Businesses are established as ‘going-concerns’ and ‘hubs of profit-making’, but the reality is that approximately two-third of new businesses do not survive after ten years in the United States of America (USA). The global average is far higher than this, especially in developing nations. According to some 1990s data from Bureau of Labour Statistics, an American principal fact-finding agency for the American Federal Government in the broad field of labour economics and statistics, 20 percent of new businesses fail during the first two years after being opened, 45 percent during the first five years, and 65 percent during the first ten years. Only 25 percent of new businesses make it to 15 years or more. These statistics have not changed much over time, and have been fairly consistent till now. In Africa, businesses are closing down every day because of ‘hard times’, including lack of raw materials, epileptic electricity supply, high cost of fuel (diesel and petrol) and high foreign exchange rate. The major factor is African businesses lack international market exposure!
In today’s business environment, with the economic crisis, especially with paucity of funds, high rate of uncertainties and high rate of foreign exchange, businesses are being told to down-size, cut expenses, pause projects, reduce stock or production or change advertising campaigns, but is there any data to support such recommendations? The straight answer is “no”. In most cases, businessmen listen to “armchair theorists” who opine and propose new developments in a field that does not involve primary or empirical research and the collection of new information. In some cases, the members of staff in the marketing department of manufacturing companies, sales representatives and stockists are under pressure to sell more or exit. Businesses ought to rely more on analysis of data and if they cannot harvest and analyse reliable data themselves, they should get professionals who can do them for their benefits. Businesses thrive based on the information they have at hand and how well they can use this information.
During the COVID-19 era, it was generally believed, based on economic psychology and not on econometrics, that people will buy less during pandemic and war periods. But econometrics has proved that people buy more properties in periods of wars and pandemics than in periods of peace and tranquillity. It is my belief that marketers who follow data – and ignore frivolous third party opinions – will position their companies better to support employees and customers and contribute to national economic recovery. Marketing researchers have shown that individual customers do not respond any differently to advertising during a crisis. As per marketing, what marketers can do is to have a wider reach through aggressive marketing and opening up of more outlets to push their products, and engage more distributors. In a period of economic crisis, marketers can only sell more through getting more customers and not through persuasion of old customers to buy more of their products. Business organisations may consider increasing, and not decreasing, their advertising budgets, especially those in the service industry.
According to Robert Harold Schuller (1926 – 2015), “Tough times never last, but tough people do”. Businesses which are having bad times may consider working more hours! A lot of successful companies, in crisis periods, gained market share by thinking outside the box and being innovative. In November 2005, during the beginning of the world acclaimed economic crisis that swept many businesses off, Cadbury Schweppes, the world’s largest chocolates and sweets company, agreed to sell its European soft-drinks business (Schweppes) to an Anglo-American private equity consortium for 1.85 billion Euros or £1.26 billion (pounds sterling). Corporate organisations can decide to sell part or their entire subsidiary to raise funds for operation and survival. Businesses may decide to concentrate production in a plant and reduce cost of operations in different plants, especially cost of leasing of real estate. Cadbury Dairy Milk, the producers of Cadbury chocolates decided to invest £15 million (pounds sterling) after Mondelez International’s, which made it possible for Cadbury’s Dairy Milk to return home to Bournville in Birmingham, UK after 115 years of production in Germany!
Some organisations have benefitted from social media marketing. It is now a disservice for any ‘customer-oriented business’ not to have social media campaigns on Facebook, Twitter, Tik Tok, WhatsApp, Instagram, YouTube, WeChat, LinkedIn, Sina Welbo, etc. Digital marketing reaches wider coverage and is comparatively cheaper to use than outdoor advertising. This assertion is based on the fact that more people use smartphones than stay outdoors. Organisations like Coca-Cola rely on “wholesaling” to market their products and weather the storm. Coca-Cola is a multinational beverage company that sells its products, including Coke, Sprite, and Fanta, to retailers through wholesalers. Coca-Cola has a vast network of wholesalers that distribute its products to retailers worldwide. Apart from the wholesalers, Coca-Cola also sells directly to retailers like supermarkets, hotels, corporate events and restaurants.
Organisations are also turning to outsourcing all or part of their operations to be in business in turbulent periods. NNPC Limited, Nigeria’s national oil company, said it will outsource the operations and management of the country’s refineries after ongoing rehabilitation. Under risk management, it is better to transfer risk to a party who can best manage it. Organisations can do better by not dealing in the aspect of its business that it does not know much about. A property developer can best contract a building engineering company to handle building constructions while he handles marketing and management. Third-party logistics organisations handle haulage of goods and products for organisations like Nigerian Bottling Company, manufacturers of Coca-Cola, Fanta, Sprite, Five Alive and Eva Bottle Water; FrieslandCampina WAMCO, manufacturers of Peak Milk; Chi Limited, manufacturers of juices, nectars, milk, yoghurts, drinks, and snack foods; Rite Foods, manufacturers of Bigi sausage rolls and Bigi Cola; Lafarge, manufacturers of Portland cement, among others.
Among the strategies to be resilient in an economic crisis and win market share is the effective management of the “constraint ring’ of business. The “constraint ring” of business is triangular and has its three sides as “cost”, “time” and “quality”. Goods, products and services, which are the outputs of businesses, have three constraints of time, cost and quality. All businesses expend cost, time and have quality parameters (standards). In a period of crisis, organisations should strive to reduce cost and time of production of the same quality of product or improve the quality of their products within the same cost and time of production. XYZ Farms is a company which has Fame Oyster & Co. Nigeria as its value management consultants. As at June 2023, a tonne of maize, a staple food used in the production of chicken feeds, cost N250,000.00 (for white) and N270,000.00 (for yellow) maize in Nigeria. The price of sorghum per tonne at the same period was N30,000.00. Sorghum can almost perfectly serve as a substitute for maize in chicken feed production. Sorghum based chicken feed was advised as a replacement for maize.
Organisations which have survived turbulent periods in the past are organisations that resolved not to fold up in times of crises. They either increase their spending on production (upscale), reduce their rate of operation or volume of production (soft-pedal) or change their strategy, like changing raw materials, products or diversifying into other fast moving goods (re-strategise) or improve the value of their product without increasing the price or maintain the value and reduce the price. In doing this, they do not go below the break-even point. They seldom temporarily close shop (hibernate) or lay off their workers (downsize) or reduce spending (economise).
