In case you have not heard Blockbuster; the go to place for video rental just a few years ago; was purchased by Dish Network for peanuts. This is the company that was valued at Billions of dollars before the market and technology changed around them and new competitors such as Netflix and Coinstar came along. They completely missed the boat.
Such is the power of free market economy! Business owners who focus only on internal operations of their business without paying attention to external market forces will get hurt. The market forces will put them in oblivion in a few short years or even months.
For small business owners it is even more important to stay vigilant and be ready to maneuver as the market shifts. After all, large corporations have resources they can tap into and survive the upheaval for some time. Small businesses do not have that luxury. They have to watch their cash flow like a hawk. Any negative impact from the business is directly and immediately carried over to their personal lives – financially and emotionally.
So what are these market forces that have the potential of making your small business a dinosaur? There are several of them to watch out for.
Economy
We all remember the phrase popularized by Bill Clinton during 1992 election – “It’s the economy, stupid.” The bad economy not only has an impact on the fate of politicians; but it can hurt the small businesses in a very significant way. Anyone who has run the business in the last 2-3 years knows what I am talking about.
The economic downturn will make consumers to cut back on their spending forcing small businesses to respond with lower prices, more coupons and so on. Those who fail to change will find their businesses in the bankruptcy court or in the junkyard.
Competition
If there is one constant in any small business it is that they will always have competition. If it is not a direct competition it will come in the form of substitutes. It is the law of free market that whenever there is higher return to be made the competitors will move in to take advantage of that.
The competitors will impact your business by luring customers away. It could be a temporary shift in the beginning; but if you fail to respond it can drive your customers away forever with the potential to put you out of business. And new competitors have a habit of sneaking up on you from behind. This is what happened to Blockbuster with the competition from Netflix and Coinstar.
Consumer Habit
The Internet and other technologies can change the consumer habits significantly. In the past, consumers had to drive to the grocery store to buy their daily necessities. Now they can do it easily with a mouse click Amazon.com. Similarly, they had to drive to Blockbuster to rent a video and, possibly, pay a penalty for failing to return it on time. Along came Netflix and other video on demand services that enabled them to rent and watch movie without getting up from the sofa. No wonder Blockbuster went out of business!
Small businesses may potentially meet the same fate if they fail to recognize the changing taste of customers.
There are number of other factors that can impact your business; but these three can do so in a direct and significant fashion. In the next post we will talk about what you can do to position yourself to react to these changes quickly so that you don’t meet the fate of dinosaurs.
