Friday, December 17, 2010

Shape your perception

Yahoo will lay off about 600 employees, mostly in the company’s product group, a spokeswoman, Kim Rubey, said.  Yahoo issued a statement on Tuesday that the company would continue to hire globally to support crucial priorities. “Today’s personnel changes are part of our ongoing strategy to best position Yahoo for revenue growth and margin expansion,” said the statement.
- December 15, 2010 NYT

Once again it proves that MOP (Market operating price) is decided by market forces and competition so only option left for increasing profitability is by reducing cost and this is one more example. Price will always be key driver for decision making for the clients however cost competiveness is one factor that can decide survival cycle of the supplier organization. For a service organizations / software development companies, this is more crucial.

As mentioned in the news that Yahoo would continue to hire globally to support crucial priorities. In other words, they will invest into resources in the 3rd world where they can get skilled labor at a lower price. This is truly ROI focused move and clearly shows that mind-set of “more for less” is everywhere with most American companies.

In today's highly competitive global economy, if a firm moves 5,000 jobs abroad, it is perhaps doing so to preserve another 50,000 jobs at home that would otherwise be lost. Outsourcing is not particularly different from the case of Boeing buying cheaper steel abroad so that it can stay competitive vis-a-vis Airbus. Force Boeing to use domestic steel only and you can be sure that the result will be more good jobs lost at Boeing than those that would be created in U.S. steel industry. - By Arvind Panagariya (the author of "India: The Emerging Giant.") published on 7 November, New York Times

Again it proves that “Outsourcing is not just a strategy of cost reduction. It is in fact, a strategic service and essential element of growth.”

During my professional career of 27 years, I have handled significant number of assignments based on marketing, sales and channel development in different markets of India. India has been system integrator driven market like all other Asian countries so component distribution and channel development has been of prime importance between 1996 and 2006.

Awareness of this problem is frequently triggered when a channel partner or a retailer indicates that they are about to drop the product. Many times they even complaint of making huge losses due to short product life cycle. Biggest challenge for Channel partners was how to deal with shrinking margins, short product life cycle and lack of awareness for the road map of product or services.

You cannot stop paradigm shift or even change the product life cycle specifically when you are part of supply chain management of it. At the same time you cannot control MOP of the product / SKU which is close to EOL (end of life). I always used to tell them “Do not fight - use it and live with it”. Only option is to keep moving, keep replacing your inventory and try improving your bottom line by smart purchase or bulk purchase.

Same principle applies to service industry and you have to find and implement means and ways of reducing your cost to increase your profit.

The effective and most economical way of growing your business is by keep adding new products and services to your line of products or services. Upgrade your sales message (your selling proposition) on regular intervals. If every six months you change your sales message and add more of perceived value, you are sure to be on your growth path. This will be the best way to stimulate your current client base and encourage new prospects who are currently not buying your product or services.

It is also important to shape the perception of the core team of your organization.

Think about it.

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