[SOUND] In the previous parts of the course, we followed the line of gradual business model operation, while paying more, and more attention to the specific details. In this module, we're going to take a step aside, and have a far more general look upon business and strategies. I would like to start with a question that may seem too simple, and even senseless, to you. But the more you're going to ponder over it, the more depth and ambiguity you're going to recognize in there. So the question is what is your business for you? The relationships between the owner and his or her business is not that simple. Many owners simply stumble at this question. There is a common saying that states, a fish does not see the water where it swims. All the same with business. I used to hear a different answer to the question. For some, business was a job, a scope of duties, an occupation, or a place where they could go every working day. The others stated that business is an instrument to reach their goals, and that they were striving to make that instrument efficient and convenient to use. The third went even further. They claimed business to be their way of living. Something so natural and inseparable that can not be understood and changed quickly. The variety of the owners' attitudes towards their businesses varied from seeing it as a curse to feeling business to be a child. Whatever answer you give to the question, it always presumes some kind of personal care and self-identity. This means that any business strategy is, to some extent, a personal strategy too. The scope of a business depends greatly on the scope of the owner's and CEO's personalities. This conclusion means a lot for my second question. What can I do with my business? What are the ways to develop it? What should my next steps be? Again, that is the question an entrepreneur should refer to himself. It should sound like, what should I do with my business? What is my way? How am I going to develop? Although this question may have great many different answers, it is still quite useful to have some basic scenarios in mind. To understand them, let's do something unusual, even funny. Let's pretend that our business is a cow. If your business is a cow, what can you do with it? How can you make money? The most common ways are either to milk it or to sell it. The first way means receiving relatively small, but repeated profits. The second one is to take everything right away. If the cow is too small yet to be milked or sold, you can grow it hoping to milk or sell it in the future. There are three basic ways to deal with your business, milking, selling or growing. There are definitely far more ways to make use of a cow. You can rent it, you can put ads on its sides, you can even rear cows. All is limited by your imagination and entrepreneurial spirit only, but those three are the basic ones. They actually define the three basic dimensions of any business, profitability, capitalization and sustainability. Once you decide to milk the business, you are interested in profitability, the ability to generate profit. And the return rates are going to be your primary concern. If you decide to sell your business, then you are going to pay much more attention to the business capitalization, its monetary value. But if your goal is to grow your business, then it is necessary to think more about sustainability. These three dimensions are most commonly mutually exclusive. Start raising profitability, add more risk, and gather decrease in sustainability. Work on the increase of capitalization, and the profitability is going to fall down and so on. Whatever business strategy you choose, it is essential to set the priorities and to choose just one dimension for a certain period of time. Here is the list of eight major opportunities that may help you to decide which way to lead your business. In different circumstances, you can choose to profit, sell, grow, scale, replicate, restructure, dry, or even kill your business. Let's see these opportunities in detail. Choose to milk the business, or to profit from it, if the business already has sustainable competitive advantages, stable market share, well-managed processes, and no outer breakthrough opportunities. Take care of the return rates and operative troubleshooting. Choose to sell your business if you feel you are losing control over it or over the market situation. Sell the business while it is still on its top. Find a strategic buyer, and sell all the risks all together with the assets. Take care of growing business when you expect it to rise and to become a strong market player or a valuable acquisition for a market leader. Pay attention to addressing new clients and improving the processes. Never grow a business with no evident market or investment prospectives. You can also choose to scale your business. That is, to change its size and capacity. Starting with a small retail outlet, you may switch to a local multi-brand store, then to a supermarket, and then to a huge mall. Each time you are going to meet the completely new sets of management and business problems. Choose to scale if the increase in size provides you some evident advantages, such as economy of the scope or market consolidation. Another way to manage growth is to replicate the business. You may choose to raise a chain of outlets or subsidiaries to attract franchising partners or to replicate the business model within another similar market. Choose to replicate when the business model proves to be a success, but your local market is limited. Some businesses need restructuring. This means it is necessary to revise and rethink the processes, the sets, and the practices in order to improve performance or competitive ability. Through the course of time, each company becomes full of unnecessary things that have no evident purpose, but still distract the resources as well as the attention of the management. Choose to restructure a business when its efficiency is significantly lower than the average in the industry. There are some kind of businesses that make no profits, or even generate losses, and there is no hope to increase performance or return rates. Then you need to dry a business of the kind. That means to separate all the processes and assess in two blocks. Number 1 is profit-generating, and number 2 is losses-generating. Sell or outsource number 2s, and support number 1s. Then you are going to have a lean and efficient business, instead of a dying dinosaur. Finally, there are some kind of businesses that have accumulated lots of troubles like debts, unsellable assets, or bad reputation. It is impossible to profit from them, impossible to sell them, and quite senseless to develop them. Then you need just to kill the business of the kind. Sell everything valuable and sellable. And then just quit or go bankrupt with a legal entity. In short, get rid of it. As you see, sometimes quitting on time can also be a perfect strategy. So let's sum it up. The relationships between an entrepreneur and his or her business is complicated and, very often, personal. The ways to develop business are often connected with the ways to develop the interpreter himself. There are three major dimensions for business growth, profitability, capitalization, and sustainability. There are also eight ways to lead a business. They are profit, sell, grow, scale, replicate, restructure, drive, and kill. Whatever you are going to do, think about the alternatives. Make a choice grounded, and do not hesitate after the choice is done. [SOUND]
