Revenue Growth

I had a chance to join a 2-day seminar held by a consulting company the other day.  It was like the business simulation game that I did at a business school in US but it was quite fun again.  5 to 6 members from different functions from our company consist of 1 group and there were 5 groups altogether: we fought against each other for market share, revenue and profit.


The team that I belonged, unfortunately, scored the lowest among five: we made a wrong investment decision and accumulated too much inventory at the first year.  But later, we aimed for revenue growth by investing further without spending too much.  When we failed at the beginning, I thought there would no chance to recover and I was right.  Yes, we were the loser but we managed to grow profit and revenue consecutively for two years.  Also, our market share recovered significantly in the second year.


It is obvious to make an investment decision based on market needs not by the past decision of line investment or your own preference.  However, whenever the time is running out and there are bunch of people with strong opinions without strong leader (or strong leader not to listen to others), the decision tends to be wrong or weak.  You see it’s the same in the real world, too.


The team that I was assigned to discussed a lot about the direction of product, price and place, the basics of Marketing, but everyone was sure that his or her idea would work: this made us difficult to make one simple decision.  This was one of the reasons that we lost.  We were quite logical but caught up with the discussions of what risks that we can afford to take under such a pressure.  One good thing was that we tried to avoid the mistakes of balanced contraction.  When people think only about cost reductions, they tend to forget to invest for the future that leads a share or revenue loss.  Remember that it is far much easier to grow profit by increasing revenue by 1% than reducing costs by 1%.  This is from my past business experience and I could not accept discussing too much about cost reductions.


Which one do you choose first, cost reductions or investment for the future?


It is always important to consider about product mix; if each product satisfies consumers’ or market needs and occasions.  It is still OK to stick to one major product but always better to think about satisfying consumers’ occasions by changing the product in a different form.  If possible, try to offer new products for unidentified consumer needs through innovation.  Again, innovation is not only about technology but also about catching occasions.


Now, I am quite interested in how you make decisions.  When you have a chance to play a business simulation application, please do so and let me know the result!

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