Earning high returns while minimizing economic risks is a mix of what it takes to run a successful business.
Operating your business confront risk but knowing and implementing some strategies could potentially minimize risks in your business.
All operations and organizations confront risk.
But knowing how to correctly plan and manage your operations can help you to avoid going out of business.
Understanding and recognizing all sorts of business risks might help you predict the economic problems that may occur in the future.
So, you can adjust your business strategies accordingly.
Firstly, these are some key factors that you need to pay attention to.
When it comes to starting a business, a lack of capital is a big danger that all organizations face.
Internal controls that are intact help you keep track of your cash flow from operations and investing activities throughout the course of each accounting cycle.
Most businesses require capital to purchase facilities or equipment to produce goods or services.
Sometimes companies acquire these money by getting bank loans or issuing stock. Which in times of tight credit, bank loans may be difficult to be obtain.
Also, investors will be cautious in buying your company’s stock if it has a poor track record of cash flow resulting in lowering the potential equity investment.
This could happen externally, internally, or a combination of several factors.
Something unexpected could occur, causing you to lose your company.
The unexpected event could be a fire or a natural disaster that damages or destroys your physical business.
Or, it could also be due to a server crash caused by humans, a power outage, or technical issues.
Many operational hazards have to do with people.
Whether it’s due to a people or process failure, these operational risks can have a negative impact on your business in terms of money, time, and reputation.
Address each of these potential operational challenges through training and a business plan.
This is important to provide strategies which allow you to consider what could go wrong and create a safety plan or proactive steps to lessen the impact to your company.
For example, inefficient production operations could lead to higher cost of goods or services.
Raising the retail price to consumers.
You will have a tough time selling your company’s goods or services if they cost higher than the average market.
Slow sales results in more inventory stock, which raises the company’s warehouse costs.
Since most buildings are lease on specified periods, it is difficult for businesses to reduce their fixed operation expenses.
The free market is fill with competition for businesses.
While a company may be aware that there is always some rivalry in the market, it’s easy to overlook what other companies are offering that may be attracting the interest of your customers.
The business risk in this situation is that you as your company’s leader becomes so comfortable with your success and the status quo that they stop looking for opportunities to pivot or improve.
The refusal to adapt on the changing market, along with increased competition could cost you in losing your customer.
Risk management process is a company’s continuous evaluation of its performance, plan improvement, and the develop strong and interactive relationships with its audience and consumers.
It’s also crucial to keep an eye on the competition by investigating how your competitors use online and social media channels on a regular basis.
The theory is that oversupplied marketplaces will eventually chase away inefficient businesses.
Leaving only the strong to supply the market with goods.
If a market is profitable early on, competitors will enter to profit from the high consumer demand. These should be enough for you to drive you to modify your business strategy, like cutting expenses or reducing any output expenditures.
Any change in enhancing your company’s operations can significantly raise the risks your leverage in the market.
Governments regulate certain industries to protect businesses from damaging customers through unethical business practices.
Regulators frequently have a negative effect on companies, forcing them to adjust their operations or plans accordingly.
Businesses should be aware of current regulations as well as anticipate any future regulations that will have a big impact on the economy.
Businesses that operate in a global market must familiarize themselves with the legislation of the nations in which they do business.
Business growth is a natural occurrence in free markets.
Businesses enter an economic market in search of profit as it grows. Businesses quit the market during a recession to earn profits in other industries.
Unless the entire market is in a recession or the whole country is having an economic depression since most industries do not increase or decrease at the same time.
Businesses must have numerous income streams from various industries and customers to be competitive throughout the business cycle.
What is the Growth Strategies ?
While you’ll never be able to eliminate company risk, preparing for it ahead of time will help.
Awareness is essential to saving money and time while safeguarding the trust and reputation you’ve worked so hard to establish.
Newly established businesses are frequently confronted with unexpected challenges.
To get your business off the ground, several strategies must be made. You can achieve success by understanding and implementing growth strategies to your business. Here are some examples of those growth strategies.
- Market Penetration
- Product Development
- Price-skimming Strategy
- Acquisition Strategy to Have a Competitive Advantage
1. Market Penetration
Market penetration is use by companies to estimate their product’s market share.
It is use on a worldwide and industry-wide scale to measure the scope of products and services.
Market penetration could be seen as a metric that measures the number of potential customers who have purchased your company’s product over your competitor’s product.
Companies’ market penetration is generally expressed as a ratio, indicating that their product accounts for a particular percentage of the total market for such products.
To calculate market penetration, the current sales volume for the product or service is divided by the total sales volume of all similar products, including those sold by competitors.
The result is multiplied by 100 to move the decimal and create a percentage.
When trying to advertise existing items in the same market, typically you need to utilize a market penetration strategy.
Lowering pricing is one approach to successfully take on a larger portion of the market and compete.
For example, in a market where product differentiation is minimal, a lower price may help a company increase its market share.
2. Product Development
You may decide to pursue a market expansion plan for a variety of reasons.
Within the existing market, competition can be so intense and overwhelming that growth is impossible. Your profits will not expand until you can find new customers for your products.
New features or distinct applications in your product might also help with a company’s growth strategy. When technology begins to improve and evolve, you must take advantage of the emergence of its widespread connection, the emergence of AI, and the growing management innovation.
To keep up with competitors, you need to adapt or expand your product line.
If you failed to do so, your customers will use the new technology that your competitors’ offer.
For example, technology companies are continuously introducing new functions or developing new technology on their products.
Companies who fail to meet consumer demand will go out of business quickly.
3. Price-skimming Strategy
A price-skimming strategy entails in charging high costs for a product, especially in the beginning. This is to swiftly regain its production and promotional costs.
However, the product must offer something unique for customers to spend such a high price.
The introduction of a new technology is one of the examples.
This is usually used to promote a new product that has little or no competition – usually have some technological features.
These products are frequently purchased by “early adopters, ” who are willing to spend a higher price to get the most recent or best product on the market.
One disadvantage of a price-skimming strategy is that it draws competition quickly.
If your competitors have the right technology, they may be able to observe the profits your firm is getting and manufacture their own products on a lower price.
A third issue is that price skimming may cause a company’s demand for a product to expand at a slower rate.
This may allow competitors more time to produce alternative products in anticipation of high market demand.
4. Acquisition Strategy to Have a Competitive Advantage
The acquisition strategy is a detailed, integrated plan that is created as part of the acquisition planning process.
It explains how to manage project’s risks and fulfill program objectives using business, technical, and support strategies.
Throughout the strategy life cycle, the strategy directs acquisition program execution. It establishes the link between the acquisition phases and work efforts.
As well as critical program events such decision points, reviews, contract awards, test activities, production lot or delivery amounts, and operational deployment goals.
The strategy should be updated on a regular basis to reflect the current market condition and the desire outcome.
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