Deal With Credit Issues

Stagnation vs. Dynamism. Stagnation occurs when there is no infusion of new energy into the organization or relationship. In a closed organization with no partnerships (past orientation), change is undesirable and suppressed. Dynamism results from the infusion of new energy and ideas (future orientation), and it is essential if a business is to successfully change with the demands of its customers and markets. How stagnant or dynamic is your organization’s culture?

Alienation vs. Collaboration. Organizations that isolate themselves cannot form partnerships with others. There is a lack of trust toward people both inside and outside the organization, which results in alienation (past orientation). Collaboration (future orientation), on the other hand, involves the give and take of information and a degree of self-disclosure, which results in building trust between people. How would you rate your organization on the alienation–collaboration scale?

The competitiveness of the market affects pricing decisions. Where few direct competitors exist there may be a greater
degree of latitude for pricing decisions. The nature of the competition also has an influence, as some competitors may be vulnerable to lower prices, chiefly if their costs prevent them lowering prices any further.

Other competitors may be open to claims of poor value or quality. In this case, a higher price accompanied by appropriate advertising could reinforce perceptions of premium value and quality. An important rule is to target one competitor or a group of competitors, attacking them with the most appropriate pricing strategy.

Customer perceptions and behaviour – what the customer wants and expects – are among the biggest influences on pricing. Successful pricing is based on a clear understanding of the needs and nature of the target market. The culture of the market affects pricing decisions. If there is an acceptance of a particular type of pricing structure or approach, strategies will often follow this. The maturity of the market is also important. If the market is mature with few new customers, pricing decisions should focus on taking customers from competitors as well as retaining market share. But if the market is new and growing, the aim is to build and gain market share as rapidly as possible.

These two approaches may or may not lead to the same result. Lastly, if the market is in decline, prices may need to be cut simply to compete for a dwindling number of customers.

Where are the greatest areas of risk relating to the most significant strategic decisions?

What are the potentially dislocating events that could inflict the greatest damage on your organisation? (The scenario planning techniques outlined in Chapter 6 are valuable for assessing this issue.)

What level of risk is acceptable for the company to bear?

What is the overall level of exposure to risk? Has this been assessed and is it being actively monitored?

What are the risks inherent in the organisation’s strategic decisions, and what is the organisation’s ability to reduce the
incidence and impact on the business?

What are the costs and benefits of operating effective riskmanagement controls?

Are the risks inherent in strategic decisions (such as acquiring a new business, developing a new product, or entering a new market) adequately understood?

At what level in the organisation are the risks understood and actively managed? Do people fully realise the potential
consequences of their actions, and are they equipped to understand, avoid, control or mitigate risk?

What review procedures are in place to monitor risks?

To what extent would the company be exposed if key staff left?

If there have been major new developments in the organisation (such as a new management structure or reporting arrangements), are the new responsibilities understood and accepted?