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Corporate Social Responsibility (CSR) and Sustainability

Road To Recovery: Lessons From Mid-size Retailers

The crisis brought all entrepreneurs out of their comfort. A business that had been profitable for years began to falter. Businessmen, explaining their problems, talk about the decline in oil prices, the rise in the cost of credit funds, the decline in effective demand, and so on. As if these are the reasons for the decline in profits. Every business has its own reasons for losses. You need to understand what you earned on before, why you stopped earning now, and then choose a strategy in a crisis. What to do to start earning even more after the crisis?

Erich Maria Remarque in his novel "The Black Obelisk" wrote, “The death of one man is just a death, the death of two million is a statistic”.

Individual opportunities are superimposed on general market trends, which provide opportunities for "manual control" in a stormy sea of ​​crisis. And if a businessman is not lazy, does not go with the flow, but manoeuvres between reefs and avoids dangers, the crisis gives an opportunity to grow.

If everything you do is telling everyone and even to yourself, that everything is bad and go with the flow towards the whirlpool, then the business is doomed.

To overcome the crisis, a businessman has four main strategies:

Waiting for the crisis while preserving the most valuable resource.

Survival in your niche.

Capture new markets and niches.

Escape from the market.

The choice of strategy primarily depends on what resources the company has at its disposal.

Resources are what helps a company earn money. The main characteristics of the resource:

Importance in the process of the company;

The complexity of the access to the resource;

The quality of the resource (to what extent what the company has at its disposal is better than that of its competitors);

The recovery in case it is lost. 

Waiting for the crisis while preserving the most valuable resource

The strategy of weathering the crisis while preserving a critical resource is intended for those who cannot work during a crisis, but plan to return. After the crisis, you will have to start your business anew, collecting the full package of resources. But it is better to start from scratch. It is necessary to preserve a critical resource - a resource that is important for business, sets your firm apart from competitors and that will be difficult to recover. This resource must be preserved at all costs. It will become a springboard for business recovery.

Survival strategy

The strategy of survival in the market niche is that the businessman "shrinks". First, he agrees to reduce his personal profit. In addition, he scales his business in every possible way. Reduce costs as long as the business is still profitable.

The length of time a businessman can adhere to a survival strategy depends on how large his personal savings are and what are his personal expenses. As soon as the business owner cannot compensate for the losses of the business and subsist on personal funds, he will have to choose one of two paths:

  1. Find resources and start developing business by pursuing an aggressive policy;
  2. Switch to a strategy of preserving a critical resource or leave the market.

Capturing new markets

The strategy of capturing new markets and niches implies that the company has enough resources to capture new markets, launch new products, and attract new customers.

In other words, an aggressive market strategy in terms of resources means that an aggressor firm takes away important resources from competitors, thereby reducing the efficiency of competitors and increasing its market share.

Example:

The resource used for aggression: Finance

A businessman who has free money during a crisis can increase his market efficiency in the following ways:

By moving to work with shorter payment delays, get big discounts from suppliers.

By attracting highly qualified and expensive personnel, improve the quality of service and attract new customers.

Buying or renting vacant retail space to increase its territorial expansion and attract new customers. 

Launching new products on the market that meet current customer needs and thereby attract new customers, etc.

Expanding the territory of transportation of the product whether it’s a pallet, full truckload or container - professional freight companies will help you with that.

Escape strategy

The market escape strategy implies a complete closure of the business and exit from the market “forever”. But you can leave the market in different ways. Anyone who does not consider - just at a certain moment makes the decision "We are closing" and begins to reason about what to do next. Serious businessmen prepare thoroughly for leaving the market according to "plan B". In this case, there is a gradual abandonment of secondary resources and a decrease in the consumption of primary resources. The assortment is being reduced, the list of suppliers is being optimised, it is working only with reliable customers, and is outsourcing the warehouse and logistics. As a result, when it comes time to leave the market, losses are minimal.

How to define a marketing strategy?

Monitor resources;

Select critical resources;

Assess how they distinguish you from your competitors and whether it will be difficult to recover them after the crisis;

Choose a resource that will allow you to produce an aggressive strategy and increase your market share;

If there is no such resource: assess your financial stability. 

Determine the time when the savings will end and it will be necessary to move to a plan for preserving a critical resource or leave the business;

Draw up a plan and schedule for maintaining a critical resource;

Or, make a plan and timetable for leaving the business.

Conclusion

If a businessman plans to pursue an aggressive policy in the market, then he will have to expand his resources: look for new suppliers, produce new goods, attract new customers, expand production, warehouse and retail space. This will require attracting new partners.

"The best conditions will be given by the partner to whom you can provide a critical resource for him, which he has in deficit and you have in excess."

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