How do the changes in the business world cause one company to go bankruptcy while increasing the shares of the other one ? How these changes are disruptive for some businesses while skyrocketing some other companies ? Well, the main difference is within the companies themselves. The answer is lying behind their adaptation capability to the change and that is a result of the business strategy.
Today, we are facing a global threat that is none like the others in the past 50 years. COVID-19 has changed market characteristics, disrupted the economy globally and even changed the way we work. And we will talk about how to transform your business strategy during COVID-19 to preserve your company from the changes in the business.
What is business strategy?
Well, you know that strategy is mainly how you achieve a certain goal. When we talk about business strategy the definition is all the same but in business context. The business strategy is the roadmap for achieving the company goals with the presence of the competitors. Let's say that one particular goal of your business might be increasing the brand awareness. Knowing that your company has a great social media team, you might focus on social media activities with more initial investment for social media as a business strategy.
When coming up with a business strategy you should mainly think about three components which are:
- Your company
- Your industry
- Competitors in the industry
1st Component: Your Company
Well, you are creating a business strategy for your company. Therefore, you need to be self-centric. You need to know your company's strengths and weaknesses to create your strategy. At this point a SWOT analysis might be helpful to concretize your analysis of the company. For instance, let's assume that you are a company that creates websites for companies and you have a great UX team. Then, you should invest more on UX design to increase your market share via your strengths.
2nd Component: Your Industry
Either the supply and demand characteristics or the customer behaviors within your industry is the second key component you should continuously analyze. I will give the simplest example of ice-cream for this case. You know the seasonality effect right? The sales of ice-creams increase sharply during summer months while it nearly sells nothing during other seasons. So, if you are a company that is selling ice-creams you should develop your strategy taking into account the seasonality effect.
3rd Component: Competitors in the Industry
The last component is your place in the industry analyzing your competitors. Now you are basically comparing yourself with your main competitors to find out your strengths and weaknesses. You will look for your relative position in this component rather than focusing on your internal strengths. Let's assume that now you are the same ice-cream brand and your thing is the quality of the ice-cream. You sell relatively expensive products but the taste is amazing. Then show it! Show the experience you are offering to your customers in your marketing channels to use your relative strength.
Alright, now we talked about what is mainly the business strategy and what are its main components. As we mentioned before, COVID-19 has affected all businesses in some certain ways. Now, we will talk about why you have to change your strategy during this pandemic touching upon those effects.
Why do you have to transform your strategy during COVID-19?
Because the main components of your business are changing. Your company changes, your industry changes and your competitive place also changes with the effect of COVID-19. "Change before your have to" is an amazing quote by Jack Welsh, former CEO of General Electrics. You should be proactive to the changes in the business so that you can adapt to these changes instead of letting them disrupt you. The main effects of the COVID-19 that causes the change in your business strategy are as follows:
Change in the Customer Behavior
Now you may need to evaluate your customer segment again. You may need to include or exclude some age groups from your marketing activities for instance. Let's think about the case of a mobile games company. Now that most people around the world are exposed to lockdown measures, they spend more time with their mobile phones. The increasing rate of mobile phone usage also increases the rate of mobile games that are played. Formerly, the company might have excluded the age group 40-50 for their strategy game. However, now that this age group has started to look for new activities to spend time at home, these might be included in the company's target group as well.
Economic Implications of COVID-19
Well, there is also the economic side of the pandemic. Now, most of the businesses are affected by the harsh change of customer demand. Hence, you may think about the reallocation of your budget. Let's say that you are a company that produces and sells desserts to the patisseries and restaurants. Well, your business is one of the ones that is worstly hit by this crisis. Most of your business partners are closed because of the pandemic. However, you may now think about allocating more resources to digital transformation. For instance, you may create your own website to sell your products. So, you may need to allocate more resources for your supply chain activities by increasing your price.
Changing Supply and Demand Characteristics
The market has changed since COVID-19. Both the supply and the demand curves shifted as we can observe. On the supply side, the production schedules of the companies have changed, and on the demand side the customers and their behaviors. There are some certain products for which stockpiling is important such as toilet papers. Let's take the example of an FMCG company that produces toilet papers. After the pandemic, the sales of the toilet papers have increased significantly. Now, the production plans should be made taking into account both the altered demand forecast, and production schedule that would take into account the health and safety of the workers.
So, that's why you should change your business strategy during COVID-19. However, how you would change it is another question to ask which we will cover now.
How to transform your business strategy during COVID-19?
We will mainly talk about 3 things in this topic. Firstly, we will analyze what the businesses should focus on in the short-term, mid-term and long-term. Then, we will talk about the areas to focus on for businesses such as operations, finance and brand. Finally, we will mention some tips for businesses during these hard times. Now that you know the roadmap, let's get on with it.
Short - term Implications
The companies should focus on protecting the business first. How to do that is basically through putting the safety of employees first. In addition, the company should be proactive for the changes in the business. Therefore, senior employees of the company might set up meetings to manage the crisis. Focus on the financial state of your company and create the worst and best case scenarios. Always be ready for the worst case.
Mid - term Implications
Focus on the business stability by flexible means. You should both ensure the continuity of the business during the crisis, and accelerate it through the recovery. Therefore, you should eliminate the non crucial activities for now and focus on the sustainability for your workforce. However, you should also forecast for the future activities to recover the process while accelerating the business.
Implications in Long-term
Remember that this is an incredible opportunity for you to shift your business wherever you want. You may "retool" for the future. If you think that your business is in the back seats of the digitization process, act now! This is your chance to take your place on the online platforms. It will both enable you to recover during the crisis, and help you in your long term activities.
Key Areas to Focus
Crisis management would be the first area to focus on. As a company, you should develop scenarios especially for this crisis. You should come up with accurate forecasts specific to your industry and take actions upon them such as changing production schedules.
Employees should be another area to focus on. You should ensure the safety of your workforce. Therefore you should implement a remote working strategy as soon as possible. In addition, you should create an infrastructure that would enable communication without disruption.
Finance should also be handled. You should assess the current effects of COVID-19 on your business and evaluate different scenarios such as disclosures. Liquidity is really crucial for your company right now like every other financial crisis. So keep as much capital resources as possible.
Operations should be evaluated carefully. You might need to make changes about your pricing according to the customer behavior. In addition, supply chain activities should also be evaluated such as decreasing unnecessary inventory holding cost for certain items.
Tips for Businesses
Well now you know which areas to focus on and what to do in short-term, mid-term and long-term. We will finish how-to part with some tips for businesses about what could be added to your business strategy during the COVID-19 crisis.
1.Analyze your expenditures
Now is a good time for analyzing your expenditure. You should look for all your company's expenditures and figure out whether it is possible to tighten the belt. If there are certain parts of your business that you think will not be effective during the pandemic, you may think about removing them from your balance sheet.
2.Try to adapt to current changes in the market
Well, as we said you should look for the changes in the market. However, you should also act on them. You should make flexible changes in both your production plan and operations to adapt to changes. This way you will be able to both catch the trends and you will be ready for the future changes thanks to flexibility.
3.Analyze your competitors
Also look for your industry. What do your competitors do during the crisis? Competitor analysis is always a good point to start when creating a strategy. Their movements and your resources are 2 key elements of your business strategy during COVID-19.
4.Reanalyze your customer segment
You should also reanalyze the customer segment you target. The changing characteristics of customers may also alter their appeal to your industry. So, you may think about including or excluding new customer segments for your business.
5.Think about the future
Well, not just think about the short-term operations. Keep in mind that this is a very good opportunity for you to change. So, take it! Do the digital transformation that you always wanted to do. Create the social media channels for your companies. See this as an opportunity to evolve and become stronger when this crisis is over.
Well, we talked about what business strategy is mentioning its main components. Moreover, we talked about why you should transform your business strategy during COVID-19 and how to transform it by analyzing short-term mid-term and long-term implications. Moreover, we mentioned key areas to focus and gave some tips for businesses for this transformation process.
COVID-19 is a global crisis none like any other in the last decade. One that we need to fight all together by staying at our homes. We as Prosoftly, offer our services for free to healthcare companies during these hard times to help the fight. Let's do everything we can to help this war against one common enemy, namely Coronavirus.