Big loans the bane for many companies - NIBM chief
Ramani KANGARAARACHCHI
Most companies that raise loans at the beginning-end to buy turnkey
factories, that stretch existing management and executive capabilities
beyond their limits, National Institute of Business Management (NIBM)
Chairman Prof Lakshman Jayatilake said. This will raise the expectations
of shareholders to unrealistic levels he told a training program
organized by the Colombo Plan on Blue Ocean Strategy recently.
Prof Jayatilake said investments must be done within available means
unless this situation imposes a debt burden that does not leave much
room for meeting the exigencies and surprises of a start-up process.
Therefore, it would not allow the build up of a reserve for future
developments of both structures and processes.
However, companies can continue to benefit from a successful blue
ocean move. The Blue Ocean Strategy is so powerful and such a move can
create long lasting brand equity for companies. It is not the size of
the research and development budget that matters, but the managerial
action of making the right strategic move, he said.
"The Blue Ocean Strategy creates uncontested market space and it
makes competition irrelevant.
It also captures new demand and break the value-cost trade-off
aligning the whole system of a firm's activities in pursuit of
differentiation and low cost. The strategy also creates a leap in value
for both the customer and the company pursuing differentiation and low
cost simultaneously.
Prof Jayatilake said that Blue Ocean firms need not be big. There are
so many people involved in the SME sector falling to Red Ocean competing
to get customers from the same pool to grab a greater share of the
existing demand.
"They have started small and grew because of both inner and outer
dynamics. The company operations are profitable and a part of the
surplus is ploughed back to improve the production facilities, develop
the competences of personnel, develop and implement new product lines,
to maintain a quality working environment throughout the organization,"
he said. |
