Leave markets with price pressure

The market decides the product price, not the product.
Diamonds are pretty much useless to most people, and yet they cost a fortune. Water is essential for everyone, and its price varies between 0.2Ct/ltr as tap water and 20-50 Ct. as "mineral water" from the supermarket. In a pub, you can easily pay 8 euros for a liter, and in Munich it can easily be double that. On airplanes, the tiny 0.2 liter cans of still tap water are sometimes sold for 25 euros per liter. Jámon ham costs around 2 euros per kg in the Spanish mountains, in Mallorca it's 20 euros, in German delicatessens it's 50 euros/kg. Here in the Philippines it can be 80 euros or more for a double pound.

It has never been easier to reposition your company.
Which does not mean that this is easy. But it does mean that it is easier to do in combination with the Internet than it was before the turn of the millennium, for example.
I wrote this article back in 2019, after (my) speech at a trade fair in Munich. And I'm proud to say that even the renowned Managermagazin in 2024 picked up on my idea. (Only the introduction is freely readable). And since 2024 even offers seminars for the repositioning of your company. Parts of this article read like a transcript of my 2019 speech in Munich.

Why should you leave markets with high price pressure?

Well... The most important reason is: If you no longer have any price-value unique selling points, you are in a mass market that is tearing itself apart.
The inevitable consequence of this is that the market will clear. Only those companies that offer a cent cheaper can survive, regardless of how they make this possible. There is only one way to survive: Growth, more mass, lowering fixed costs and variable costs, going even deeper into marginal costing. And in doing so, betray your own principles with which you once entered this market.

If, as with milk, roast pork and detergent, you no longer have to haggle with your customers such as Lidl, Aldi or Edeka for 1/10 of a cent, but for 1/100 of a cent, you are definitely in a market with high price pressure. Of course, examples can also be found outside the food retail sector. Standard screws, simple bearings, interchangeable electric motors, valves, batteries, furniture, sheet metal, tools...

Another sure sign: If you can only survive in your business environment with state aid (subsidies).

You know the trend from television and the supermarket: more environmental scandals, unscrupulous production methods, exploitation of people, animals and the environment. Cows with bursting udders, pigs kept in stalls, chickens that can no longer walk after 2 weeks of turbo fattening.
Antibiotics in all animals, which in the worst case are no longer available to humans for real disease control.
Disposal of production waste with damage for future generations.
Burning textile factories with people dying in them, and in front of them: rivers that have already died. We are still more familiar with these images from India and Bangladesh, but you don't need to leave Germany for visible shortcomings in animal husbandry..

If you operate in markets with high price pressure, you are interchangeable and therefore always in the weaker position at the negotiating table. This will also change you - and not for the better.

What is or are the alternatives?

Shrinkage

This will generally lead to specialization. But perhaps even shrinking will be enough to make your products so rare on the market again that your customers will ask you to supply them. You will find great examples of this in 2021 with the first noticeable end to the coronavirus pandemic. Chip manufacturers, timber producers and processors, oil suppliers: Products that years or decades before only knew one direction: Cheaper! suddenly became rare. Entire production lines are at a standstill because comparatively small upstream suppliers are suddenly no longer able or willing to deliver. Buyers who previously sat back due to their market power now suddenly had to beg to get some raw materials or semi-finished products - whatever the cost.

Growth

A good example is Tönnies, by far the largest meat "producer" in Germany (not only) in 2021. And therefore a regular in many reports. However, in markets with price pressure, growth is only ever possible at the expense of competitors, people, animals and the environment. If you want to survive in such markets with growth, you make the conditions under which you suffer worse.

Modification

Do you still produce sandpaper using expensive steam? Can a switch to electrically atomized water perhaps make your production so cheap that the cost pressure on the sales side is suddenly no longer there? Can you simply use air and water to turn the cream cheese you used to sell into a cream cheese preparation that gives you 200% coverage instead of 2%? The border to the "niche" is of course also floating here.

Transformation

Reinvent yourself. This is the supreme discipline and also the most difficult to achieve. Here it can help to analyze the path of purchased preliminary products or even the path of your own products or production waste. In fact, even food giants such as Tönnies and Meggle are giving ideas here!

Tönnies, for example, realized that they were in competition with pharmaceutical companies when purchasing pig intestines. The latter produced the anticoagulant heparin from ingredients in the intestines. The pharmaceutical industry works with completely different margins, which meant that they were able to negatively influence the market for pig casings (from the sausage manufacturers' point of view). Tönnies turned the tables and started recycling its own - actually waste - semi-finished products. Although this activity was restricted again in 2017 by the sale of this production, Tönnies had been able to sell its main products even more cheaply for many years as a result. This is because the money was now earned elsewhere.

Meggle, as one of the major purchasers of milk, did something very similar: they set themselves up in the lactose pre-producer sector, supplying the pharmaceutical and homeopathy industries. But the invention of packaged portioned butter alone was a milestone for the company. However, this is more of a specialization.

Large-scale transformations can be seen in the automotive industry in the 2020s. The switch to e-cars is reinventing large parts of automotive production. But the switch from bomb detonators to precision watch movements (and vice versa) or the change from a dying department store to a shopping manufacturer like Galeria Kaufhof can also be described as a transformation.

Specialization

Stay in your market segment, but reposition yourself. Concentrate on products with strong coverage or on products that you are particularly good at. Or even: products that you particularly enjoy manufacturing/trading! Perhaps you already have a hidden champion in your portfolio and simply haven't found the right market for it yet. Listen to what you are passionate about. Observe what your customers do with your products. Perhaps you can turn your replaceable chipboard with a new impregnation into a specialist product for fire protection or ecological thermal insulation. The booming market for organic products in particular may enable you to breed chickens or trout in a species-appropriate manner instead of stock-appropriate.

Complete reorientation

This is somehow already included in the points mentioned above. But of course it can also be much more radical. For example, if you keep a small inherited business on your own plot of land in the city center afloat - or build a commercial and residential building on the same site instead.

Or close your sawmill because the new forestry policy has left your fir tree environment to the bark beetle anyway, and you now simply offer shelters for boats and caravans in your halls covered with new solar panels.

You might even open a campsite directly, because your site is on a beautiful lake anyway.

Just take a look at the Mühlen Group, which grew up with cheap (in many respects) supermarket sausage. And has now become one of the largest suppliers of vegetarian products.

Brand management

Build your brand in such a way that customers demand your products. Here is the shining example of Apple. There is no need to go into the individual details. Suffice it to say that Apple has a +/- 10% market share in the mobile device segment, accounting for around 75% of market profits. But even on a small scale, companies from the SME sector in particular are demonstrating time and again that a company name - perhaps chosen rather at random - can be developed into a brand that buyers can no longer ignore.

Closure

Yes, this option also needs to be reconsidered, of course. But then what to do with it? If your business was operating in rented premises with outdated tools anyway, a simple task involving scrapping the BGA (business and office equipment) can give your life a new meaning. Finally travel, finally look after the grandchildren so that the children can concentrate on getting ahead, finally get the garden in shape and enjoy an early retirement instead of pouring more and more money into the dying business. However, if you still have your business on your own land, this can of course quickly lead to a complete reorientation. Haven't you always wanted to set up your own nursing home because you hate the neighborhood and don't want to go there to die? Or could your home and under your roofs be a great place to store motorhomes, caravans and sailing boats? Passive income, without deadline pressure or annoying price negotiations.

Is it that simple?

No, of course not. Depending on your sector, it may lead to a new business being set up. Perhaps your existing business will have to be closed down or sold. This can be painful. Perhaps no buyer can be found and you have production equipment worth millions that nobody wants to pay you for. However, if you have already experienced that no one wants to pay you anything for your life's work, then this is unfortunately just another indication that you are operating in a dying market. You may have a lot of employees who are unable to find a new direction on their own. Perhaps perhaps perhaps. It has always been easier to find difficulties than solutions.

How can I support you in this?

Well... If you have come across this page here, then perhaps I have already helped you a little. Because thinking about your own situation is already the start of a change.
You can also end a life by starting a new one. Incidentally, this is a book subtitle that really appealed to me. The accompanying book not so much. But that sentence was enough to make me buy it.

We can sit down together virtually or in person and you can tell me about your situation. Sleep on it a few times and perhaps I can support you with a reorientation or at least with a portfolio analysis of your customers or products - of course only if you are already using Navision / Business Central or are planning to do so. But I have to make an urgent note here: I like to think outside the box and sometimes have "unthinkable" ideas. But I am not an expert in transformation planning. OK, neither are most people who offer this kind of service.

Maybe we can brainstorm together to come up with new ideas?
You can find me via the contact page, via Teams, Whatsapp, phone... Perhaps a vacation with us in Davao in the Philippines will give you a completely new look on life.