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A JOINT VENTURE WITH BDC Insight: New strategies for a new marketplace

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When a changing marketplace calls for new business strategies, the first thing a company should do is "step back and assess the landscape," said Peter Lawler, senior vice-president of financing and consulting for the Business Development Bank of Canada in Ontario.

The company's strengths and limitations should be rigorously examined and key issues identified. Perhaps the company's market niche is no longer secure because of competitive actions. A frequent response to this type of challenge, is a production diversification strategy to create different price points, Lawler said.

"Then the question is how to leverage the strength that the company has built with the higher-priced products to the new lower-priced line in an effort to gain a competitive advantage," he said.

There is always a danger the lower-priced brand could cannibalize the existing one. To avoid this outcome, companies should consider creating a separate, differently branded line.

"This way, there is differentiation in the market. It really comes down to understanding who your customers are and what they want, making sure that if you have varied price points, you target your message effectively to each market segment."

When developing lower-priced lines, it is important to consider other supply sources. But Lawler said this makes sense only in labour-intensive situations. "If there is a small labour component, there may be no cost advantage in outsourcing to other regions."

Also, in an offshore arrangement, rigorous control of the supply chain is essential. This may require different management skills, which means part of the planning process is deciding whether the company has the right people to follow this path. "Managing a supply chain with inputs from around the world can be very different from managing a supply chain that is down the street. Asking whether the company has the right human resources is part of the broad objective of executing the plan."

If there is a new supplier, it's crucial that the relationship be well-managed if the company's realignment is to succeed. "Understanding the supplier's capabilities and weaknesses is very important in terms of developing the relationship," Lawler said.

"Building those relationships is much easier than it was 10 or 12 years ago because technology has made the world very small. There's more information out there, so it makes it simpler for companies to find the right types of partners."

Professional advice is valuable at every stage, from initial assessment through to making and financing required changes, he said. "An integrated package of advice that puts opportunity, knowledge and financial resources together makes it happen."

Republished from the Winnipeg Free Press print edition December 4, 2012 B6

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