Strategic Options

This checklist presents a range of small business strategic options proven in hundreds of applications.

1. Rationalize distribution. Cut back to most efficient network; look at volume, geography, type. Increase profit margins, lower inventories, some costs go down; may need new investment; moderate risk.

2. Develop the market. Create demand for a brand new product. Very high marketing costs, may increase receivables, impacts profit and loss statement, hinders cash flow; large expense budget; high risk-but high reward if successful.

3. Penetrate the market. Increase market share: lower price, broaden product line mix, add service and sales personnel, increase advertising. Increases marketing and sales expenses, need for working capital, and need for capital investment if capacity grows. Reduces short-term earnings; high risk.

4. Promote new products to present market. Develop, broaden, or replace products in product line, sell to present market. Lower unit costs; increase inventory, sales volume, profit, and cash flow; some capital investment needed, increased development, design, and manufacturing costs; moderate to high risk.

5. Seek new markets, same products. Expand existing markets by geography (abroad) or type for existing products. Increase sales volume and profit margins as unit costs drop and as new market grows; higher short-term selling costs; modest capital investment, increased working capital; high risk.

6. Develop new products for new markets. Invest in developing, manufacturing, and marketing products unrelated to product line for new markets. Will increase sales volume, costs, profits (if successful); will have same problems as a new business if products unrelated to current line; will need more working capital, may need new capital investment; increase in sales and marketing costs; high risk.

7. Rationalize market. Prune back to most profitable segments, higher volume segments; concentrate marketing focus. Reduce sales volume, increase profit margins, lower working capital needs, increase cash flow as percent of sales, decrease receivables; willingness to accept lower sales totals; moderate risk.

8. Maintain products and market share. Business continues as before; same products, same markets. Increase at industry growth rate with stable, short-term profit margins; decrease working capital and increase cash throw off overtime; may lower unit costs; investment in strategies to hold position; low risk.

9. Cut costs. Reduce costs uniformly through management edicts. Increase profit margins, achieve lowest possible return of all efficiency strategies; needs excellent implementation to apply intelligently; moderate risks due to arbitrary nature of cutbacks-may have invidious consequences.

10. Abandon unit. Sell or liquidate unit because it doesn't fit in with company-or because it is worth more to someone else. Improve cash flow from sale of assets, create possible morale problem in rest of organization; low risk.