This week’s focus: A couple of days ago I heard a politician on the radio telling the interview that her party was a “broad church”. The facts would suggest otherwise. Political parties are pulling apart here in the UK, characterized by in-fighting between rival factions, and are being threatened by up-start, more narrowly focused rivals. Using social media and targeting specific social groups, these challenger parties, including UKIP, SNP and The Green Party, have rapidly built up a meaningful base of support. It’s the same in many European countries, including Italy, France and Germany, and even the two big parties of the USA are under tremendous strain to remain intact.
There are similar trends in business. In many markets, large, previously successful businesses are struggling to grow in the face of competition from smaller, niche rivals. Last week, for instance, The Economist reported that consumer product companies such as Nestle, Unilever and P&G are all struggling to hit their growth targets in the face of these trends. In retail, meanwhile, giant ‘broad churches’ such as M&S and Tesco have seen recent and ongoing declines in sales and customer loyalty.
There are three broad options for the leaders of these ‘broad churches’. First, is to gain even greater scale by acquiring rivals and smaller brands, and cut costs to improve margins. This is what the private-equity firm 3G has done with Heinz, Kraft. Second, is to break up the company into smaller, more focused businesses, as P&G has done and as Tesco is currently doing. Third, is to strengthen and build your areas of competitive advantage, which is what M&S is seeking to do in Food and Fashion.
There are no easy answers, but at some point the answer must be to become more meaningful to your target customers. You can’t simply cut your way to long-term growth. In the meantime, if you run a smaller business, you should remember that the big boys are nervous and while their ‘churches’ may look big, they are more fragile than you might imagine and the walls could easily come tumbling down!
Off the record: Take Me To Church by Hozier
Take me to church
I’ll worship like a dog at the shrine of your lies
I’ll tell you my sins and you can sharpen your knife
Offer me that deathless death
Good God, let me give you my life
© Stuart Cross 2014. All rights reserved.