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| Subject: Avoid Cash Flows Problems In Recessions | |
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Author: Dennis S. Vogel |
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Date Posted: 23:22:18 07/12/08 Sat In reply to: Skeptic 's message, "Re: Avoid Financial Problems like Recessions" on 16:32:42 07/12/08 Sat & If I’m elected as your president, the 1st thing I’ll do is resign. I don’t want the job. Plus, despite the musical claim of Tears For Fears—“Everybody Wants To Rule The World” I definitely don’t want to do that either. Hi Skeptic, Omnipotence & omniscience are generally considered attributes of The Man Upstairs. Though I am The Man Upstairs, the tenants downstairs wouldn’t agree about me being omnipotent & omniscient. If I were, I’d know when my children are shaking the building & being noisy. I’d also be able to prevent their misbehavior. But I suppose in keeping with free will, I’d have to let them hurt themselves & others. Be that as it may, & some of it could… Thank you for your request for me to clarify what I wrote. I can’t prevent recessions because it would interfere with my dictum of free will. People decide whether to purchase things. No politician—in a democracy—will change that. (My explanation below seems to ramble, but I’ll tie in it with what I wrote in other posts & the concern you seemed to express.) I can help retailers determine the values/solutions a market niche wants. In this case, “value” means something people willingly pay for & “determine” has 2 meanings—decide & discover. Since people have general or specific ideas about what’s missing in their lives, I can help retailers match what suppliers make available & solutions people need/want. Since people don’t always know what they want until it’s presented to them, I can help retailers decide what to present. I’ll use an old situation as an analogy, but 1st some background. Among things Clayton M. Christensen wrote are these ideas- 1- Inventors/innovators & consumers don’t always know how a product will be used until consumers have enough experience with the product. 2- Products often don’t work optimally until they’ve been perfected. A related concept & circular logic: People may not realize how to get the best value from a product until it’s fully optimized, but how can it be fully optimized until people express how they need it to work—what they need it to do? These imply products won’t work optimally until people have used them enough to discover what’s good & bad about the products. After they know the pros & cons, they can give feedback & inventors/innovators can adapt products based on what people like & dislike & what they use & don’t use. Using formal marketing research (if we could afford it), we could get some idea what people think they need/want. Sometimes this is too nebulous to be practical. If a product concept hasn’t even been developed yet, how can people answer questions about it. If a product concept has been developed—but not finalized & patented—an inventor may not want any specifications revealed. So, there may be still be little we can tell people before asking for their feedback. When cars were invented, many people didn’t want them. Some were afraid, others were frustrated by the lack of performance & defects. Many were skeptical & preferred horses. After early adopters bought cars, there were still some problems (people were injured & there were performance problems) & almost no economy of scale. Cars didn’t work well & were relatively expensive (compared to the current “technology”). Many people already had horses & some had wagons &/or buggies. Buying a car meant abandoning what they already paid for, then paying more money for something with similar benefits. To justify buying a substitute for something they already own & know how to use, how much better would the benefits have to be? It was embarrassing because of the social visibility to have car problems when horse owners quipped, “Get out & get under (to fix the car problem).” & “Get a horse.” Now we’ll segue slowly into modern times & how I can help retailers avoid some financial problems. Let’s presume you were a wooden (horse-drawn) wagon dealer during this transitional period. Would you want to offer cars too? You’d still specialize in transportation. But you may have to find fuel for cars. If you find a reliable source (wholesaler) you could profit from selling the fuel too. You’d probably have to learn how to repair & maintain cars or hire somebody who knows how to do those. But these services could be profitable too, but only after the product is profitable. Hindsight Is 20/20 Warning: Sometimes when a major technology is being displaced by another, there can be a recession. Sales of the old technology decrease, but sales of the new technology are slow. Recessions happen when people & businesses don’t buy much stuff—like in transitions like these in 2008. Recessions can be regional, national or international. Recessions affect some business categories more than others Could this be happening now? In the USA, we’re still transitioning from an manufacturing economy to service dominance. Technology change is definitely part of the problem. Another problem is baby boomers are retiring & younger workers are being trained. This messes up production & people are changing their purchasing patterns. Their needs & incomes are changing. Employee recruiting & training are expensive—no matter which country employers are in. Research & Development—innovation—are difficult when some R&D people are retiring & others haven’t been educated or trained. Plus, money used for employee recruiting & training isn’t available to invest in R&D. When new—innovative—products aren’t available, there’s not much reason to buy products. The old products still work. Plus, what’s making our economy a lot worse is--Wal-Mart is increasing offshoring of production. Workers aren’t working. They can’t afford to buy much, so they try to save money by buying cheaper products. It seems to justify W-M forcing manufacturers to import products (but it isn’t justified). It’s a vicious circle; each part makes the rest worse. Hold your horses, we’re going back to our analogy. Automotive travel is faster & cars can go further in a day than horses. But most people can’t afford to buy cars yet. They’re learning the advantages of cars, so they’re less apt to invest in new wagons, replacement parts or repairs. (I know selling feed, supplies &/or veterinary care for horses is a possibility. Plus there were many more issues involved in making cars viable & valuable. For the sake of simplicity I’ll ignore those.) Assuming it’s about 1920 & you’re in a small Western US town- What will you do? Cars sales are too low to bring you enough income. Every product you bring to your lot better be sold quickly. You can’t afford to stock products people aren’t buying. But demand for wagons is decreasing. Should you try to promote them more & hope to increase sales? Should you opt for more replacement parts & promote repair work (hoping to stave off the need for cars)? Promoting old technology may waste your money. What you waste on old technology isn’t available for new technology. Here are some assumed facts/problems & possible issues/solutions: Most people can’t afford cars. Should you accept horses & wagons for trade-ins? Then cars may be more affordable. But how much trade-in value do horses & wagons have? Would anybody purchase them? You may find a bank or wealthy person who will loan you money for a few cars to stock. Banks or wealthy people may loan consumers money to buy cars. Many people are frustrated with the newly realized limitations of horses & wagons compared to cars, but they don’t want imperfect cars. You may be able to work with a horse breeder who may find/develop the best horses for specific situations. But this may be a waste of effort, time & money because it may be too late in the “product”—horse—life cycle. People recognize common problems of using cars. You may be able to repair & possibly fabricate cars so they’d work better in specific situations the manufacturer may not know about. Fabrication to adapt cars for local consumers is innovation as opposed to invention. Each innovation may increase a product’s value, but it may increase the wholesale cost & retail price. Would enough consumers perceive the value of innovations? (Marketing consultants deal with this issue.) Until the innovations are implemented in finished products, people won’t buy them. Producing & stocking new, improved products costs money. If there aren’t enough sales, it can contribute to a recession. You may find a politician who vowed to “clean up this 1 horse town”. S/he would be more willing to do it, if there’s only 1 horse in town. Hint- There are various sanitation problems when horses are in town. Possible Ad Headlines: You’ll Never Again See People Point, Then Hear Them Yell, “What Horse’s Ass Put That There!” Or you may use something with a similar theme. What Has 1 Head, 1 Tail, 4 Legs & Flies—A Horse. —OR— You Don’t Have To Put Up With That Crap! But seriously…I’d help you—a retailer—find potential consumers of products & determine why they’d want products you could buy from wholesalers. I’d help you test various ways to promote the products to find possible demand. Hopefully, we’d get indications of demand so you’d know how many to order. You shouldn’t tie up too much storage room & money in unpopular products. Cash flow problems like doom too many retailers. Marketing consultants should help you avoid many cash flow problems. You’d probably want to order enough products to qualify for volume discounts & prevent out-of-stocks—frustrated customers. Since economic transitions cause &/or aggravate recessions & recessions aggravate &/or cause/necessitate economic transitions, I’d help you discover which transitions are starting & ending. I’d help you survive & adapt to them, so you & your business can thrive. Politicians & marketing consultants can influence economic fluctuations, but we can’t prevent them. If we can stimulate the flow of money, we can mitigate economic problems. Mostly what we can do is help people & businesses improve their situations so recessions aren’t so severe. Dennis S. Vogel thrivingbusiness@email.com Being in business is risky enough; recessions create more risk. You need effective & efficient methods. You can learn many of the right marketing methods from my free information web site & this blog. http://www.lakefield.net/~thrivingbusiness/ http://www.voy.com/31049/ [ Next Thread | Previous Thread | Next Message | Previous Message ] |
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