Diversify
Diversification has been critical the past few years and will continue to play an integral role this year.
“If you’ve made it through, you’ve probably figured out a way to diversify your company from one product to another product so you’re not reliant on one business sector,” Hadden says.
But he says it’s time to take it a step further in 2011.
“Let’s diversify your customer base so you’re not totally reliant on one customer in that business sector,” Hadden says. “Find ways to expand your business that way, still doing what you … do best but find more customers. It’s a big world out there, and there’s no reason why we can’t be competing in a lot of markets out there.”
He says one of the keys to effectively doing this is to look beyond America’s shores.
“Our biggest growth opportunity for us as manufacturers that we haven’t taken advantage of is finding customers in other countries that we can help supply,” Hadden says. “I think that’s the biggest tone that we’re going to try to set this year. We all know we can’t rely on one or two customers anymore. … If you’re making a part here for an auto company, why can’t you be making it for someone in Germany or Japan or India?”
Hill agrees that diversification overseas is important because of the growing demand that will come from those markets.
“There is a lot of opportunity out there, but the opportunity is going to be based first on international markets, particularly in growing, developing economies,” Hill says. “It is really important for American manufacturers to really pay attention to international markets.”
For example, one of the biggest markets that American manufacturers need to be involved with is China, but it’s not because of cheap, offshore manufacturing.
“They should be looking seriously at China, because it’s an incredibly growing demand and middle class that’s going to drive global sales for years,” Hill says.
Diversification also means that you have to look at other ways to position your expertise and capabilities in the market.
“Companies are continuing to look for new markets and new ways to use their knowledge and their capital for new products,” Burkland says.
But when you look at the global economy and look at your industry and look at your business, you could get dizzy from seeing everything that could potentially happen. That’s when you have to choose a few things to focus on in your diversification efforts.
“Survey, and then pick a couple that are likely winners,” Nicholson says. “Trying to do everything is logistically impossible.”
The way Nicholson and his company decided was by looking at the products they know really well and then looking at applications where they felt their products weren’t well represented. Finally, they looked to see if they could move into those markets with their products.
“Again, [it’s] trying to leverage what you know into a new market. It’s very hard to get into a new market where you know nothing about the product and where you know nothing about the market,” Nicholson says. “You have to choose to either serve a market where you know something about the product or serve a market where you know something about the market and need to develop the product. There’s too much risk and investment to try to solve both those problems at once.”
