When the bull’s eye lands on your business
— George F. Brown, Jr. is a business strategy consultant specializing in business-to-business growth issues. Reuters spoke to him about the topic of a new book he co-authored, CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs (Greenleaf Book Group). —
Q: You talk about what happens when a business becomes a bull’s eye, that is, the target of rivals looking to undercut by price. How does this happen to small companies when they’re rarely dominant players in their market?
A: Small business is rarely the largest provider to a large company, but I’ve seen quite a few instances where a small business is a key supplier to another small business.
Q: How do you know if you’re becoming the bull’s eye?
A: Whether you’re a big business or a small business, if you sit back and reflect and this sounds right, I’m fairly important, I’m fairly visible, I could see the competitors and the procurement managers taking aim at me – assume it’s going to happen at some point and begin to prepare for that day.
Q: What are your options when faced with severe price competition?
A: One fork in the road is to say this customer really should and does care about much more than price. If you believe that’s true, you emphasize the product, you emphasize the service, you tell them all the things you’ve done over the years to help them be successful. The other fork in the road is to say I’m not very different from my competitors, I really haven’t done anything that is going to generate applause. And I better figure out how do I compete with price being a part of the equation.
Q: Should you let the customer go?
A: If you’re only making 10 percent on the customer and a competitor is coming in at 20 percent lower then you do let the customer go. If you can think about how can you cut your own costs and get down to the competitor’s price point, you need to take that seriously because there’s a lot of businesses large and small that really aren’t differentiated on product or service. When that’s the truth you don’t have any choice but to figure out, how do I respond to price based competition?
Q: It’s often hard for small companies to respond to global competition. Do you see price competition from companies like China and India worsening in the next few years?
A: We have not yet seen the full tidal wave of offshore competition with almost as good products at really attractive prices. One of the reasons for thinking this through is there is some time. For a lot of firms, it’s not going to happen in 2011, not even in 2012. There’s no reason why American firms, big and small manufacturing, can’t compete. It’s going to take more attention to issues like this on a proactive basis.