Startup Strategy: It’s All About Costs And Benefits

You might think that there is just one strategy that’ll help your new startup win in the long term. But as you go down the entrepreneurial road, you soon realise that everything has costs and benefits. For instance, you might decide that you want to be the type of company that focuses on marketing, like Apple or Red Bull. But the cost of all those marketing dollars might be an underdeveloped research and development program.

 

When it comes to competition, companies don’t compete with each other on all fronts. Walmart is never going to have the cachet of Whole Foods, but it doesn’t need it. Instead, it can compete on price, lowering costs through its enormous supply chain. Likewise, Whole Foods can’t compete with Walmart on price. It has to focus on something else: green credentials and quality. Every company in the marketplace – except for perhaps those rare people who are in perfectly competitive markets – is doing something similar, trying to differentiate their products from the competition.

 

Build A Supply Chain That Reflects Your Company

How did Amazon become so successful? Was it because the company slotted itself into an existing supply structure? Or was it because people like Jeff Bezos decided that they were going to remake their supply chains in their own image? It turns out that it was the latter: companies that are incredibly successful recreate supply chains, forming new patterns of exchange. Amazon did it by bringing together a bunch of sellers and creating its own logistics platform which operates under its own rules. Yes, there were enormous costs involved in setting it up (it took Amazon more than 10 years to turn a profit), but ultimately it was worth it.

 

Help Your Strategy Endure

Startup Strategy: It's All About Costs And Benefits

According to Xavier Morales, a trademarking expert, the name you choose for your company is one of the most important decisions your company will make. It’s not just that you want something catchy: it’s also that you want something which will endure for a long time. Take Freshbooks, for instance. Businesses are always going to have to pay their taxes so long as we have governments, and so companies that help with doing the books are likely to be around for a long time yet. Right now, the cutting edge of business accounting is software from companies like Freshbooks, but in the future, it could be radically different again. Freshbooks is a clever name because it doesn’t pin the company down to any particular point in time. Instead, the company will probably evolve, use more artificial intelligence, and continue to make filing with the authorities easier.

 

What Do You Sacrifice To Compete?

 

As discussed, you can’t have your cake and eat it in business: low price and high quality are almost impossible to achieve at the same time, (unless you’ve developed some fabulous new technology). But it is possible for businesses to still win, even if they have to make sacrifices. Ecommerce companies, for instance, have a long checkout process. It’s getting easier but still requires customers to fill out fields. However, although the checkout process is longer, these businesses still win over customers because of their lower prices and operating costs.

 

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