You can’t always trust your sat nav

  

One of the most valuable assets available to any organisation is local knowledge. 

How many times has a venture ended badly owing to a basic failure to understand and deal with local market conditions? 

The UK is a mature and sophisticated market and though offering different challenges to operating in a 3rd World destination there are still obstacles in trying to establish a presence.

Operating overheads present a crucial challenge and this is where we can assist you to achieve a cost-effective solution to marketing your products in the UK.

Take a look at our website www.glbconsulting.co.uk 

Or check out our video link http://youtu.be/ruUtQnlJwVM

 

Greek crisis lurches on

 “If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem” the famous quotation from JP Getty neatly sums up the dilemma faced by the international community in dealing with the Greek debt problem.

The fact is the international community will have to learn to accommodate the spectre of countries failing to grapple effectively with their debt burdens. In turn this will inhibit growth and limit the speed and strength of global economic recovery.

If Greece does not repay its creditors, a dangerous precedent will have been set. This will make investors increasingly nervous about the likelihood of other highly-indebted nations, such as Italy, or those with weak economies, such as Spain, repaying their debts. If investors stop buying bonds issued by other governments, then those governments in turn will not be able to repay their creditors - a potentially disastrous vicious circle.

To combat this risk, European leaders have agreed a 700bn-euro firewall to protect the rest of the Eurozone from a full-blown Greek default.

Equally, if banks that are already struggling to find enough capital are forced to write off money over and above that which they have already agreed to, they will become weaker still, undermining confidence in the entire global banking system. Banks would then be even more reluctant, and less able, to lend to one another, potentially sparking a second credit crunch, where bank lending effectively dries up.

For example, Greece owes French banks $38bn, German banks $5.5bn, UK banks $8.2bn and US banks $3.5bn.

It will be an uncertain time but one undisputable outcome of the above will be the hard ball attitude of the Banks towards companies seeking funding. It will become ever more necessary to demonstrate effective control over all areas of cost and exposure as the banks will undoubtedly remain reluctant lenders.

 

 

 

Back with us again – the usual suspects fear and greed

Currently with all the talk of gloom and doom in the financial markets, fear is the overriding factor with a sense of panic gripping many operators.

Politicians seem to be hell bent on outdoing each other as to who can send out the direst warnings.

Now is the time to remain focussed and consider the implications for your business. 

Just as was evidenced during the credit crunch crisis in the summer of 2008 there is a question mark over the manner in which the Banks will respond to the current inputs. 

The problem for the Banks is that because of the legacies of their previous mistakes they are effectively stifling their customers businesses as they look to batten down the hatches and strengthen their own balance sheets.

It will become increasingly difficult to gain support from the Banks in the coming months therefore it must be the absolute priority to keep a strict rein on your finances – make sure that your Debtors Book is strictly controlled and ensure that Stock turn and inventory levels are well policed. 

With their houses far from in order, the Banks will undoubtedly become increasingly conservative in their approach to lending, so the order of the day is work within your current limits and maximise your profits.

Diversification – sometimes silver bullet, often poisoned chalice

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.
The first step is examining why the current business model is not working. This requires an honest appraisal from the Management in respect of their performance.

Then the areas of diversification have to be closely considered, very often people plunge into businesses in which they have little knowledge or experience and the results pretty quickly show up these deficiencies.

Thirdly 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.

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.

Squeezed by leverage

  

As a legacy of the private equity boom an increasing number of companies are now finding their activities largely targeted to satisfying their repayment obligations to the Banks. Companies are finding their growth restricted as money which is needed for new projects is swallowed up in servicing debt. 

Over the next four years British companies owned by private equity firms must repay or refinance £100 billion of debt. 

The Banks that formerly were willing to take a more lenient attitude and renegotiate loans are playing by much harder rules. 

As more and more companies find their ability to borrow restricted, they have to revisit their own payment terms with their customers. It becomes a vicious circle from which very few are immune. 

The key is to make the most of available cash resources which inevitably leads to some hard commercial decisions. Late payers are a luxury that no company can afford in this climate. Stock must be turned as efficiently as possible. 

Those who either will not or cannot adapt to the demands of today’s business will join the growing list of casualties.

The Dragon catching its breath

China's export and import growth slowed for the second straight month in July, raising fears about the strength of the world's second-largest economy.

Exports rose by 1% from a year earlier, down from 11.3% growth in June, amid slowing demand from key markets.

Meanwhile, imports rose by 4.7% compared with 6.3% in June, indicating that domestic demand was also slowing.

Analysts said the data was weaker-than-expected and may see Beijing introduce stimulus measures to spur growth.

"Trade data has come in dramatically below expectations - the worst export growth number (excluding Chinese New Year) since November 2009 - highlighting the risk that the external environment poses to an economy in the midst of a rapid internal slowdown," said analysts in Beijing.

"The government is likely to respond by ramping-up its stimulus efforts, with both monetary and fiscal guns firing."

European markets are crucially important to China but with European economies in a fragile state the implication for Export growth is obvious and the potential for the euro debt crisis to spread would result in a further decline in export growth in the months ahead.

US Mid West drought – global implications

The US is experiencing the worst drought in decades with the subsequent disastrous impact on grain production. The latest USDA Corn Crop production report indicated production of 10.8 billion bushels a fall of 13% to a 6 year low.

Wheat and Soyabean prices have also risen sharply in recent weeks and the UN has warned that the drought in the US mid West will drive up food prices reviving memories of 2008 when record prices sparked riots in developing countries.

Livestock and milk related products will rise in accordance with the higher costs of grain based feedstuffs.

Food manufactures are caught in a vice; the buying pattern for many has been “just in time” reflecting the need to keep inventories as low as possible. However without the safeguard of a “buffer stock” they are now more than ever exposed to the harsh reality of having to “pay up” in order to secure the raw materials to keep their facilities in production.

There also have the problem of the general economic background with buyers seeking to delay payment, renegotiate contracts etc.

The order of the day is strict policing of each and every element of operating costs, stock turn and the all important question of receivables.