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Growing Your Business Via Competitive Advantage
When businesses think about competitive advantage, it is not uncommon for them to focus attention on how to improve their offerings over those of competitors through better quality standards. Financial efficiency very rarely comes into the equation for the determination of competitive advantage, in spite of its importance to sustaining the viability of the business.
I am here to tell you that financial efficiency, combined with innovation and creativity, relevant and necessary to the market a business operates in, can stimulate tremendous competitive advantage for the business. I once learnt about a business that focussed a lot of attention on innovating its products at the expense of its financial viability only to find itself grinding to a halt when it ran out of cash and became insolvent. Fortunately for this business, it was bailed out by a main stakeholder but not without a number of bad press coverage.
Regardless of the quality of a business’ products or services, its survival and future sustainability depends on its financial viability. Whilst there is no doubt the market will purchase products that are deemed competitive in terms of quality and price, poor control over the management of financial resources will crash a great business overnight. For this reason, no business, regardless of its size, location, creed or colour can afford to operate without a firm understanding of financial management and support systems that facilitate sound financial management discipline across the organisation. To take this point further, the concept of sound financial management is now prevalent in the public and voluntary sectors that were once renowned for their relaxed culture in this subject area. Public sector organisations like many normal people, do not want to buy products and services from inefficiently managed organisations that charge excessively for their products, just to make up for their weaknesses and poor financial management discipline.
So what is financial efficiency and how can businesses generate competitive advantage through this source. Firstly financial efficiency is not about cutting corners at the expense of service or product quality. In its simplest terms, financial efficiency is about optimising financial resources and minimising wastages, which so often exist in businesses with no concrete action plan to correct them. When a business is financially efficient, it can very often produce products and services that are similar to its competitors but at considerably lower costs, making it possible to sell at lower prices. At lower prices, the demand for such services and products will increase, which will ultimately strengthen profitability and build free reserves for future development and improvement to the business. To achieve financial efficiency, a business must be financially disciplined and at the very least, possess a framework for effective planning, budgeting, accounting and controlling of resources to ensure key performance indicators are achieved.
The author is an expert in business and personal development strategies.
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