Superior Competitive Advantage: The key to survival in 2017

At the close of every year, we all have that moment when we think about the past year and what we would have done better. We also consider what we learned from the past year that will enable us make positive strides in the coming New Year. Resolutions, many would call them. For premier companies and others, the resolutions of the management team is to achieve more growth in the bottom line. But can they achieve this when growth forecasts look so bleak? How can they remain formidable when the macro environment is so hostile on a global level? The answers lie in the numbers. The numbers are what allow these companies to develop a strategy that can allow them to navigate the business environment of 2017. Here is how.  

Durable Competitive Advantage

Taking a leaf from Warren Buffet’s ideology of what makes a company attractive, there are lessons that premier companies in Zambia can learn from on how to remain relevant in 2017. The investment maestro seeks out companies that have durable competitive advantage. Now, TFHZPC understands that the New Year Stock Exchange (NYSE) is light years ahead of LUSE in terms of transaction volume, however, the fundamentals of business remain the same.

Over the course of the year, through our corporate intelligence investigations of companies on LUSE, we have observed there are companies that exhibit “Buffetology alignment”. These are companies that sell a unique product, service or are a low cost buyer. These 3 approaches to business fundamentals for many companies in Zambia will be key to ensure they survive the coming times.

As liquidity tightens, financial institutions will need to develop product offerings that are both unique and give customers an opportunity to differentiate the products they are offered in order to get the best value for money deal. For the food industry, economies of scale as demand for lower costing food sources will be key in ensuring growth in revenue and profits. This will be made possible through further integration of the value chain that will enable companies within that industry to be low cost buyers. For the real estate industry, product bundling may be the means of selling a unique service by players in that industry. With consumers becoming shrewder with their investments, product offerings that allow them to get the most out of the transaction will be key.

In order to achieve superior value, an inventory of resources and capabilities will have to be conducted. An assessment of the company’s assets and their time to expiry will be important when making strategic decisions that may require pursing an economies of scale approach. It is impossible to grow your production level when your equipment or animals are getting old.

Another concern is the turnover of inventory. Carrying stock will be expensive in 2017. Therefore, being able to move the goods off the shelf will be key in growing bottom line. As consumers scale back on spending, price elasticity of demand will be crucial in deciding what price movements to have in place for the products in stock.  Some companies will be tempted to drop prices in order to boost revenue growth however it will be pointless if they do not consider the low cost buyer of raw materials or component services that make the final deliverable. This is how they will be able to protect competitive advantage and increase value.