
Step 3: Use mergers and acquisitions to boost market share
It often takes a long time for companies to achieve market leadership in their chosen sector or country by growing organically. It can be quicker to strategically choose existing companies in the right sector to merge with or acquire.
That was Kellogg’s strategy when it decided to enter the Asian snack food market. In Asia, that market is roughly ten times larger than the market for breakfast cereal, in which Kellogg’s dominates in the Americas and Europe. Kellogg’s decided not to wait for their brands to grow until they were the market leader in the sector, which anyway might never have happened. Instead they acquired the Pringles potato chip brand from Procter & Gamble. It bought instant scale in Asian markets.
Step 4: Cut costs
Fast growth is rarely combined with a rigorous focus on minimizing costs. Given that, a company that has grown by grabbing as much of a market as possible is likely to have inefficiencies in its supply chain and processes which need to be ironed out.
This means that the path to profitability often involves a focus on cost cutting. Companies should check the agreements that they have in place with third party manufacturers or marketing agencies honestly and critically.
Step 5: Exit where no path to profitability
Choosing one category in which to aim for market leadership or one country on which to focus will mean shutting down the operations that cannot transition to meet new needs. This sometimes means taking losses, writing off investments, and accepting the losses as a cost of achieving market leadership ultimately.
Sometimes it will make sense for companies to set up a dedicated divestiture team to handle the process, concentrate knowledge, and make it happen as smoothly and painlessly as possible. That team will often have to work out how to offer stakeholders a plan for redeploying the capital the process releases.
A bright Asian future
Asian markets are at an inflection point. Companies that have made the most of the good times and enjoyed robust growth will have to learn some new tricks and techniques to make the most of the future.
Those companies that are able to undertake the transition, however, will be rewarded with greater profitability in the years ahead.
Summary
During the Asian economic slowdown, companies able to transition and adjust will be rewarded with profitability in the years ahead.