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Babafemi Aderounmu: 3 Tips for Building Sustainable Businesses in a Declining Economy

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dreamstime_m_34461540After many years of boom and prosperity in the oil industry for encompassing stakeholders, the outgoing year has seen the biggest downfall in price of crude oil perhaps since the sharp downturn in the 90’s. From a standard average price of USD 100/barrel, prices have slumped to as low as USD 26/barrel and now gradually recovering at USD 40 – 50 per barrel. The implication of this sharp downturn on predominantly oil exporting countries like Nigeria is the need to drive cost leadership by major stakeholders in the oil industry and on a larger outlook, the need for government to cut down on spending and expenditure to make room for the shortfall in oil earnings. And as can be seen with most oil exporting countries, the cut in spending has slowed down their economy and as a result led to record cases of job cuts, high inflation and low purchasing power amongst consumers.

With struggling economies and limited sign of growth or recovery – businesses in the product and service sector (multinationals and SME’s inclusive) have been on the receiving end of the downturn seeing that patronage from consumers and profitability has dropped with buyers wanting to pay the lowest price for the best quality of service or product out there. Drilling down, we are constantly witnessing cases of businesses fighting for the same share of wallet, indicating that competition is at its all-time high!

With little or no indications that oil prices are going to reach peak levels anytime soon and considering the fact that the diversification drive for the Nigerian economy would not happen overnight, new and existing businesses must adopt a more proactive approach especially with the declining economic outlook and increasing competitive landscape.

Keep
In a time where the profitability of most businesses has taken a huge beating with consumers unwilling and unable to pay more for value due to shrinking disposable income, it is now paramount for businesses to deliberately strive to keep and maintain their market share while profitability continues takes a momentary back seat. Business focus/strategy should be aligned mainly on maintaining and holding tight to your market share as opposed to the norm of growing profit and meeting shareholders expectations.

Key questions to ask and consider:
• How can I improve customer service and product delivery?
• How do I keep my customers engaged and committed?
• How can I offer my customers the best service/product at the most competitive price?
• How can I drive cost leadership and excellent service delivery without comprising quality?

While this is not a call for businesses to transact at a loss, the plea and proposal is to keep your market share and ensure you are positioned to defend your territory. Achieving this puts your business in a good position to grow profitability as soon as the economy starts showing signs of improvement and growth. Worthy of note is that any market share lost to competition now might take a lot more to re-gain when the economy begins to show sign of recovery. So, keep your customers close!

Grow
Improve support and patronage from your existing customers. It is important to be positioned to grow support from your existing client base.
Some key questions to ask and consider:
• Which other products or services would add value to my existing customers?
• What actually do my existing customers want, any other needs I could be solving?
• Do I really understand my customer, industry and market dynamics? If yes, how can I grow traction and achieve bigger share of my customer’s wallet?

Seek
Following the next two approaches should be how to find new customers and improve your current client base. Some key questions to ask and consider:
• Which customer segment am I missing out on, which new customers would find my product/service appealing and be willing to pay for it?
• Which new markets can I conquer, how can I scale into such markets?

In torrid times that we are now, safeguarding existing market share and growing your share of wallet with existing customers should take priority. Only after this is successfully achieved and tracked should new customer acquisition strategies take centre stage.

Photo Credit: Hongqi Zhang (aka Michael Zhang) | Dreamstime.com

Babafemi “Jay” Aderounmu is a Certified International Manager and Business Development Professional with substantial international and local experience working with start-ups, mid-sized and multinational establishments. In writing, I have been able to find expression for my yearnings, passion and surrounding experiences which all together have daily gratified my journey towards fulfilment.

6 Comments

  1. Mia

    November 10, 2016 at 2:31 pm

    Great write up. This is a to-do list for all businesses.

    • Babafemi Aderounmu

      November 11, 2016 at 7:41 am

      Thanks Mia, glad to see that you find the content relevant and helpful.

  2. Sammie

    November 10, 2016 at 7:52 pm

    I disagree with you Babafemi. In a recession time, it’s innovation and creativity and not “Window dressing” that an organisation would not only maintain but expand its market share. How did America get past The great depression in the 1920’s. It was through the Industrial revolution!

    This the time for strategic alliances, mergers and acquisations, bold, ambitious, aggressive plans (Trump style).

    Your business as usual approach won’t do much. How can an organizations strategy be to maintain its status quo in a recession when it’s competitors are agile and adaptable to their environment?

    • Babafemi Aderounmu

      November 11, 2016 at 7:40 am

      Hello Sammie,

      Thanks for making out time to share your thoughts.

      I actually do think we are on the same wavelength. Innovation and creativity should lead the way and be big contributors as organizations push to primarily keep and improve their current market share.

      The underlying message and direction from my article is the need to use every means and resources (strategic alliances, mergers and acquisations, bold, ambitious, aggressive plans) available to primarily defend and grow your share of wallet in the market, although this might entail profitability taking a downturn and momentary back seat until the economy starts showing signs of recovery.

      Driving profitabilty aggressively as to norm in this difficult times might loose your business some valuable share of the market.

      Would love to read from you again on other relevant articles I hope to put out.

  3. Solomon Ilaboya

    November 11, 2016 at 2:20 pm

    Well written, Jay. I share your views and these are practical ideas. I found interesting the idea of focusing on maintaining market share and customer base, rather than pushing for profitability. Indeed, when the economy fully recovers, the secured market share should potentially translate into profitability. I believe another strategy will be ‘lose’ – these trying economic times call for losing or letting go of cash traps, those businesses with low market share and in a low growth rate market, thus they are not generating any cash nor have potential to generate cash for the business; these are the businesses BCG call ‘Dogs’. Overall, good read and I’m looking forward to reading more from you on this platform. Cheers!

    • Babafemi Aderounmu

      November 14, 2016 at 11:01 am

      Thanks Solomon. I appreciate your comments. And yes, we are aligned. ‘Dogs’ should be let go of to stabilise your core business units or other products and services. This way, you also gain more liquidity and focus to maintain and grow market share of your core units.

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