Competition for North American companies with foreign manufacturers during the past five years has been brutal. The domestic automotive industry has been in a virtual slugfest with Asian automakers such as Toyota. Now, even Toyota is coming under attack from even lower cost automakers from Korea and India. The once-proud furniture industry in the Southeastern US has been especially decimated by foreign competition.
So, whether it’s the competition from Asia, or the new Walmart store in town, how do you respond to fierce competition? Sun Tzu said…. “When your strategy is deep and far-reaching, then what you gain by your calculations is much, so you can win before you even fight. When your strategic thinking is shallow and near-sighted, then what you gain by your calculations is little, so you lose before you do battle”.
Before going into battle, take the time to step back and study the enemy. Get to know them. What challenges do they cope with? What are their strengths, their weaknesses? The specific characteristics for your industry may vary, but any offshore competitor still has the expense of shipping their products to North America, an expense you likely don’t have. Also, shipping takes time, especially if it travels via a container ship. How would you turn those two vulnerabilities into a competitive advantage for your company? If your company took a leadership role in dictating new and improved product features, these competitors are floating (literally) a lot of inventory with features that are now outdated.
During the last three months of 2007, the Business Performance Analysis Engine (BPAE) reported some additional interesting competitive data. Many companies, from the Pacific Rim countries especially, were reporting that:
• 73% indicated that their company realized significant sales revenue growth over the past year;
• 86% indicated that their company’s profitability remained steady, as a percent of sales;
• 84% indicated that their company did not do an adequate job of internally managing their corporate finances.
So where’s the competitive edge in that information? First, there is a significant opportunity to compete based simply on managing your corporate finances better. Carefully examine the ROI for each of your assets. Increase your efficiency by unloading assets with an unacceptable ROI. Secondly, eliminating idle inventory seems to be an especially sweet spot; a surprising number of Asian companies are exposed to this vulnerability. Finally, during the next six months, make a commitment to sharpen your personal skills and focus on financial management issues.
Many companies remain focused on competing via increased sales while maintaining current profitability levels. In other words, they continue to compete by selling more goods and services, not necessarily by increasing their rate of profitability via increased efficiency. In other words, do an even better job at what you already do. Constantly look for new technology, manufacturing processes, products, and services that you can take advantage of to improve your competitive posture. In the long term, the strategy of growing their profits via increased revenue growth requires additional (and expensive) resources as their manufacturing capacities become max’d out, they take on additional debt to expand facilities, and promised deliveries stretch further.