Hello, David Elliot here again. Today I’d like just to talk for a few minutes about The Idiot Box. What do I mean by “The Idiot Box”? Well basically it describes diversification when diversification is totally inappropriate, and with the economic recession and other aspects that are not particularly favourable I would suggest that diversification at the present time is a very risky venture. This is true even in the best of situations but when a company decides to go into a completely new market when they don’t know the market, they don’t really know the customers in that market, they don’t really know how to make the products relevant for the new market, then they are really taking on something that is extremely risky. It used to be almost de rigueur to diversify but many, many large companies have done this in a way that has not really helped their future prospects. So if you’re a small company I would suggest that diversification is literally jumping into the idiot box.
So what other alternatives are there for growth-oriented companies? Simply put, if a company is wishing to review it’s future position then available to it within it’s current marketplace and dealing with it’s existing customers it has three options; one is to penetrate further the existing market. In other words go deeper, harder with those customers that you know already, with those products that you are successfully producing. If this option is not available then you may wish to consider consolidation, where particularly in harsh economic situations consolidation with prudent cost-cutting can actually improve the bottom line rather than make it worse. If, however, this option isn’t really available then in a worst case scenario you should simply withdraw from that marketplace. However, most companies with fairly strong businesses, fairly strong balance sheets and fairly strong customer loyalty would not wish to do that. So what really should they then consider doing? There are many examples perhaps which indicate that the most logical next step is to take new products to existing customers. A couple of examples will perhaps suffice in this context. One goes back really to the 1980s when a fairly small company at that time, Seven Seas, was able to not only revitalise it’s own business performance but also was able to create a new market in vitamin and mineral supplements, a market that had been hitherto been only serviced through health food outlets with natural products being imported from the USA predominately. Seven Seas saw that an opportunity existed to take this product into pharmacy where they had almost total distribution and a very strong brand name. The rest as they say is history.
Another example is Cillit Bang from a company called Reckitt Benckiser which is now available in probably around seventy countries worldwide. The company very prudently saw an opportunity to launch a range of hard-working no frills household products through the outlets which they were already servicing. An outstanding success and an outstanding illustration of how it can work to take new products to existing customers. Another option that is available but I would put it very much behind the former strategy is to take your existing products into new markets. If you’re a local producer then you can extend in adjacent geographic segments. If you are already supplying products to a national market then you can consider moving into the international marketplace. However, this will require more changes within the organisation, some of which I’ve outlined in a previous video termed “Developing International Strategy” which you can see on the website, but the opportunity still exists. My recommendation would always be to look very carefully at the opportunities that may well be available to you to take new products to your existing customers. Thank you very much.