These Changes in Value Chain Network Can Help Survive Your Business

To counter the adverse effects of the epidemic, businesses have to start adopting the strategies of the west; they need to give importance to the value chain
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Aug 17,2020
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  • 19 Mins Read

In such tough times, small businesses grapple for sustenance. Generally, they strive to attain profitability and recognition in the market. Owing to the pandemic, the market situation has become unfavourable for the companies. Most of the organizations have got out of business whilst some have pivoted their business at the right time and hence, survived the lockdown phase. 

While reforming business strategies, small companies have to primarily focus on their value network. Value network is essentially a group of connections between companies and other vendors or resources interconnecting with one another to engender benefits to the entire nexus. Such a network permits members to buy and sell goods as well as services. It also allows two parties to share information with each other. 

So, a business does not suffer alone in adversities but other individuals or groups also suffer more or less in the general value network. According to the survey conducted by All India Manufacturers’ Association (AIMO), as Unlock 1 started, over a third of self-employed and SME companies do not see any grounds for business recovery. They were on the verge of winding up their business. 

This states the businesses stifled not only during the lockdown phase but during the unlocked phase as well. It also informs the businesses can be dismal in the current scenario. To counter the adverse effects of the epidemic, businesses have to start adopting strategies of the western business culture. They need to give importance to the value chain and comprehend as to what they have to keep and what elements should be wiped out.

For instance, a restauranteur builds a value chain at the moment he starts his business. To purchase vegetables, raw food, and other food items, he builds contact with localised companies and wholesalers. While maintaining the restaurant's interior, he connects with interior designers and also creates connections with wholesalers to buy tablecloths and other relatable items. For preparing good quality food, he employs chefs and assistant cooks. Furthermore, he lends money from the bank to carry out daily expenses. Alongside that, he reaches local customers by extensively promoting his business. In this way, a restauranteur unknowingly creates a value chain around him. In a similar vein, all other businesses create value chains around themselves. 

Here are some ways as to how small businesses can employ their value chain effectively and soar their business through it. 

1. Keep Hold of Vital Human Resources 

Before taking important cost-reduction decisions, a company needs to comprehend whether it will sail through the pandemic like a threat or drown into it. The response to this question determines if a business holds the capability to work along with a small set of employees.  

If a certain firm comes out of the pandemic as a winner, then it can easily dive through a seastorm. It has to cling to its experienced and talented employees and also, bring more on board if the situation requires. 

On the other hand, if the company cannot sustain the pandemic, then it should immediately shift its course of business. It has to formulate a strategy so that consumers remain interested in the product and start buying online purchases as well.

For instance, when pandemic impacts a restaurant business, the restaurateur has to adopt a new business strategy. He has to shift his business into an online platform and start taking orders online. By doing so, he would not require waiters, cleaners and other unimportant employees. However, he requires chefs and assistant cooks to prepare the food. In such a case, he can lay off employees other than chefs. Other businesses who stifle in the market can similarly follow this strategy and work with important, skilled staff only.

2. Acclimatize to the Changing Consumer Preferences 

Owing to the pandemic, the customers' attitude towards the products and services have changed dramatically. They abide by social distancing norms and take other sanitary precautions. Seeing this change, companies have to alter their schemes and adapt as per the consumers' needs and preferences. 

If the companies pivot swiftly and effectively, then they can convert this adversity into an opportunity and initiate new business models. On the flip side, companies that are sluggish would be soon out of the race and will be distraught for not taking immediate action.

Reconsider the situation of restaurants, in pre-pandemic time, they had a large chunk of customers and even had to introduce an advance booking system. With the onset of the pandemic, restaurants do not have as much as customers that they had previously. It also struggles to sustain in the market and accordingly, taking adequate measures to cut costs. 

3. Increase Supply of Vital Resources, Cease the Rest 

The companies that are adversely affected in the pandemic have to cease the business operation. However, if they continue to work during the uncertain condition, then they need to take some important moves such as stopping the supply of insignificant materials whereas increasing the supply of raw materials. 

For instance, if a clothing business understands the market condition then it has to stop producing clothes for adults and children. It has to pivot the business and begin producing face masks, gloves and other health-related wearables. By doing so, it will lessen the impact of the pandemic and survive in the economic slump. 

4. Negotiate with Vendors and Creditors 

When a company is not coming out as a winner from the pandemic, it is crucial to cut down its expenses in the long run. For that, it can begin talking to the landlords and request to trim down the monthly rent amount. It can also urge to postpone the rental until the market improves. In a similar manner, it can negotiate with other vendors and delay making payments. Later, the company can reach creditors like individual lenders and banks and request them to pay an interest amount later. 

5. Technology and Supply Partners

The companies suffering owing to the pandemic decide to shorten their contracts with tech and supply chain partners. Suppose, in the clothing business, a company may cut the contract with a logistics partner who delivers products from the factory to the clothing shop. Similarly, the business owners can cut down the contract with the suppliers who deliver products on regular basis. 

Companies should adopt the above-cited things in the value chain and accordingly, survive in the pandemic. 

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