Cost effective entry into the UK market

 

The UK offers a very attractive market for companies wishing to export their products. Counter party risk is identifiable and can be successfully managed.

 

However one barrier may be the perception of high operating costs. 

 

There is no doubt that to commission and run a UK operation can prove a costly commitment. The lists of outgoings such as rent, communications, staffing costs are daunting, particularly in a start up situation where income streams are lagging far behind these costs.

 

This is where we can assist you, as an established independent company, we have experience of representing overseas organisations in marketing product into the UK.

 

In addition to opening up new markets for your products and services we can also police the all important areas of logistics and payment of your invoices.

 

An introduction to our activities can be seen on our web site www.glbconsulting.co.uk or alternatively why not contact me at gordon.blackburn1@btinternet.com to arrange a meeting to discuss how we assist you in entering the UK market.

 

Crossing the line

 

The most important component in any business relationship is the question of trust.

 

The ultimate demonstration of trust and good faith is when a Supplier delivers goods to a Customer on Credit terms.

 

It therefore is incumbent on the Buyer that they acknowledge this act of trust and observe the agreed payment terms.

 

With the current pressures it is easy to understand the temptation of “pinching” a few days extra credit but this type of behaviour soon begins to pall. Once a Supplier feels that their Buyer is taking undue advantage the relationship is damaged sometimes irreparably.

 

For any relationship to be sustained there has to be mutual benefit. When a Buyer gains a reputation for persistently crossing the line the merit in maintaining the account is questionable.

 

Diversification –sometimes it turns around and bites you

 
Without doubt one of the most difficult challenges a business faces is diversification. Very often a company is faced with the dilemma of diminishing revenue returns and a tired business model which is either irrelevant or obsolete.

Diversification is seen as the solution to this dilemma. However, the mechanism for achieving this objective can be particularly difficult.

One should always respect geography it may be very tempting to consider that there are opportunities just waiting to be picked up but to underestimate the advantage of local knowledge and conditions can again prove costly.

Mobile phone retailer Carphone Warehouse has agreed to buy out its joint venture partner Best Buy for £471m, giving it full control of its retail operations across Europe.

The joint venture - Carphone Warehouse Europe - operates almost 2,400 stores across Europe.

The joint venture was created in 2008, when Best Buy paid £1.1bn for its 50% stake in the firm.

Carphone said the two companies had decided to focus on their own regions.

The withdrawal marks the end of a costly venture into Europe for Best Buy.

Carphone Warehouse Europe opened 11 American-style Best Buy electronics megastores in the UK, but closed them in 2011 after they lost tens of millions of pounds.

In essence diversification can provide the answer to a company’s need for increased revenue but without a clearly defined strategy it can equally provide another drain on an already embattled balance sheet.

 

Eurozone problems still mounting.

The Eurozone crisis continues to dominate the economic backdrop.

Latest figures for Spain showed the recession is continuing to deepen. The jobless total topped 19.2 million at the end of March a rise of 1.7 million in the past year. The unemployment rate in Spain is now running at 26.7 percent only a little less than Greece at 27.2 percent. The recent interest rate cut from the ECB is not expected to have an impact.

As governments wrestle with their respective debt burdens the only certainty is there is no silver bullet.

The knock on effects of the Eurozone crisis will be felt globally not least by the Chinese keen to kick start their labouring export sales. China, the world's second largest economy, has relied heavily on its manufacturing and export sector to key markets such as the Eurozone to drive its economic growth.

The all pervading sense of nervousness will continue to impact on all business sectors. The days of easy access to finance are long gone. Companies need to focus on cost control and their exposure at every level ranging from inventory levels, rate of stock turn and the integrity of the debtor’s book.

Operating in this current climate of austerity will provide the ultimate challenge for those managing companies, be it an SME or a large multi-national corporation.

 

The Butcher, the Baker et al

Greggs the bakers one of the most dominant forces in the UK High Street (with over 1700 retail outlets) have issued a profit warning stating that like-for-like sales, which exclude newly-opened outlets, were down 4.4% so far this year.

Citing  bad weather and "under pressure" consumers, the Group said it did not expect market conditions to improve in the short term.

It said profits for the year were now likely to come in lower than market expectations.

UK consumers continue to rein in their expenditure in response to increased fuel costs for domestic energy and petrol together with food price inflation .

Greggs have focussed on good cost control but with Consumers under pressure, promotional deals have been particularly popular, which has hit profit margins.

This is a dilemma common to many businesses the need to boost sales whilst protecting the bottom line.

It is a very hard act to get the balance right in the current climate.

 

 

 

The Banks – meaner and definitely leaner

NEW YORKCopyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

The major banks continue to reduce their payrolls. In first-quarter earnings announcements, Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley revealed that they have slashed more than 31,000 jobs, or 3.5 percent of their combined workforce, in the past year. For three of those banks, it was the second straight year of cutbacks. This pattern is being repeated at banks globally.
 

These job losses are a reminder of the meltdown and its lingering effects.

 

A slow, halting recovery has reduced the demand for loans. Low interest rates are weakening profits from lending. New regulations have extinguished old sources of revenue, and compliance is expensive. 

The cuts also reflect advances in technology that have made retail banking staff more expendable as customers get increasingly comfortable banking online or by Smartphone. 

The mantra in the banking industry is cost cutting. The CEO of Citigroup

comments that examining costs and improving efficiency should be "business as usual" and "not just an annual event."

It's a far different mood from the pre-crisis years that were fueled by risky trading and complicated investments that eventually backfired. 

Now Citigroup is cutting back in troubled countries in the Euro zone such as Greece and Spain.

Germany's Commerzbank and others are laying off branch workers as customers gravitate toward online banking. Barclays is exiting businesses with "reputational risks" after some of its bankers were caught manipulating global interest rates. 

There are areas where banks are seeking to add staff. For example wealth management perceived as a steady source of income, based mostly on fees, rather than the spectacular gains and losses associated with trading.

Banks are also actively recruiting compliance workers, to help ensure they're in line with stricter regulations that came out of the financial crisis.

 

Antony Jenkins, appointed CEO of Barclays last year after the bank's interest rate-fixing scandal, in February laid out a turnaround plan that included exiting risky businesses, cutting jobs and slashing the proportion of revenue that the bank spends on salaries and bonuses.

"We need to accept," he says, "that society's expectations have changed." 

It’s taken some time but maybe at last the banks are getting it.

Time to lighten up

  

Daily we are seeing clear cut evidence that  2013 will be a difficult time for business as Consumers further reign in their spending. Without doubt now is the time to tackle potential problem areas with some effective housekeeping.

One of the first areas for scrutiny is the level of inventory which you are carrying. Make sure you are achieving the best level of Stock Turn and that you are not carrying any obsolete Stock. Rather than face a “fire sale” it may well be prudent to lighten up now with some innovative marketing strategies.

How is your Company’s cash position? With the ominous backdrop surrounding financial institutions and Governments alike, don’t expect the Banks to readily provide additional finance- it is an absolute priority to maintain positive cash-flow and this can only be achieved by keeping Debtors under control.

Undoubtedly, the casualty rate will climb over the months ahead and now is the time to do everything you can to ensure your Company doesn’t become part of these statistics.