Find profitable ideas, but above all: to identify the appropriate segment.

February 3, 2011 | Doing business

In many of our post, we looked at many topics and areas of activity.

Sometimes, we realized that within a sector, after some time, some areas and segments were no longer profitable enough. While others, continued to produce income and adequate margin.

Today, using three examples, we seek to highlight a problem that often companies, when you are in the situation of working in an area without adequate margins, ultimately subjected to the problem or when they decide to intervene with a new strategy, it is often already too late.

Business in crisis: when the segment is no longer profitable.

In the nineties, were opened many computer chains which offered computers and computer accessories at reduced prices.

With the end of the growing sales of IT products and the arrival of large retailers, this market segment, suffered a setback and the small stores, went into crisis.

Problem: their business model was based on the low retail price and then their charging on the sell price is not high and since there were two elements: arrival of strong competitors and reduced demand, most of these shops have closed!

Another example : the so called ambulant trade, in both sectors : the food business and attire.

Until the seventies, guaranteed to the holders of these assets an attractive profitability.

Over the past thirty years, the development of large retailers, the emergence of new operators and the change in the way of shopping by consumers, has challenged some of this commercial world.

Third example : the service providers for hosting and housing services for sites web.

We’ve gone from the late nineties by tens of thousands of micro, small and medium suppliers, until you get in a few years to a situation in which four or five suppliers control almost the entire market.

What happened?

The policy of low prices, has crushed the small operators who could not bear the fixed costs of their facilities and has favored few, but large suppliers that with their economies of scale could hold prices on the market.

Analyzing the three examples used as a benchmark, we realize that other entrepreneurs in the same sector but operating in different segments, have held up better to the crisis and competition because they failed to develop forms of customer loyalty, diversification in products and services offered allowed them to remain on the market.

Successful business : when the crisis arrives!

The ability for an entrepreneur to understand of the negative trend and the strength to fight back, thus avoiding of suffering the crisis and the changes, are the element that was lacking in the small businesses that have closed.

In many cases, it was a business that as the type of setting and for the formation of their business, they had not the chance to evolve and adapt.

But, in some cases, there was an underestimate and the case of do not want to take note of the changes going on!

Doing the entrepreneur, it is also have an open mind and a willingness to change.

Where it is not possible for technical and financial reasons, you should always plan an exit from that sector / segment in time to avoid losses useless!

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