adminI felt I must share with you lessons that one of my mentors gave me using the Joseph model.
Remember that the Bible tells us Joseph predicted seven years of plenty and years of famine and one year of recuperation. So, what are the lessons that business can make derive from this?
Plan for the future
If you have knowledge of your supply and demand — you can plan for the future.
You can observe trends over a period of time — if you are in a seasonal type of business take care to allocate resources accordingly.
If it is cyclical, plan for the upcoming season with the appreciation that the dry season will come but you still need to survive.
Diversify your risk — remember the saying “Do not put all your eggs in one basket”.
Have the intuitive mind to gather information that will assist you in planning. If you do not plan — you are heading for disaster.
One author said if you fail to plan, you are planning to fail.
Cash management
Joseph realised that “cash is king”, and as such collected cash and kept it in reserve.
From a business perspective it simply means that we must align our costs to the cash available and not expected income, in order to create a balance between earnings and expenditure.
Created a strong working capital
Joseph created “tradable stock” through the receipt of livestock in exchange for food and grain. Streamline your operations — do not have too much stock at hand. Do take stock regularly and invest in inventory systems that allow you to monitor your stock at any given time.
These allow you to have knowledge of your re-order point — you do not want to run out of stock.
Created a strong balance sheet
This was achieved through the land he acquired during the famine. The land was a productive asset that earned him cash.
From a business aspect we must learn to disinvest non-productive assets and invest in ones that give cash returns. Businesses can use the Boston Consulting Group Mode to classify a business unit’s performance in categories — question marks, stars, cash cows and dogs.
Dogs are businesses and products that have weak market shares in low growth markets.
Typically, they produce low profits or losses. Where a cash cow starts to lose relative market and no remedial action is taken by investing money into it so as to maintain market leadership, it will degenerate into a dog.
With the passage of time SBUs change their positions in the growth-share matrix.
Many SBUs start as question marks and become stars if they are successful, then become cash cows as market growth falls and finally turn into dogs at the end of their life cycle. When management has planned its various businesses on the growth-share matrix, the company has to make an assessment of its portfolio. For example, too many dogs or question marks and too few stars and cash cows signify an unhealthy portfolio. Management next establishes the objectives, strategy and budget to allocate to each strategic business unit.
Forged long-term partnerships
Joseph cultivated long-term, strategic partnerships with the Egyptians during the time of famine through land tenure agreements in return for food. By so doing, he effectively bought land from the people and entered into a buy/lease arrangement with the owners.
This meant that he ensured long-term productivity of the land as it allowed the former owners to still live on the land, work the land and pay 20 percent of the land’s produce to Pharaoh, thereby creating a continuous stream of income. In simple business terms, he was growing Pharaoh’s business on a long-term basis through strong partnerships.
Cultivated strategic partnerships
Strategic partnerships can be strengthened through backward or forward integration.
Backward integration refers to when a company tries to own an input product company — like a car company owning a company which makes tyres.
Be careful though — developing new core competencies may compromise existing competencies.
You can also try forward integration where the business tries to control the post-production areas such as the distribution network.
A mobile company can open its own mobile retail chain. This has the advantage of producing economies of scale.
Horizontal integration simply means a strategy to increase your market share by taking over a similar company.
This takeover/merger/buyout can be done in the same geography or probably in other countries to increase your reach (e.g. a car manufacturer merging with another car manufacturer).
In this case both the companies are in the same stage of production and also in the same industry. The goal of horizontal integration is to consolidate like companies and monopolise an industry.
For example, a book publisher might acquire another publishing house to increase its stable of editors and authors or to otherwise enhance its competitiveness. So now you see why I fancy the Joseph strategy.
Hopefully, this will serve as a guide to your planning and growth as a company. And when all is said and done, you can invite us to toast to the success of your company. Cheers!
Till next week . . . May God richly bless you.
- Shelter Hamandishe-Chieza is a management consultant. She holds over a decade of management experience and is in the final stages of a Management of Business Administration degree with a reputable local university. She can be contacted at [email protected]
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