses are facing often or once in the lifetime. Be careful and take educated steps, because with your business the livelihood of other people is also attached.
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