adminour manufacturing companies are either downsizing or closing some of their subsidiaries if not winding up operations completely.
Those that have managed to survive are mainly multinationals that have received support from their parent companies through provision of equipment, technology upgrades or capital funding, over the decade of economic challenges.
Unlike most local manufacturing firms, these companies have managed to keep abreast with developments in the global market and have the latest technology to ensure they remain in production.
How then does a local company operating in this economy survive or achieve growth?
Some have acquired growth through a variety of techniques.
These include acquiring another company’s revenue stream, slashing prices, or opening as many new locations as possible and quickly as possible.
All of these techniques create a base for growing your revenue, but none of them address the issue of sustaining that revenue – in fact, some of them actively undermine it.
A short-lived revenue spike does not measure sustainable growth. Rather, sustainable growth is measured by metrics such as revenue per store, or revenue per product, or number of services used per customer.
These metrics reveal whether or not your revenue stream is robust, whether it will last.
How do you explain a company that operates in a country but shuts down after 40 years because it lacks capital?
Let’s face it, doing business at the moment is not easy. Figures released show that a company’s labour cost was 25 percent of total cost during the Zimbabwe dollar era but has since risen to 45 percent after dollarisation.
You cannot afford to employ people for the sake of employing. Great managers select the best people, set accurate expectations for them, motivate them, and develop them.
At the same time, you cannot afford to lose more talented people. Avoid overpromoting, undervaluing or misusing talented employees.
Get talented people in their right roles, an over-reliance on marketing or an unquestioned fondness for acquisition might not work for you as much as it did for the other company.
It is also important to have loyal customers that become advocates, which create a large, vocal and unpaid sales force.
Working capital or funding for recapitalisation is being cited as the major reason for most closures.
If your company is given half the money it applied for from the bank and the repayment is over a six-month period, chances are it might start experiencing haemorrhaging that you never expected.
This is largely because most companies that used to import raw materials at 90-150 days credit are now being squeezed into a situation where their suppliers are now demanding cash upfront, which can be very problematic.
Given that capacity utilisation figures have retreated from 52 to 44,9 percent, it is difficult for local companies to repay such loans.
The downside is that the poor performance in most sectors not only affects companies in that particular sector alone but also the backward and forward linkages that exist within it.
This has the potential of setting in motion a vicious cycle that will lead to the demise of all sectors involved.
Some companies have manoeuvred around the challenge by implementing short-term measures that drive short-term profitability.
Some have taken up solid operational initiatives, such as improving process efficiency or cutting costs.
Some have done “creative accounting”, such as write-downs, aggressive one-time charges, or forcing orders for products at the end-of-period in order to overstate revenue.
Ultimately, Zimbabwean businesses will not compete, nor will they attract investors, if they are not compliant with international standards of professionalism.
Till next week, May God richly bless you!!
Shelter Chieza is an advisor in management issues. She can be contacted at [email protected]
Online Reporter