In the last year we’ve seen various price promises from the leading supermarkets in the UK – Tesco, Asda and Sainsburys and price competition intensifies as national austerity restricts spending.

The idea is simple.

The supermarket agrees to reimburse the buyer for any difference in the price of his or her shopping that would have been achieved at one of the other big supermarkets.

How The Supermarket Price Promise Works And Why It’s Not As Good As You Think

There are various limits in place but let’s take a tin of Heinz baked beans as an example with the following made up prices.

In Asda – 50p

At Sainsburys – 54p

At Tesco – 55p

Asda shoppers don’t need the price promise.

Sainsburys would refund 4p to get back to the Asda price, Tesco would refund 5p.

But I doubt the supermarkets do it on individual line items without offsetting savings where they are the cheapest.

Then we have the issue that about 40% of purchases are made from special offers.

If Branston Baked Beans are on special offer, 4 cans for a £1, in Tesco, the number of customers buying Heinz Baked Beans will drop sharply.

Some have a strong enough product preference to pay the price premium but others don’t.

The Tesco customer buys the Branston baked beans and no longer has an effective price promise.

In fact, if those packs of four cans of Branston beans were available for sale at Sainsbury and Asda for £1.50, there is a favourable price difference of 50p to offset against higher price discrepancies.

Exact Like For Like Purchases Are Not The Best Like For Like Comparison

With so many products on special promotion, the best buy shopping basket from each supermarket will be very different.

A customer can buy the same generic items at all three supermarkets with the price promise and still not qualify for any kind of price refund.

These price promises give you a false sense of reassurance that you’re getting a good deal.

In fact there is much more marketing style than cost saving substance.

It is clever marketing and while it may not be a scam, it is based on tricking customers.

Can The Price Promise Backfire?

I went to Tesco on Saturday and when I paid, I received a Tesco Price Promise receipt that told me I’d saved £0.44 (on a spend of about £50).

Bearing in mind that I bought a number of special promotions including 25% off six bottles of win, to be told that I’d only saved 44p is really quite alarming.

Some of the items I bought must have been much more expensive at Tesco than at the other supermarkets.

A key success factor (KSF) for a trade, profession or industry is something that a business must do to be successful. It is a necessary condition for success.

The Difference Between Key Success Factors, Key Factors Of Difference & Critical Success Factors

There are a number of similar sounding phrases that mean different things. To help understand key success factors, you also need to understand:

Key Factors Of Difference (KFD) – performance dimensions that make individual successful businesses in an industry unique and distinct from each other

Critical Success Factors (CSF) – performance factors which are individually necessary and together sufficient for your business to succeed in its defined mission.

To summarise in less formal terms:

Key Success Factors are common across firms within a product-market or industry.

Key Factors Of Difference are the factors a particular business chooses to differentiate itself on.

Critical Success Factors are the essential elements of a strategy for success in a particular business in a particular industry at a particular time. Your CSFs should vary every time you make significant changes to your strategic plan and the emphasis may change with minor tweaks in strategy.

Success Factors And The Value Chain

As you think through the factors for success in your particular industry and business, it is recommended that you look at both:

• The value chain for your business – all the interlocking processes you use to create value for your immediate customers.
• The industry value chain – how the entire industry from the start of the supply chain to the end create value for the final customer.

The ideal position for any business is the ability to create a product or service for the lowest quality in the quickest time and for the best quality.

This ideal isn’t possible but it’s a useful “perfect product” to keep in mind when thinking about product innovation and process innovation.

Where are the big differences in cost, time taken and quality arising? Do particular processes or steps create trade-offs in these three main areas of performance.

Success Factors & Your SWOT Analysis

When you put together your SWOT Analysis, your strengths hopefully include your key success factors or you have opportunities to develop the extra strengths you need for success.

It would be simple if key success factors stayed constant over a long period of time to allow the business to build superior skills in the vital areas but key success factors change.

Factors That Will Change Key Success Factors

Key success factors can change through:

• Moving through the product life cycle – in the early stages of a product life, design and marketing may be vital but as the market matures, emphasis switching to low cost, efficient operations.
• Changes in customer needs, wants and priorities – purchase criteria that were important may be replaced by new criteria
• Changes in PEST factors – technology changes in particular

If you ignore the idea that Key Success Factors evolve over time, you are likely to find that your strategy makes you less and less competitive.

Your Strategic Plan

Your strategic plan will bring together what you intend to do on:

1. The industry key factors for success as they are now and as you expect them to develop in the future
2. The particular key factors of difference that you believe you can use to create unique customer value to create a competitive advantage.

At this stage, they become critical success factors and need to be backed up with key performance indicators so that you can track performance.

Critical Success Factors (CSF) are unique to implementing your particular strategy.

Key success factors will be common across many of the businesses within an industry and (hopefully) each business has identified a small number of key factors of difference to differentiate itself away from the  competition.

The combination of key success factors and key factors of difference you need to focus on to deliver your strategy become your critical success factors.

Critical Success Factors Are Individually Necessary & Together Sufficient

These CSF are the factors which are individually necessary and together sufficient for your business to succeed in its mission.

There are normally about seven critical success factors for a business. If you identify more than ten, you need to go back and have a look at what you’re trying to do and test each success factor to see if it is really critical.

The reason is simple.

The critical success factors become the guide to managing your business and assessing your daily decisions and actions. You can remember five to seven success factors and check that actions that improve one won’t have an unnecessarily detrimental effect on another.

The Problem Of Having Too Many Critical Success Factors

But trying to juggle thirteen or fourteen success factors makes the process too mentally demanding.

You lose focus when the entire purpose of identifying success factors is to create focus on the few things that really make a difference.

Your business becomes complicated and confusing when the intention is to make success simple to understand and simpler to do.

Communicating Your Critical Success Factors With Key Performance Indicators

I sometimes talk to business owners and directors who have a problem with communicating their critical success factors with their staff and suppliers. It seems that there is this idea that having done all the hard work, thinking and analysis, your strategy should be kept secret.

Bits of it should be but not your critical success factors. Your staff need to understand the important elements that really matter and the success factors should be converted into performance measures and targets.

Performance measurement systems are important for monitoring how well the business is achieving its critical success factors and the Balanced Scorecard is the best well known technique.

Your customers need to be told about your key differentiation factors and they need to experience for themselves that the words turn into consistent performance, benefits and experience. And if your customers can see your differentiation factors, then so can competitors.

Blockbuster, the DVD rental chain went into administration in January 2013 as demand shrank under pressures from online video streaming services like NetFlix and Amazon’s LoveFilm and the increased entertainment options provided by the many channels available on satellite TV.

It was announced just before the quarterly rents were due for payment in late March 2013, 264 stores have been bought from the administrator, Deloitte by Gordon Brothers Europe.

Is There A Future For Blockbuster?

Little has been said about the future strategy for Blockbuster.

The Five Competitive Forces still don’t look very favourable although better than they did before the administration.

Buyer Power – while dealing with individual consumers rather than big buyers, customers are both price sensitive and service sensitive with the higher convenience of video streaming services coming on line.

Competitive Rivalry – the administration of HMV will have helped by reducing supply for shoppers who want to browse through DVDs. Supermarkets will continue to be a problem for the latest releases and most popular of the back catalogue classics.

New Entrants & Substitutes – like for like new entrants are unlikely but there may be further competition in the video streaming services market. Cinemas also rise and fall in demand as certain blockbusters need to be seen when everyone else is talking about them and the “big screen” experience can be much better.

Suppliers – this could be the force that has the most give in it. Landlords have been forced to change some of their practices as the commercial properties are increasingly empty. It’s better to earn something than nothing and too many empty stores will create a snow-balling effect of decline. DVD suppliers and film intellectual property holders may also want to keep a variety of different types of suppliers active.

What Can Blockbuster Do To Make Their Stores More Attractive?

The stores that have been acquired will have been cherry-picked based on profitability. Some areas don’t have good enough Internet service to allow the online video streaming competitors to be effective.

I haven’t been to a Blockbuster store for years although I don’t subscribe to any of the video streaming services.

I don’t subscribe to Sky or any of the other enhanced TV services although I do have access to the Freeview channels. I rarely go to the cinema because there aren’t many films that capture my imagination.

Perhaps I’m easily pleased with the repeats on the TV channels and the box-sets of programmes that I saw and enjoyed from yesteryear or I wanted to see and missed.

I struggle to see what would get me back into a Blockbuster store other than time to waste before I met someone and bad weather to stop me waiting in the fresh air.

What Do You Think? How Can Blockbuster Be Turned Around?

What would you do to make Blockbuster have a more attractive customer value proposition?

Can anything be done to make it more competitive?

There are two fundamental questions that business owners and managers ask all over the world:

• Why are some companies and businesses more profitable than others?

It’s a great starting point for the second, and even more important question.

• How can we this business or company more profitable?

Profit Or Sales

We know some people focus on the wrong issue.

They look to grow the top line rather than the bottom line in the mistaken belief that high sales revenue automatically leads to high profits.

That’s nonsense of course.

The biggest corporate losses in history come from giant businesses with huge sales revenues.

There’s a famous saying, sometimes called the Banker’s Mantra:

“Turnover is vanity, profit is sanity but cash is reality”

My advice is to forget all the ideas about mergers and acquisitions that create big businesses unless a very strong case can be made for much bigger bottom line profits.

Why Are Some Companies More Profitable Than Others?

This is the question that Professor Michael Porter set out to answer in his book, Competitive Strategy in 1980.

His answer was surprisingly simple although the answers led to some very cl;ever thinking on complicated subjects.

The most profitable businesses:

• Operate in industries that are particularly profitable; and
• Have big competitive advantages that mean they can capture a bigger share of the available profits than their competitors.

Businesses can make a good profit by meeting one of those conditions.

The weaker the performance in each dimension, the worse the business will perform so the most unprofitable companies:

• Operate in a particularly bad industry; and
• Have big competitive disadvantages which make it difficult to win business from customers or to service any orders profitably.

That’s why strategy is concerned with both the inside and the outside issues of a business.

It’s only by looking at both aspects that a business can map out the most likely route to profitable success.

What Can You Do To Make Sure You Have A Profitable Business?

Do you have a business or are you thinking about starting a business?

If you’re starting, you need to think about?

• Is the market niche you’re thinking about entering an attractive one that can provide you with good profits or is it a potential profit trap? The Five Competitive Forces Analysis and STEP Analysis are good starting points.
• When you enter this market, will you have a competitive advantage in terms of a differentiated value proposition or lower costs?

If the answer is No to both questions, don’t waste your time and money.It’s better to find another business opportunity that excites you.

If you have two Maybe’s or a Yes and a No, I think you need to think very carefully. Consider your options. Is this a market that you’re really committed to? Can you find a better niche? Can you find a business proposition and model that offers you the chance to have a competitive advantage?

A useful article to read is Will My New Business Venture Succeed Or Fail?

If you already having a business and it’s not performing very well, I think you need to ask yourself three questions:

1. If the market is bad, can you find a more profitable niche or segment that you can move to with confidence? This is easier if you’re a general business who needs to specialise rather than a specialist who has a reputation in one field and needs to jump to another specialism.
2. Do you have a competitive advantage that you’re not making the most of (it happens) that you can promote more extensively or can you development a competitive advantage (differentiation is usually easier than cost leadership)?
3. Are things so bad that you need to leave this market by selling or closing the business? Sometimes a business that isn’t commercial viable on its own can become a profitable sideline in a better established business through synergies and shared costs.

Should every business have a clear vision, no matter what the size?

In my opinion, yes.

There’s a danger of thinking that mission statements and vision statements belong to the work of senior managers in big businesses and only big businesses.

While it’s true that big businesses have a much harder job of communicating a clear focus and purpose to the many employees in a way that builds a consistent company culture that pulls in the same, right direction, small business owners need to think about vision too.

Why Having A Vision For Your Business Is Important

There’s a saying that goes along the lines of…

“If you don’t know where you’re going, any road will do.”

That’s frightening when you stop and think about it because it means that you’re vulnerable to each and every nice looking opportunity and you could find yourself chasing here, there and everywhere.

It seems that the saying is based on a thought in the children’s book Alice In Wonderland.

“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where–” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“–so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
(Alice’s Adventures in Wonderland, Chapter 6)

Let’s summarise those last two lines.

You’re bound to get somewhere if you walk long enough.

Putting that into a business content, your business is bound to become something if you work hard enough.

The problem is that the “something” is often a business where long hours, hard work and low pay are the rewards for not having a clear vision.

They are common small business problems that you want to avoid.

The Benefits Of Having A Vision For Your Business

What is the purpose of your business? What did you set out to achieve at the beginning?

For me, purpose comes down to finding the right balance between two forces:

• What you want to do for your customers and clients

• What you want to do for yourself

Your mission and vision help to bring those two forces into alignment.

Sometimes they pull in opposite directions – you want to give your customers great value for money but you also want to charge a high enough price to give you a big profit.

But they don’t have to be opposites.

A business that does great things for its customers deserves do do great things for its owners.

A business that doesn’t serve its customers well doesn’t deserve to reward its owners well.

How To Create A Vision For Your Business

First you need to agree on your purpose in terms of customers and the owners.

Then you need to decide whether that’s sufficient.

It is for many business owners but others want to include other stakeholders like employees or the environment.

Create a short, snappy sentence or two that captures your purpose.

Make sure that it is meaningful and specific.

It’s not

Our purpose is to have many happy customers and for the owners to become rich.

That is meaningless and gives little or no direction.

Then when you’ve got your purpose, write your vision.

This is a visual expression of your purpose in so many years time. It may be one, five, ten … whatever you choose.

An Example Of A Vision

Let’s move away from business because I know that some people find it difficult to switch from examples of one trade to their own.

We’ll think about holidays.

A bad purpose is

I want to have a great holiday.

There’s no direction there. It doesn’t close down options.

A much better purpose because it’s more specific is…

I want to have a great holiday in South Africa with my wife and children in September 2013 including at least three nights on safari.

The vision would be…

The sun rises slowly and the air is still chilled but we’re excited. The tracker caught sight of the big cat’s tracks about ten minutes ago and we’ve been edging along in the safari vehicle ever so quietly. Then I hear a deep roar and the bass thuds into my chest. I can’t breathe. I can’t talk as the long grass parts in front of me and a gorgeous male lion appears, blood smeared around his mouth.

The kids have seen their first ever wild lion and their eyes are shining brightly as they stare at the magnificent beast in awe.

The holiday example has given me the chance to turn up the emotions but your vision should be inspiring and emotional.

It puts you where you want to be and gives you the motivation to get there.

Really great visions aren’t often seen in business but that doesn’t mean that you can’t have one.

If you want more inspiration for a vision, two great examples from the political arena are:

• Winston Churchill’s “We shall never surrender” speech from the second world war
• Martin Luther King’s “I have a dream” speech in the 1960s civil rights movement in the USA.

More Help To Create A Vision For Your Business

If you want more help creating a vision for your business and many more tips on building a successful business, you should take up the offer of 30 days trial membership in Profitable Growth Strategies.

This article looks at prices wars and in particular, how to survive a price war if you find yourself being dragged into one by competitive rivalry by undifferentiated competitors or a particularly aggressive strategy by one competitor who may be differentiated but whose actions damage the entire market.

My Experience Of Price Wars

I have experienced a number of price wars while I was a senior manager in business and seen the effect of others since I’ve been a consultant/coach.

It’s a bloody business.

Each price war has been extremely damaging.

The big lesson I’ve learnt is that the best way to survive a price war is do you best to stop it from starting in the first place.

Unfortunately sometimes, competitors are so stupid and behave so irrationally that a price war is inevitable.

The prolonged financial crisis and recession is increasing pressure on businesses to keep sales high and owners and managers can feel forced into cutting prices to keep their businesses above the survival line.

Why Do Price Wars Start?

Price wars start because:

• The market is declining and firms are fighting for a larger share of a smaller cake; or

• One (or more) firms have very aggressive growth objectives

• Price wars can even start by accident.

Aggressive competitors believe that they can make more money by:

• Trying to force competitors out of business because they have major cost advantages or can withstand the losses for a longer period. Once competitors leave, the aggressor believes they will have a dominant position in the market which allows them to control prices.

• They don’t understand how their own cost/volume/profit relationship works and may underestimate the cost of the product or service.T

• They don’t realise that if they lower prices, their competitors are likely to find out what is happening and respond. All too often strategies are considered in isolation without thinking about how competitors will react.

Price Wars Can Start By Accident

Competitors’ actions are misunderstood.

Perhaps there is a temporary special offer from one competitor to turn slow moving stock into much needed cash which escalates into a series of tit-for-tat price reductions as the other competitors respond to what they perceive as an aggressive action.

Or fluctuations in market demand are not understood and firms think that competitors must be stealing their business. I have written an extensive review of the beer game and how systems thinking can help you interpret fluctuations in demand.

There is also the risk that price wars can start because of manipulation by buyers and fear based naivety of suppliers. A buyer gains by paying a lower price so an unscrupulous buyer can:

• Exaggerate the offer from a competitor by outright lying – Smith & Jones have offered us a price of £2.50 per unit when you are charging £3.30 (when their best price is actually £2.95)

• Mislead by missing out key terms – Smith & Jones have offered us a price of £2.95 when you are charging £3.30 (but they want us to order and take immediate delivery of 10,000 units – their price for the 1,000 units that you provide us with is £3.35)

There Is Usually No Winner In A Price War

There are often no winners in a price war.

A price war can destroy the profitability of an industry for many years hurting every single competitor. Many industries have found that it is much easier to cut prices than it is to increase them again afterwards.

Even customers may lose out if a product is treated as a price based commodity when there are really valuable differences in either the product or the service. As struggling competitors withdraw from the market, either voluntarily of through bankruptcy and liquidation, customers are left with less choice.

What You Can’t Do To Survive A Price War

You can’t reach an agreement with competitors to fix prices to particular customers.

Cartels are illegal in the European Union, the USA and many other countries.

What You Can Do To Survive A Price War

• Emphasise the extra quality or service of your offering – don’t allow the customer to that the product or service is a commodity and  that all competitive products are equal so that price is all that matters

• Remind the customer of the risks in taking a low cost option

• Create a low cost, lower value alternative product of your own that gives extremely price conscious customers a chance to stay loyal to your business and brand.

• Work together to take costs out of the transactions. Recognise the difference between saving the customer money and your cutting your prices.

• Lower prices through a rebate scheme that rewards extra volume and not just promises of extra volume.

• Re-align your price lists. Supermarkets have low prices on the staple products like bread but make their margin on the extras that people buy. Can you use loss leaders to keep customers who will buy premium priced items out of convenience.

• Make it difficult to compare prices – e.g. mobile phone tariffs – although makes it difficult to win customers on price as well.

The Risks Of Buying From The Cheapest Competitor

Price is often used as an excuse for changing suppliers but it can be a disguise a service problem or general dissatisfaction with the customer supplier relationship.

Alternatively the customer may take for granted the customer service you provide and believe that is the industry norm when your service and dissatisfaction with that of your competitors wins you business elsewhere.

So make sure that the customer is aware of the risks of buying from a cheaper competitor:

• What will the customer lose that he takes for granted from you?

• What short cuts/cost savings must the competitor have made to sell at this price profitability? How will this impact on the customer?

• Why is the competitor so desperate to get extra business? Is this a last desperate attempt to win enough volume to stave off financial collapse and if that happens, where will that leave the customer.

Communicate By Signalling To Competitors Within The Market

Collusion is illegal and the punishments are high.

But that doesn’t mean that there can’t be some kind of indirect communication with competitors – perhaps with the market in general via the trade press, through customers (although you have to be careful that the true message is passed on) and through trade associations.

It’s what business strategists call signalling – making clear what is happening in the market and what you are doing so that the competitors are better informed and not left to make up their own minds.

Some of this signalling is counter-intuitive but it has to be to fight the idea that “more sales equals more profit”.

If the market is in severe decline, like the housing and car markets at the moment in the UK, it makes it much easier for business owners to understand why their sales volumes are down by 30%.

The market leader needs to make sure that they are not caught up in a bravado exercise for their own public relations – the industry is down a long way but we are selling more. That kind of statement signals to competitors that their volume is being “stolen”.

The same education is needed to explain the impact of the Beer Game and how de-stocking along the supply change exaggerates the impact of demand changes at the other end.

And if you are having a sale to sell off excess stocks, signal the fact that the sale is limited in quantity and duration. It may cause competitors some short term pain but it won’t last long.

If there is a danger of a price war, the trade can be educated on the dangers of cutting price and the devastating effect on profit of just moving the purchase volumes around.

The aim of effective signalling is to stop the price war happening.

The Signals Of An Aggressive Competitor

Sometimes a competitor will signal an aggressive move. “It is our intention to grow market share to 40% and we will do whatever is necessary to get it there.”

This type of signal gives competitors a problem and a price war may be inevitable.

There are some key questions to ask?

• Is the threat credible? Does the competitor have the financial muscle to back up the intention?

• Will the expansion stop at 40% or will it then be 50%, then 60%…?

You need to reach a decision.

In fact it’s the classic survival decision of fight or flight.

If you are going to have to fight, it  may be better to fight the battle early.

What will it take to stop the competitor and is the fight worthwhile or should the business withdraw from the market?

It is better to withdraw early than suffer huge losses and being forced out.

Disciplining The Aggressor In A Price War

Some price wars are fought in public and in full view of all the market participants.

The market trader selling vegetables knows when his competitor has cut prices and can react immediately. The other party sees the reaction and has a choice of cutting price again, matching the price or increasing the price hoping the competitor will follow again.

Other price wars are in private.

The first the incumbent supplier may know that an aggressor is taking action is when the orders stop or a phone call comes in asking for a new competitive quote.

The choice is to match the lower price or to hold. Keep the business at a lower price, then your competitor has not gained but you have lost profit – and the customer may now be very marginal.

But do you leave it there, or should you try to rap the competitor across the knuckles?

It’s another signalling issue.

If you know the industry well, you can go to your competitors customers – not all of them but enough to get the point across – and either

• Submit a lower price yourself and threaten the established competitor’s volume.

• Discover the prices offered by your competitor and make their customers aware that the firm is aggressively offering new customers deals which may be far better than given to existing customers.

It’s one thing to try to increase profit by getting extra profit by winning your competitors customers on price but it is another to see the profit on the established business damaged.

What Are Your Thoughts On Price Wars?

Have you found yourself caught in a price war?

What happened and how did you get out of it? Which of the tactics to survive a price war mentioned above do you think could have helped you?

Let me know by leaving a comment?

I look looking for products that are new, different and innovative so when I read about Sex Cereal, I knew it had to feature in my differentiation examples.

Sex Cereal is promoted as the world’s most Passionate Cereal and the first gender-based wholefood and it’s promotional slogan is “big life living, fuel your fire”.

It comes in his and hers varieties.

SEXCEREAL for HIM is blended with ingredients to support testosterone.

SEXCEREAL for HER is blended with ingredients to support hormonal balance.

You can read much more about Sexcereal at the website sexcereal.com.

How I bet they wish the slogan “snap, crackle and pop” hadn’t already been taken.

In my dimensions of differentiation, this breakfast cereal comes into differentiation by what, differentiation by who and differentiation by why.

You can read more about the Sexcereal story at sexcereal.com

I had to smile at the promotional video.

I’m sure you’re asking two questions:

1. Does it work? Does it put extra vigour into your sex life?
2. Does it taste good?

I don’t know. I haven’t tried it but I’d love to hear your feedback if you have, so please leave a comment below.

They say “sex sells” but does it sell breakfast cereal?

I want to take this opportunity to explain why I recommend Profitable Growth Strategies as the business growth training for small business owners.

The Business Problem I Saw

Ever since I was a trainee accountant in the early 1980s, I’ve been concerned at the struggle many small business owners have to earn an income that comes close to what they deserve.

I was able to see behind the bluster (“things are going great and we’re really busy”) and the trappings of success (the new BMW that was leased not owned) to what was really happening and it was quite an eye-opener.

Small Business Failure Statistics And The Bigger Problem Of Under-Performance

There’s a lot of exaggerated claims made by people who want to sell services to small business about the risk of failure. You may have seen claims like “50% of small businesses fail within two years” or “90% fail before they are five years old”.

Other people say that it’s much lower – small business failure – the real numbers

I think part of the reason is the definition of failure.

Is a failure a business that goes bankrupt costing creditors money and where the business owner loses everything?

Or is it one where the owner quietly closes it and pays off everyone else?

From what I saw as a young man and what I’ve seen since, the number of small businesses that fail in a formal sense or are closed by a disappointed owner are often dwarfed by the number of businesses that provide little more than a subsistence income.

I’ve seen businesses where the owner works 60 hours plus a week and with their house on the line with the bank, earns less than the lowest paid employee who has no commitment to the business.

That can’t be right.

And especially when the businesses are often ignoring significant opportunities and instead focusing on doing the wrong things, often in the wrong way.

The Need For Business Training

The world of education is letting down its citizens by not teaching young people more about finance and the dangers of spending more than you earn.

That’s only a starter.

A business owner needs to know much more.

The Entrepreneurial Myth

Author Michael Gerber became famous for writing his book The E Myth which tells the story of many business owners.

Most start as employees of other businesses and learn the trade.

They are printers, bar staff, chefs, plumbers, architects … (and every other trade and profession you can think of).

And they do a good job and feel they are not getting fully rewarded.

They see the business owner and believe he or she is reaping high profits.

So they decide to start their own business.

And then the problems begin.

They are still good at their trade.

But they don’t know how to build a business.

So the business that was meant to deliver the dream becomes a long term struggle.

Sometimes it ends in business failure. More often the business owners is sucked into a long commitment of long hours for too little money.

There Has To Be A Better Way

The success of some small businesses shows that there has to be a better way.

Sometimes the business owner is in the right place at the right time. He gets lucky.

But sometimes the business owner does the right things in the right way.

You can’t rely on luck.

You can rely on doing the right things.

Traditional Business Training Is Expensive

If you’ve bought business training that’s delivered in a classroom environment, you’ll know that good training is expensive.

As a chartered accountant, I have to have continued professional development.

In the mid 1990s I started my MBA course because I was tired of paying £400 for a one day course, and if it was in London, another £100 or so for the travel and subsistence.

It turns out that was cheap.

Jay Abraham is an extraordinarily successful marketing consultant in America who built his reputation selling short 3 to 5 days courses for $5,000. Then $10,000. I think it’s got as high as $25,000.

Other people have followed him into charging amazing price for short courses.

Information Overload On The Internet

Of course you don’t have to pay to get business training.

there is plenty of stuff available for free on the Internet.

The problem is sorting out the good from the bad.

There is plenty of bad I can tell you.

And then there’s the problem that even when you find a quality website like this one, the information that’s given for free is often a teaser for the paid stuff.

It goes part of the way there but it rarely answers the specific issue of what you should do in your specific circumstances at this specific time.

To be useful to everyone it has to be more general in nature.

Then Business Growth Coaching Is The Answer

Yes it is if you can afford it.

There’s no substitute to working with the right business coach who is happy to support you in getting from where you are to where you want to be.

Unfortunately there are wrong coaches who don’t know as much as they claim and there are great coaches who are right for some people but may be entirely wrong for you.

I know I work very well with some people but the chemistry isn’t right for others.

But coaching has a huge problem.

It is very expensive.

And many coaches expect payment upfront before they’ve helped you and don’t offer any kind of money back guarantee on results or satisfaction.

In 2008 I Saw The Future

In early 2008 I saw a coaching course promoted in a product launch on the Internet although I missed all the build up.

It was the Business Growth System by Rich Schefren developed to help Internet entrepreneurs to build a successful business.

It made some very impressive claims and I bought it as a check on my competitors.

I was very impressed.

The content was very good but I was familiar with much of it although some of the angles taken were neat and helped to make it feel new and different.

But it was the format that really impressed me.

High quality video training delivered on the Internet at times when it was convenient for me.

Together with a weekly Q&A call where business owners could call in and ask their specific questions provided they didn’t mind the answers being shared around the group.

And the price was significantly lower than traditional business coaching.

My Search For General Small Business Growth Training

I began a long search for some business training to recommend.

It took me in many different directions.

I thought I’d found the ideal solution… until the price went up by 568%.

I tried to create my own solution.

But I had various problems including the site being hacked and having my own login deleted and the brand name was ruined by being associated with some malware.

My health problems got in the way as well.

It was too much.

Profitable Growth Strategies Training

Then I found some great training that could be licensed.

The websites were very professional and the ideas in the training were high quality.

It was, to be honest, much better than I could ever hope to put together on my own.

The more I thought about it, the more I liked the idea.

Profitable Growth Strategies was born.

www.ProfitableGrowthStrategies.com

Try Profitable Growth Strategies For Yourself For 30 Days

Don’t take my word for it.

I’d like you to try the training for yourself for 30 days.

You can see just how good it is and how much there is.

It only costs $1.

www.ProfitableGrowthStrategies.org

I charge a token amount because I want to weed out the people who aren’t going to do anything with it.

While you can cancel at any time, I feel I’ve let you down if you cancel quickly.

And I don’t like feeling bad.

But even a small charge like a $1 takes out many of the tyre-kickers who aren’t going to do anything.

I can’t help them.

The information in Profitable Growth Strategies isn’t going to help them.

But if you’re serious about your business and you’re ready to take action, it will help you.

www.ProfitableGrowthStrategies.org

One of the very best known strategy models is the Five Forces Of Industry Profitability that has been developed and promoted by Professor Michael Porter.

Background To The Five Forces Analysis Model

The Five Forces Analysis model was first introduced in the Harvard Business Review in 1979 in an article by Michael Porter called “How Competitive Forces Shape Strategy.”

It was then a major element in Michael Porter’s book, Competitive Strategy.

In 2008 Michael Porter returned to the Five Forces Model with an updated article in the Harvard Business Review called “The Five Competitive Forces That Shape Strategy.”

Even Michael Porter Didn’t Believe In The Five Forces

I found this article in Forbes.

It says that Michael Porter’s own strategy consultancy firm, Monitor, had stopped using the Five Forces Analysis.

That’s a big shock when the Five Forces are still a big part of the strategy courses that are taught on many MBA courses.

Sadly I didn’t feel the article went into too much more detail about the five forces and talked more about why the strategy firm failed. In fact there was more of a criticism in the original article.

I’ve said before, criticising the ideas of Michael Porter is very popular because of his preeminence but that criticism is often made based on a misrepresentation or simplification of Porter’s basic ideas to promote the “next big thing”.

Where’s The Customer In The Five Forces?

In my article, What Is Strategy, I define strategy as

“Strategy is how you achieve your own objectives by winning the hearts, minds and business of customers by out-thinking and outmanoeuvring competitors.”

While customers aren’t entirely ignored in the Five Forces model, there is little attention given to them. In fact big customers are seen as a negative force because of their enhanced bargaining power.

The Five Forces Analysis Isn’t Strategy

The Five Forces are one tool that takes a supply side approach to strategy.

It’s focus tends to be on the industry – the companies who supply the products to meet customer demand – and the aim is to operate in an industry where there is enough profit to avoid the pitfalls of severe competitive rivalry.

You won’t get a winning strategy from just doing your Five Forces analysis.

No matter who much time and attention you give it.

But that’s not to say that it doesn’t serve a purpose to give insights into the competitive process.

My definition of strategy recognises that you need to understand your competitors and what they want to do and can do.

I’ve seen far too many hockey stick financial forecasts to know that many businesses ignore competition and the basic fact that competitors also want to grow and increase profitability.

I’m not going to criticise a tool that shines a light on competitors and how the industry fits together.

The five forces exist.

It’s a huge risk to ignore them and especially if there is a developing trend.

The Problem With The Five Forces

The big problem I see with a very detailed five forces analysis is finding the answers.

It’s much better at identifying problems than coming up with solutions.

Substitutes are a growing threat – so what do I do?

Bargaining power of customers and suppliers is growing – so what do I do?

New competitors are entering the market with much lower factor costs of products – so what do I do?

The slashed profits in the industry have caused competitive rivalry to become cut-throat – so what do I do?

I find it’s a better tool for asking:

• Should I go into this product-market (industry)?
• Should I look to diversify away from this product-market?
• Should I exit this product-market?

than for answering the question:

• How do I make more money in this product-market?

Those three questions are very valid in certain situations but the fourth question is the universal question of strategy that every business wants to answer.

The truth is that sometimes you can’t expect to make good profits in a product-market.

I think it’s useful to know that so that you don’t waste precious resources trying to do the impossible.

The Five Forces analysis does help. It wouldn’t have been accepted so readily when it first came out and it wouldn’t have stood the test of time.

The Five Forces are based on industrial economics which looked to explain why all markets weren’t perfectly efficient. The economists saw perfect competition as the ideal but as I explain in my article, It’s Not Perfect If I Can’t Make A Profit, entrepreneurs and business managers took a different view.

It’s just not the panacea to all strategy questions.

What Do You Think About The Five Forces Model?

I’d like to know your thoughts about the five forces.

Have you found the model helpful or do you think it’s a waste of time?