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Winning Strategies in a Complicated World

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Winning Strategies in a Complicated World

By Alastair Hartrup, Global CEO, Network Critical 

We live in a period of constant uncertainty fuelled by factors such as globalisation, worldwide economic challenges, climate change and much more. In fact, many businesses are struggling to stay aligned in what is increasingly being referred to as the VUCA (volatile, uncertain, complex, and ambiguous) nature of today’s global competitive business environment.

But today volatility, uncertainty, complexity and ambiguity have been amplified tenfold as we move towards a post-Brexit environment. The UK leaves the EU by mid-2019 and as that moment approaches so the debate is widening in terms of what this will mean for the UK and the wider global economy.

 To this point, hardly a day goes by without a headline proclaiming the ‘golden opportunity’ that Brexit represents, only to be countered by a gloomy prediction of economic decline, with some of our mainstay institutions reputedly drawing up plans to move their operations to other countries in the near-term. The truth is that no-one really knows how Brexit will play out, but what is self-evident is that the continued uncertainty stimulated by the current Brexit debate makes it tough for British companies to plan ahead and to compete. And, while we have heard some very encouraging reports about the performance of the UK economy, we do have to take seriously the central prediction of forecasters that leaving the EU will have a negative effect on the UK’s economic growth. Taken in this context, it is likely that UK businesses will face volatility, uncertainty, complexity and ambiguity at unprecedented levels.

Here at Network Critical we are a UK company with a global footprint and we are proud of the products that we manufacture which enable network architects and managers to better understand network traffic and protect valuable information and infrastructure. We also know all too well that competition is a fact of life in our world where we have limited resources. So how do we create a winning strategy and, gain and maintain market share in what is undoubtedly a complicated world?

It is Good to be King

The multi-billion-dollar mega-companies have some advantages that are difficult for smaller companies to address head on. The marketing and research budgets of these companies are larger than the total revenue of many of their smaller competitors. Their regional sales coverage is denser and the sales support resources likely deeper than smaller organisations can afford. By sheer force alone these companies will dominate their primary markets. They are likely also looking for new markets to attack as well. However, if you are thinking there is no hope for the little guy…think again.

The market leaders will lead primarily by force. The old IBM tag line, “No one ever got fired for buying IBM” is a great example of how big guys win. They can bring products to market faster, forge high level relationships with the largest accounts and lock up large deals by the sheer scale of their operations. If you are king, you take advantage of your wealth, connections, reach and force. You crush little guys who get in your way by running them out of business or buying the pestering ones that will not go away.

If Not a King, A Guerrilla Be

The description above paints a pretty bleak picture for the peasants. They do not wield the power or have the wealth of the kings. However, they also do not have to support the palace infrastructure and they may have a better understanding of the needs of the commoners.

First, remember that many of the mega-companies started as small companies. They either created something disruptive that no one else had or they built and marketed something better than the kings of the day. They figured out how to survive and to grow.

Generally, a direct, head on competition between a smaller company and a mega-company will end up badly for the smaller company. However, there are many strategic avenues for small companies to carve out a niche in a market and thrive and grow. Strategy number one is: do not try to compete head to head with someone that has a bigger head.

The biggest and strongest mega-companies have markets/segments in their corporate portfolio where they are not as strong as in their other, more dominant, markets. This is where the smart guerrilla picks a target. Understanding the weaker markets/segments of your competitors is step one in devising a winning competitive strategy.

In parallel with understanding your competitor, it is also important to understand yourself. Look inside to understand where you are faster, cheaper, smaller, simpler, more innovative, more connected, smarter, more focused and/or just better than your competition. Then you put the pieces of the puzzle together and match your strengths with the weaker areas of your competition and that becomes the target for your success strategy. If you have a laser focus on this target and you don’t try to blanket all the outer rings of the target you can compete and thrive.

Remember, you don’t have to be big to be the best at what you do. Pick your targets and focus in order to be the best there is in your particular niche. A proactive mind-set and a willingness to listen and learn and take small steps to success will help to place your business in a positive position. Adopting systems and processes that help businesses make sense of the VUCA world that the Brexit process is creating, is crucial. This, in turn, helps to generate belief in the direction of travel for your business which generates confidence, which generates success.

Mark my words, this is exactly how small companies get to be big companies!

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Battling Covid collateral damage, Renault says 2021 will be volatile

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Battling Covid collateral damage, Renault says 2021 will be volatile 1

By Gilles Guillaume

PARIS (Reuters) – Renault said on Friday it is still fighting the lingering effects of the COVID-19 pandemic, including a shortage of semiconductor chips, that could make for another rough year for the French carmaker.

Renault reported an 8 billion euro ($9.7 billion) loss for 2020 which, combined with gloomy take on the market, sent its shares down more than 5% in late morning trading.

“We are in the midst of a battle to try to manage a difficult year in terms of supply chains, of components,” Chief Executive Luca de Meo told reporters. “This is all the collateral damage of the Covid pandemic… we will have a fairly volatile year.”

De Meo, who took over last July, is looking at ways to boost profitability and sales at Renault while pushing ahead with cost cuts. There were early signs of improving momentum as margins inched up in the second half of 2020.

The group gave no financial guidance for this year, although it said it might reach a target of achieving 2 billion euros in costs cuts by 2023 ahead of time, possibly by December.

Executives said they were confident the carmaker could be profitable in the second half of 2021, but that they lacked sufficient market visibility to provide a forecast.

Renault struck a cautious note, saying it was focused on its recovery but warned orders had faltered in early 2021 as pandemic restrictions continued in some countries.

The group is facing new challenges as the European Union tightens emissions regulations and after rivals PSA and Fiat Chrysler joined forces to create Stellantis, the world’s fourth-biggest automaker.

The auto industry endured a tough 2020 but a swift rebound in premium car sales in China helped companies such as Volkswagen and Daimler to weather the storm.

Auto companies globally have since been hit by a shortage of semiconductors that has forced production cuts worldwide.

“The beginning of the year has shown some signs of weakness,” De Meo told analysts, but added the chip shortage should be resolved by the second half of 2021. “We have taken the necessary measures to anticipate and overcome challenges.”

Renault estimated the chip shortage could reduce its production by about 100,000 vehicles this year.

SHARP HIT

The group was already loss-making in 2019, but took a sharp hit in 2020 during lockdowns to fight the pandemic, which also hurt its Japanese partner Nissan.

Analysts polled by Refinitiv had expected a 7.4 billion euro loss for 2020. The group posted negative free cash flow for 2020.

The 2018 arrest of Carlos Ghosn, who formerly lead the alliance between Renault and Nissan, plunged the automakers into turmoil.

In a further sign that the companies have been working to repair the alliance, De Meo told journalists that Renault and Nissan will announce new joint products together in the coming weeks or months.

Renault has begun to raise prices on some car models, and group operating profit, which was negative for 2020 as a whole, improved in the last six months of the year, reaching 866 million euros or 3.5% of revenue.

Analysts at Jefferies said the operating performance was better than expected. Sales were still falling in the second half, but less sharply.

Renault is slashing jobs and trimming its range of cars, allowing it to slice spending in areas like research and development as it focuses on redressing its finances. It is also pivoting more towards electric cars as part of its revamp.

It was already struggling more than some rivals with sliding sales before the pandemic, after years of a vast expansion drive it is now trying to rein in, focusing on profitable markets.

De Meo told journalists on Friday that the French carmaker will make three new higher-margin models at its Palencia plant in Spain, where manufacturing costs are lower, between 2022 and 2024.

($1 = 0.8269 euros)

(Reporting by Gilles Guillaume and Sarah White in Paris, Nick Carey in London; Editing by Christopher Cushing, David Evans and Jan Harvey)

 

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UK delays review of business rates tax until autumn

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UK delays review of business rates tax until autumn 2

LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.

Many companies are demanding reductions in their business rates to help them compete with online retailers.

“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.

Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.

($1 = 0.7152 pounds)

(Writing by William Schomberg, editing by David Milliken)

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Discounter Pepco has all of Europe in its sights

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Discounter Pepco has all of Europe in its sights 3

By James Davey

LONDON (Reuters) – Pepco Group, which owns British discount retailer Poundland, has targeted 400 store openings across Europe in its 2020-21 financial year as it expands its PEPCO brand beyond central and eastern Europe, its boss said on Friday.

The group opened a net 327 new stores in its 2019-20 year, taking the total to 3,021 in 15 countries. The PEPCO brand entered western Europe for the first time with openings in Italy and it plans its first foray into Spain in April or May.

Chief Executive Andy Bond said its five stores in Italy have traded “super well” so far.

“That’s given us a lot of confidence that we can now start building PEPCO into western Europe and that expands our market opportunity from roughly 100 million people (in central and eastern Europe) to roughly 500 million people,” he told Reuters.

To further illustrate the brand’s potential he noted that the group has more than 1,000 PEPCO shops in Poland, which has a significantly smaller population and gross domestic product than Italy or Spain.

The company, which also owns the Dealz brand in Europe but does not trade online, has already opened more than 100 of the targeted 400 new stores this financial year.

Pepco Group is part of South African conglomerate Steinhoff, which is still battling the fallout of a 2017 accounting scandal.

Since 2019 Steinhoff and its creditors have been evaluating a range of strategic options for Pepco Group, including a potential public listing, private equity sale or trade sale.

That process was delayed by the pandemic, but Steinhoff said last month that it had resumed.

“The business will be up for sale at the right time. It’s a case of when, rather than if,” said Bond, a former boss of British supermarket chain Asda.

Pepco Group on Friday reported a 31% drop in full-year core earnings, citing temporary coronavirus-related store closures.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 229 million euros ($277 million) for the year to Sept. 30, against 331 million euros the previous year.

Sales rose 3% to 3.5 billion euros, reflecting new store openings.

($1 = 0.8279 euros)

(Reporting by James Davey; Editing by David Goodman)

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