Product Life Cycle






Leveraging better Payment Terms










The Impeccable Venture Types

Two concepts that appear to have a major bearing on long-term prosperity of a business are the notion of ‘distinctive competence’ and ‘market share.’


A company with larger market share in its particular line of business gets more practice in performing that business than a company with a smaller market share and consequently should be able to develop through that practice a higher level of competence. At the same time, by having a larger market share a company enjoys economies of scale—quantity discounts on purchases, thinner spreading of advertising costs, and justification for greater investment in tooling and automation and for more research and development. Consequently, it has an advantage in lowering unit costs, which in turn can allow it to lower prices and thereby outsell the competition to gain still more market share, and so forth. There are research data that indicate both that more sharply defined competence, often as a result of narrower specialization, leads to greater growth, and that larger market share leads to higher profits.


In evaluating prospective venture ideas it therefore makes sense to as, “What will the company’s distinctive competence be?” in other words, what will it be able to do better than other companies can and why? It also makes sense to ask what share of market the company will have as compared to competitors. If it seems likely to have only a very small share of market and competitors enjoy larger shares, then it will need either some major performance improvement such as a significant special innovation or else a lot of financing to increase its share and be able to survive.


One ideal approach is to begin early in a new industry. When the industry is small, it should be possible for the new company to obtain a significant share without having to be large to do so. As the industry grows, the company can then grow with it, still maintaining its market share, with consequent high profits. This type of enterprise is ideal not only from the entrepreneur’s point of view, because the company prospers, but also from a funder’s point of view, because rapid growth of the company will create a profitable application for capital to expand the company’s capacity to handle increasing business. Thus to capture a major market share at the opening stage of a new industry is an ideal pattern for a growth-oriented venture.


A second ideal type of venture is one that captures a major share of an existing but more mature industry. The major share will generate high profits, but if the industry, because of its maturity, is not growing, then the company will not have to grow in order to maintain its market share. This will mean that it will not need external funder. From a funder’s point of view it is not particularly attractive. But from entrepreneur’s position it is, because the profits will not have to be plowed back but can rather be taken as salary, dividends, and other benefits. The trick, of course, is to capture a major share in an existing industry, and this can be done by choosing a very small industry to start in, by entering through purchase of a going concern that already has a respectable share, or by entering with a strong innovation or other competitive advantage.



Legal Fiction or Economic Reality?

Knowing the cost of your operations, however, is not enough. To compete successfully in an increasingly competitive global market, a company has to know the costs of its entire economic chain and has to work with other members of the chain to manage costs and maximize yield. Companies are therefore beginning to shift from costing only what goes on inside their own organizations to costing the entire economic process, in which even the biggest company is just one link.

The legal entity, the company, is a reality for shareholders, for creditors, for employees, and for tax collectors. But economically, it is fiction. Thirty years ago the Coca Cola Company was a franchisor. Independent bottlers manufactured the product. Now the company owns most of its botling operations in the United States. But Coke drinkers–even those few who know that fact–could not care less. What matters in the marketplace is the economic reality, the costs of the entire process, regardless of who owns what.

Again and again in business history, an unknown company has come from nowhere and in a few short years overtaken the established leaders without apparently even breathing hard. The explanation always given is superior strategy, superior technology, superior marketing, or lean manufacturing. But in every single case, the newcomer also enjoys a tremendous cost advantage, usually about 30 percent. The reason is always the same: the new company knows and manages the costs of the entire economic chain rather than its costs alone.

A powerful force driving companies toward economic chain costing will be the shift from cost-led pricing to price-led costing.

It will be painful for most businesses to switch to economic chain costing. Doing so requires uniform or at least compatible accounting systems at companies along the entire chain. Yet each one does its accounting in its own way, and each is convinced that its system is the only possible one. Moreover, economic-chain costing requires information sharing across companies, yet even within the same company, people tend to resist information sharing. Despite those challenges, companies can find ways to practice economic chain, costing now.

Whatever the obstacles, economic chain costing is going to be done. Otherwise, even the most efficient company will suffer from an increasing cost disadvantage.


The Drive for Speed

The time culture can impose unrealistic deadlines upon those who are charged with the responsibility for delivering improvements. When a supply chain is involved, the single company may be no more able to achieve a tangible impact upon the external environment than it can deliver all the value that is sought by a final customer. When others are involved, there is likely to be bargaining and negotiation.

Environmental initiatives should not result in the pressure for speed or response driving out the lonh-term thinking that is required. Assuming results are required, these might best be achieved as a result of flexibility within the framework of a longer-term relationship.

Today’s craze can be tomorrow’s memory. Too many managers assume that trends will continue longer than subsequently turns out to be the case. With many environmental and social policies taking taking many years to have a significant impact, companies face a dilemma similar to that encountered by those seeking to change attitudes and behavior. By the time the outcomes initially sought have been achieved, the requirement may have changed. Will there be a backlash when people count the costs? Will they become bored? Will certain lobbies go the way of the skateboard as possible become more aware of the lack of achievement in relation to fundamental problems?


Supply Chain Management

That’s about all parties directly or indirectly involved in fulfilling a customer request is said to be performing under supply chain management. It not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers. It includes all manufacturing functions involved in receiving and fulfilling a customer request. they include new product development, marketing, operations, distribution, finance, and customer service. Supply chain is dynamic and involves the constant flow of information, product, and funds between different stages. This implies that customer is an integral part of the supply chain. The primary purpose for the existence of any supply chain is to satisfy customer needs, in the process and thus generating profits. Supply chain activities begin with a customer order and end when a satisfied customer has paid for his/her purchase. it thus enwraps images of product or supply moving from suppliers to manufacturers to distributors to retailers to customers along a chain. The planning for supply chain involves expert planning and putting together many aspects of functions, process and operations. My Consultancy–Asif J. Mir – Management Consultant–transforms organizations, makes them relevant, and suggests solutions for succes. For details please contact Asif J. Mir