How to beat cheap retailers at their own game

In the early 2004, Njoro, Elburgon and Molo in the Rift Valley were dominated by businesses ran by individuals of Oriental extraction, many of who operated from vehicles parked along the road.

They sold Chinese-made trinkets at astonishingly low prices, creating an uproar among local family businesses who felt they were poised to expand into other goods.

Following a number of meetings in which several options were considered – including that of using violence, it emerged that there were competitive advantages the local businesses had against their foreign counterparts.

The first was the most obvious; they spoke local languages. The second was more subtle; the foreigners were completely focused on profits. They had no concept of the niceties that often accompany trade among Africans; being brusque, rude and obnoxious, their trinkets lost their lustre and they quietly left the scene.

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Invasions by cheap retailers are not a Kenyan or African problem. When Wal-Mart* announced that it was coming to the outskirts of Spearfish, businesses in Belle Fourche, South Dakota, almost all of which are family owned, knew that they were in danger of annihilation.

According to www.familybusiness.com, three years after Wal-Mart’s entry into local markets, retailers within a 20-mile radius typically suffered reductions in sales of $9 million while Wal-Mart gained $13 million.

In addition, research by the same organisation showed that these local traders stood to lose 23 per cent of their annual sales; that in all likelihood, all general merchandise stores would close down and that only food stores stood to gain sales.

The leaders of family business in Belle Fourche wasted no time; months before Wal-Mart came to town they engaged Prof Kenneth Stone, an economics don for a one day workshop to help them develop strategies not only to counter Wal-Mart’s invasion, but to use the increased traffic it would generate for local business benefit.

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Innovation

Family business heads should never be intimidated by wealthy corporate competitors. Rather than attempting to take on them on the resource front, family ventures should resort to innovation, maneuverability and the sense of loyalty only they can muster among those who work and associate with them.

These advantages, used skilfully, can put the family business committed to surviving intense competition from multinational corporations in a position of strength.

Since family businesses are part of the local communities in which they operate, they know of indigenous trends, peculiarities and preferences long before outsiders ever get wind of them.

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By carefully listening to their customers and speaking their language, they can meet their needs almost before they are expressed and in that way, always be a step ahead of the competition.

Most family businesses have uncomplicated management structures; what the leaders say goes. While that makes for many a consultant’s governance nightmare, it is a godsend when the venture is in a rapidly changing market and when its leader is quick and decisive.

What may take a large corporation weeks to approve can be agreed upon and implemented in a family business over a cup of tea. These rapid decisions are a useful competitive advantage for the family business.

TheFounder Magazine

Made Of Founders

TheFounder Magazine is an online business magazine that focuses on starting, running and growing a business in Kenya today

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