David Braun, president of Washington, D.C.-based acquisition firm Virtual Strategies Inc., spoke at National Manufacturing Week in Chicago in September about current market challenges and how companies can adapt.

The session, “Innovative Growth Strategies for Tough Times,” explored the five forces that affect businesses: suppliers, customers, substitutes, new entrants and competitors. “Each of these pushes and pulls your business in different sections,” Braun said. But even if business changes, customers will always drive the industry.

“You know that your customers are your key,” Braun added. “They specify your product, what it does and how much it costs. However, the other four forces must be accounted for when choosing how best to improve your situation in the market.”

He said some market challenges today include cyclicality, increasing material costs, low availability of qualified workers and foreign competition. Braun said there are five options to increase a company’s edge:

• Growing organically
• Growing through external means
  
• Minimizing costs
  
• Exiting the market
  
• Doing nothing
  

Braun said external growth – joint ventures, strategic alliances, franchising and acquisitions – is the best way to approach a business. “It is the quickest option for growth because the new customers and products already exist,” he explained. “These customers are already buying a new product or service they know, saving the time and effort of introducing a new product or service to the market.” External growth allows for cross-selling, he added, so it is better to adapt and fix the existing products or services rather than develop new, untested products.

In addition, Braun advised companies to take a “careful, thorough approach” to growth. He suggested hiring an outside consultant to bring in a different perspective. “An outside consultant will have experience in engineering growth for companies like yours,” he said. “They can serve as the arms and legs for your development team while providing an unbiased approach to external growth.”

The last three options may sound simpler, but they are riskier, Braun said. Excessive cuts will eventually affect product and service quality, he emphasized. Exiting the market, on the other hand, makes sense only in very rare circumstances.

“Exiting the market by selling your business may make sense if the competitive landscape requires more capital than you are willing to expend, the market forecast is extremely grim, or there are other personal issues at stake – succession, desire to pursue other interests or liquidity,” Braun explained.

The last option of “riding out the storm” can lead to devastating results, he continued. “Whatever you do, do something,” Braun stressed. “Start by identifying your true customer and maintaining your focus on them with a can-do mentality.”

For more information, visit www.virtual-strategies.com.