1000 Business Lessons Every Businessman Must Know

Chapter 37 Business Blind Spots: Business Mistakes Commonly Made by Some Bosses (1)
288. Ignoring the development of the target market

The development of enterprises cannot be separated from the market environment. At present, many small and medium-sized enterprises ignore the development trend of the target market and blindly expand their scale, which is one of the main reasons for their troubles.For example: In recent years, the domestic health care products, VCD and other product markets have become saturated and have stagnated, and the market competition pattern has undergone great changes. Large-scale enterprises have gradually controlled the market, and small and medium-sized enterprises have blindly expanded in this market. Will be subject to tremendous competitive pressure, or even close down.

For this reason, in order to become a "strong" small and medium-sized enterprise, it is very necessary to locate in the "sunrise" market. The "sunrise" market refers to a partial and specific market, such as a continuously expanding The service industry is a "sunrise" market.Because of the ever-expanding market size, small and medium-sized enterprises can be given a relaxed space for survival and development.

289. Ignoring advantages in local markets
In the process of development, many small and medium-sized enterprises often neglect to maintain their competitive advantages in parts and blindly pursue large and comprehensive, which leads to the loss of local competitive advantages and business failure.The domestic red sorghum fast food chain operation is an example.The earliest red sorghum fast food was established in Zhengzhou, and its business mode was recognized by local consumers. However, after it was transformed into a chain operation, the core of competition shifted to the management and financial capabilities of the enterprise, and red sorghum lacked advantages in this regard. As a result, Leading to the overall collapse of red sorghum enterprises.

A strong small and medium-sized enterprise must be an enterprise with unique competitive advantages in the local market.A restaurant in a community may not have superb cooking skills and luxurious decoration, but it may have unique strengths in understanding the tastes of consumers in the community, and it is better than large restaurants in terms of price, business hours, customer affinity, etc. Even better, this is enough to form a unique competitive advantage in the local market and remain invincible.

290. Neglecting to cultivate the main business with steady growth

The key to the survival and development of small and medium-sized enterprises is to have a stable growth of main business income, rather than a short-term simple increase in income.Small and medium-sized enterprises that are struggling to survive often engage in multiple businesses, which is not a good phenomenon, indicating that the business foundation of the enterprise is very weak and they are in danger of closing down at any time.A small consulting company may undertake various types of business for income, and it is comprehensive and purely to increase income. This method is not conducive to the long-term development of the enterprise.

It is advisable to be targeted and form an advantage in a local field. If the market in the targeted field happens to be a "sunrise" market, the enterprise will have a broad space for development.

291. Neglecting to build a stable team

Although it is common for SMEs to lose a lot of personnel, it is still necessary to maintain the stability of the core team.Especially for some technology-based small and medium-sized enterprises, the core technology is often in the hands of core team members, and an unstable team sometimes directly destroys the career of a small and medium-sized enterprise.

The correct approach is that when the enterprise develops, it is necessary to formulate appropriate incentive policies to encourage key personnel, such as giving dividends, stock options, or salary increases, etc. In addition, it is also necessary to maintain communication so that key employees agree with the development goals of the enterprise, thereby establishing stability. core team.

292. Ignoring unstable financial situations
The capital scale of small and medium-sized enterprises is small. When the scale of operation is expanded, an improper investment will cause instability in the financial situation, and it is likely to ruin the future of the enterprise.Of course, for small and medium-sized enterprises, due to the desire for development, it is impossible to have no risk at all, but it is necessary to keep in mind the principle of "stabilizing the financial status of the enterprise". In many cases, the reason for the closure of the enterprise is not just because of losses, but rather It is due to the improper occupation of funds that leads to problems with the flow of funds.In particular, it should be noted that the diversified development of enterprises in the early stage of establishment is an important reason for the deterioration of the financial situation of enterprises.

To improve financial status, we must pay attention to financial indicators, the most important of which are "cash flow", "accounts receivable", "accounts payable", and "quick ratio". It is very important to keep these indicators in a healthy state.In addition, you must be very cautious about the plan to entrust your income on future investment income. If you invest in special equipment, the cashability is very weak; if it is a product that is different from the current product type, you must be very cautious.

293. Ignore the rise in marginal cost

This is a misunderstanding that many small and medium-sized enterprises are prone to fall into.The so-called "marginal cost" is the additional cost required for each additional unit of output.

As the scale of the enterprise expands, management costs will increase, market expenses will increase, and employee wages will also increase. However, sales and profits will not expand simultaneously, and marginal costs will continue to rise.Marginal cost rises, and even enterprises that rise rapidly will gradually decline in profitability, which is doomed to lose their development prospects.

In addition, the rise in marginal costs also reflects the lack of management capabilities of enterprises, and enterprises will encounter more operational resistance due to scale expansion.

294. Belief in high profits
The most common business mistakes are worshiping high profit margins and "pricing at a premium."The near-collapse of Xerox in the 20s is a prime example of what such a mistake can lead to.

Immediately after the company invented the copying machine—few products in the history of the industry have achieved such enormous success so quickly—it began adding feature after feature to the machine, each priced at a maximum profit margin, so that each added One feature drives up the price of a copier.Xerox's profits soared, and so did its stock price.But the majority of consumers who only need a simple machine are increasingly looking to buy from competing manufacturers.When Canon of Japan launched this product, it quickly occupied the American market.Xerox could only survive.

GM's troubles -- and the troubles of the American auto industry as a whole -- are also largely the result of an obsession with profit margins.By 1970, Volkswagen's "Beetle" car had about 10 percent of the U.S. market, demonstrating the need for small, fuel-efficient cars in the United States.Years later, after the first "oil crisis", the market has become large and growing rapidly.For many years, however, American automakers were more than happy to leave this part of the market to the Japanese, since the profit margins on small cars seemed to be much lower than those on larger cars.

This notion quickly proved to be an illusion—and that's how things usually are.GM, Chrysler, and Ford have had to give buyers of larger cars more and more subsidies, such as discounts and cash incentives.As a result, the Big Three presumably paid more in subsidies than they could have spent developing a competitive (and profitable) small car.

The lesson: The cult of premium pricing always creates a market for competitors.High profit margin does not equal maximum profit.Total Profit = Turnover × Profit Rate.Thus, the greatest profit is achieved by the rate of profit that produces the greatest total profit flow, which is often the rate of profit that produces the best market positioning.

295. Pricing at "highest affordability"

Some companies limit the price of a new product with "the highest acceptance in the market".It also creates opportunities for competition without risk.Even if the product is patented, this policy is wrong.Given enough incentives, potential competitors can always find a way to counter even the most powerful of patents.

The reason why the Japanese can occupy today's world fax machine market is because the Americans who invented, developed and first produced the fax machine set the price with the highest market tolerance—that is, the highest price they can get.However, after studying hard for two or three years, the Japanese lowered the price of their products in the United States by 40%, and won the market overnight; only a small American manufacturer that produced special fax machines in small batches could survived.

On the contrary, DuPont still maintains the status of the world's largest synthetic fiber manufacturer, because in the mid-20s, it launched a new patented product to the world market - nylon, the price of which made it necessary for DuPont to sell for 40 years before it could make a profit. , so that it remains competitive.

296. Cost-driven pricing

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