Wednesday, March 25, 2009

Recession Strategies: Cut costs or increase sales?

A recent article published by Scott Latham in the Journal of Small Business Management examined how firms react to a recession. Their study of 137 software firms during the previous economic downturn in 2001-2003 suggests that start-up firms are more apt to focus on increasing sales and other revenue-generating strategies to make it through the touch times. However, larger firms tend to instead focus on cost reductions.

I find this pretty interesting as when I look around at what is happening right now – I am continuously hearing about all the layoffs at the large corporations and yet, many of the smaller businesses are frantically trying to get a bigger piece of the pie in order to make it through.

So, it seems to be an accurate depiction of what is happening in the real world. However, the real question, though, is ‘should it be happening?’ For instance, should small businesses be focusing solely on revenue-generating strategies? Should large businesses solely be cutting costs?

Wednesday, March 18, 2009

Thinking a social way

I recently read that the Salvation Army had increased their Red Kettle donations by 10% in 2008, DESPITE the fact that the retailers suffered one of their worst years. How were they able to do this? By thinking and acting entrepreneurially.

The increased donations were the result of (a) increased partnership with Wal-Mart and the NHL, (2) using 'cashless kettle' that accepted credit card donations and (3) a text messaging service that allowed contributions via telephone bills. What neat ideas! These are three creative ways in which the Salvation Army thought 'outside of the box' in order to increase their revenue. 

It is my hope that the many non-profits as well as for-profits are able to maneuver their way through this difficult time economically by doing the same.

Monday, March 2, 2009

Competing with the Big Box Retailers: Yes, it is possible

Today on the radio, I listened to a talk-radio host make the arguments that entrepreneurs are unable to compete with the big box stores such as Wal-Mart. This is nothing new -- as I hear this argument frequently. This always intrigues me -- as I see Wal-Mart as a positive.Walmart - Save Money. Live Better.

First, Wal-Mart (like any other big business) was started by an entrepreneur and we can learn a lot from Mr. Walton.

Second, Wal-Mart offers consumers convenience and lower prices through their economies of scale. Yes, this benefit also applies to all the people living in small town America where Wal-Mart is supposedly ousting all the existing small businesses. I know I appreciate this.

Third, Wal-Mart makes the market more efficient. Sure, many small businesses go under that are no longer able to offer any competitive advantage. But, the real entrepreneurs will simply respond to this change and find a new way to compete.

And, yes, it is easier than you think to compete with Wal-Mart. You just need to think strategically, and think either a low price OR a premium product niche! Here are some examples: -- They specialize in diapers and other baby products. They match the prices for diapers with the big box retailers and even offer free shipping on orders over $49. They are able to do this by focusing on a niche and not having to spend the big bucks on a retail outlet.

Whole Foods -- Although they offer grocery items just like the Super Wal-Mart, they are able to compete and bring in customers by focusing in on more organic and specialty items.