QuickStrategy

Adjust to Market Decline or Die

2005-10-31T21:05:15-07:00

Atkins Nutritional Inc. filed for Chapter 11 bankruptcy protection in September 2005. The market leader in low carb food products was faced with increased competition from large suppliers like General Mills and Kraft Foods and new more moderate low carb diet plans like the South Beach diet. Was this why it failed?

Dr. Robert C. Atkins the namesake founder of the diet plan and tireless promoter until his death in April 2003 may have inadvertently caused in the decline of low carb diets. He died of a fall in the streets of New York but the coroner indicated he suffered from congestive heart problems and hypertension, illnesses many medical practitioners warned Atkins dieters about since its inception. Shortly after his death, his family sold the majority control of the company to private equity funds that engaged new management. In 2004 they decided to take on the competition and launched marketing campaigns to build the business. This resulted in a $300 million loss. Why did they fail?

According to Business Week, 9.1% of Americans were on a low carb diet in February of 2004 dropping to 2.2% by July 2005. Rather than tightening their belts and adjusting the business to the lower market - Atkins Nutritional Inc. with new investors and management was investing to build market share.

The first step in strategic planning is to know whether your market is growing or declining, (and why), and adjusting your investment accordingly. Even the market leader has to react to changes in the overall size of the market if it is to survive.

Barriers to Entry

2005-08-23T16:01:05-06:00

When surveying the market battlefield, it is critical that both competitors and market alternatives are evaluated. Of course, you're thinking, we do this every three years at our strategic planning retreat. Or, maybe you run one of those businesses that do it annually.

Well, that's is not near enough.

Change is now occurring in the various business marketplaces at an unprecedented rate. Regardless of your industry, not only was it less expensive for someone to enter your business ten years ago than it is today, it is also true that even the most basic of business services are less expensive today than they were just one year ago. If you want be prepared, you should be conducting, at a very minimum, a quarterly evaluation of your market competitors and the alternatives.

A Classic Mistake

2005-08-08T22:34:22-06:00

The latest news out of Ford is a perfect example of how important it is to audit market strategies.

Freestyle sales have been much softer than Ford had anticipated. Since it went on sale, Ford has sold 44,066 Freestyles in the United States. Company officials at one time forecast annual sales of more than 100,000.

Did these company officials take a hard look at industry performance before they made this projection? Ford didn't take any cars off the showroom floor, so the question that begs to be asked is whose market share did they intend to capture to reach these goals. This is a common mistake businesses of all sizes make. The neglect to take market performance into account when coming up with annual growth projections.