COVID-19 impact continues and businesses have come under stress to retain the current position, grow, contain costs, manage staff, and above all survive. This problem is more important for MSME (Micro-Small and Medium Enterprises) as they do not have reserves or different businesses to fall back upon in such difficult times. Staff morale is low, and costs are biting, as customer remittances and visibility to grow in new areas look difficult. It might just be the time for these MSME to go back to basics and reincarnate their organizations to gear up for the new normal.
We must remember that businesses were facing problems all the time. Refer book on Centuries of Change (which Century saw most changes), life changed rapidly in all times. From horses to carts, carts to train, train to aircraft and now to rockets, drones, and flying human beings. Only businesses with detailed planning for the future and determination to succeed continued to grow. Otherwise, there are many examples where the business failed.
Authors are trying to bring in insights to “Entry Strategy during Covid period”. We deal with basic concepts of entry and how to start a new business alternatively re-start an existing business.
Each business activity starts with an idea. In the changed current situation, every idea looks difficult to implement. To succeed with any idea, detailed planning and thought process is a must. Businesses fail as enough time is not spent on planning and relentless execution. Therefore, while the idea for an MSME / start-up is the core, it is the execution of the idea that would ensure success.
The idea could be a novel product or a service or even a new way of delivery. The idea, however, must ensure that the MSME is providing the new product/service/deliver with a “wow” over the existing product that it intends to replace. Or provide an altogether new service or product. For example, Uber is not really selling a new service. Taxi or its equivalent has been around for hundreds of years. The novelty it brought was the connection with the mobile phone and the on-demand service it brought absent in the earlier model. It was replacing the existing mode of public transport. In India, the model was also extended to Autorickshaws, motorcycles and even shared taxis. Uber used the same model to deliver food and then groceries. In pandemic times, food delivery is a bigger revenue earner than the traditional taxi business. If we go back in history, even Nestle’ was a start-up as babies needed mother’s milk replacement products. Over time it became the largest food company in the world. They have gone through tough times for centuries. Similar stories exist for Unilever, TATAs, and many other successful local and global companies.
The planning task must begin from product, service, proposition, target customer, way to reach, ways to communicate, which channels to target, how we will reach, how we will we grow, etc. However, all these elements must follow a defined business strategy and not work in isolation or on impulse.
Once there is an idea, the MSME must think about how to organize around the idea. It takes us back to the age-old question – whether you are competing on cost or on a superlative product offering. In other words, are you selling a Nano or a Mercedes? The entire organization must be geared up to deliver based on your strategy. The pandemic has been more favourable to companies that follow the low-cost model or have been able to cut costs rapidly and do so better than others.
Key Opportunities to build Entry Strategy
Every idea must pass through 5 key tests to build an entry strategy: –
Let us examine each opportunity in detail. How to build on each entry strategy for any product for ease of understanding.
Economic / wealth opportunity
A recent McKinsey study suggests positive sentiments across the world on an economic recovery across the world in the next six months. While we are aware that the GDP has fallen, it is showing signs of growth. Petrol and diesel demand is steadily growing in India showing the revival of the economy.
History confirms that after every such crisis world economy grew rapidly and made up for the loss of life and material. We, therefore, must stay positive to plan entry on the worked-out idea. All we need to plan whether we can play a short- or long-term game. Both methods have seen successes. Typically, opportunities are there in the following six areas – (1) creating value by offering higher benefits for lower costs, (2) value through style, (3) changing the brand image of an existing brand, (4) health and wellness, (5) providing consistency of supply chain, and (6) harnessing the changing lifestyles.
Consumer / Shopper Opportunity
The changed environment is changing the perceptions and desires of the consumers. Survival is becoming more important followed by the value of the product. These aspects have taken canter stage in the decision-making process. Masses are following time-tested methods and are reluctant to try different routes. Small cars and motorcycles have become a more important method of transport compared to big expensive cars. Possibly due to the higher risks in public transport and reduced disposable income. Health, weight reduction and improving immunity has also become important. Indulgence is being avoided. Changing lifestyle, work culture (work from home) along with increased working hours has made life difficult and for consumers. Ensuring consistency of supply chain and user experience has become more critical. The new normal planning has to take into account these realities.
Key opportunities exist in (1) social impact investments / social entrepreneurship, (2) last-mile delivery, (3) technology, (4) retail (both brick and mortar but more so online), (5) health and wellness, and (6) infrastructure.
The category must be understood and identified in the right manner. Categories are not industry rather very specific aspects of the industry. Every business is driven by category and you need special knowledge about each category. Talking about food, we can divide food into many categories e.g. beverages, culinary, chocolates and confectionary, pet food, baby food, water, dairy, frozen foods, ready to eat, health products, specialised products for sick people, etc. As you can imagine, each category would have different consumer preferences and buying behaviour. Each one of these categories then further must be divided into sub-categories. For example, we can divide beverages into Coffee (roast and ground, instant, freeze-dried, capsules, etc.), Tea (Leaf, dust, flavoured, tea bags, etc.), health drinks (for kids, mothers, babies) and so on. Mind you each one of these categories must have a detailed study and manage by staff with expertise.
A similar division can be done for all the key categories of today, for example (1) social impact instruments ( banking, business correspondents, microfinance, mutual funds, etc.), (2) last-mile supply chain (delivery systems, on-demand, drones, etc.), (3) technology (app-based, connectivity-based, online presence, etc), (4) retail (online, offline, specialist channels like chemists, etc.), (4) health and wellness (supplements, drinks, food, home-cooking, etc.) and finally (6) infrastructure improvements that government at every level is pushing to drive growth.
Each state of India is almost equal to or bigger than any country in Europe. The recent US Presidential elections showcased the stark difference in numbers. The voter population in India is three times the total population in the US. While that is a challenge, the Election Commission in India has designed mechanisms to manage such a challenge.
We do not have to look for opportunities in the entire country (India). Opportunities are present in urban areas as well as rural areas. The ability to harness the opportunity depends on the product or service that we are offering. The success would be dependent on the ability to select the turf and the right approach to the consumers. Products or services that would sell and solve a problem in urban areas may fail miserably in rural areas.
This is a great method to focus and get the most “bang for your limited buck”. A channel is a way of reaching the consumer. Many companies find a single channel and are extremely successful. Nespresso and Tesla, for example, operate through exclusive owned stores that showcase the uniqueness of their products. But this model is perhaps the most expensive and high investment model. On the other hand, many products and companies only exist in an on-line environment with no physical retail presence. The choice depends on the plan and capability to execute the channel strategy as well as bring together the entire organization to work on the strategy. A recipe for failure would be to have an exclusive store but also sell the same product online.
While most large corporations have an all channel plan and own last leg distribution directly or through partners/distributors, smaller MSME can start slowly and build channel strategy and capability one step at a time.
However, like in any business, MSMEs also have just three options for taking their products and or services to the market – greenfield investments, joint ventures, and acquisitions.
In summary, the renowned author and corporate adviser Mr R Gopalkrishanan mentioned in one of his recent deliberations at Business Clinique, there was no time in the world when business was easy to be done, every time has different challenges. COVID-19 must be taken as one of the similar challenges and we have to find ways and means to continue our business with innovation, new thinking, lower costs and above all determination.