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Strategy directions for the new normal

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Businesses today face three sets of forces that are concurrently disrupting the global economy. First are transformative changes brought about by the 4th Industrial Revolution. Second are changes that have been set off by the fundamental shifts taking place the world over well before the onslaught of COVID-19, notably the breakdown of globalization, increasing nationalism and growing political extremism. The third and most recent set of forces are those that have been unleashed by the coronavirus pandemic.

Under the unsettling conditions that prevail in today’s business environment, existing business models and old ways of doing business have become largely dated and ineffective. In order to survive and thrive under the newly emerging business conditions, companies must pursue new, novel, and heretofore unproven strategies.

In adapting to the so-called New Normal, businesses may adopt either of two broad strategy options. If they are experiencing only limited threats from both the pandemic and the structural changes that have been taking place beforehand, and can therefore safely weather the storm — or even prosper — they may opt to navigate the crisis, seizing opportunities as they occur and fending off threats as they arise. Or, if they were already in a decline when the pandemic struck, they may choose instead to use the crisis as a catalyst for change.

ALTERNATIVE SURVIVAL STRATEGIES
The structural changes that are taking place as a result of the pandemic will affect businesses in different sectors of the economy in different ways. Companies must therefore pursue different survival strategies. Depending on the special set of circumstances that they face, companies may choose any of the following strategies.

Straying — strategies pursued by firms confronted by severe structural challenges arising from the ongoing pandemic, and facing ominous threats to their continued existence. Major players that are engaged in the travel and tourism sectors, such as those in the airline and hospitality industries, retail merchandising, and entertainment, fall under this category, along with the small ancillary businesses that form part of their extensive supply networks.

Consolidating — strategies implemented by firms in the wholesale business, those that engaged in metal production, high tech, and textiles, many of which need to redefine their business models in order to survive under the newly emerging business environment.

Recovering slowly — strategies that are suitable for firms in non-food retail, professional services, and banking.

Continuing, or staying the course — strategies that are well suited for businesses that are neither doomed to extinction nor destined to prosper as a result of the crisis, such as those in real estate, pharmaceuticals, and financial services.

Seizing — strategies that are appropriate in industries that will profit the most from opportunities arising from the changing global business environment and the ongoing pandemic. Food retail, online food ordering and delivery platforms and those that offer data storage services are among these sectors.

Whatever survival strategy is adopted, it is imperative for firms to reboot their business models in order to enhance their chances of surviving the crisis, if not indeed to thrive in it. These are the essential steps to be taken:

Re-establish financial viability as quickly as possible. In order to immediately recoup as much lost ground as possible, it is essential for business organizations that have been adversely affected by the crisis to respond to the fast-moving situation as quickly as possible. Under the highly dynamic and unpredictable circumstances as those that exist today, timeliness is crucial, and flexibility is key. What is needed is a startup mindset which favors action — even impulsiveness — over deliberation, and testing, or experimentation, over analysis.

Firm up relationships with stakeholders. Times like these require business organizations to reassess their relationship with their stakeholders on whom they depend for their continued existence — their customers, their workers, and the other firms that form part of their extended value networks. It is therefore crucial that they rethink and strengthen their relationships with them. The following steps are necessary:

Focus on changing customer needs. Companies need to understand what customers will value under the New Normal, and develop new products and services, or repurpose existing ones to better serve those needs.

Address the pressing needs of workers whose lives and livelihood are under threat. Companies must reassure their employees as best as they can that their jobs are secure and their incomes are assured. Operational procedures must be reconfigured and job assignments modified to enhance working conditions and lessen anxiety among workers, particularly those who are required to work from home.

Adjust ecosystems to new realities. In responding to crisis-related disruptions in supply sources and distribution channels, adaptability is essential. This means changing the existing ecosystem and considering nontraditional collaborations with nontraditional partners up and down the supply chain.

Rebuild operations. This includes accelerated end-to-end value-chain digitization. Even before the coronavirus struck, many companies have already been digitizing their operations. Accelerating these efforts will enable them to achieve substantial benefits in productivity, flexibility, quality, and end-customer connectivity.

This also means having to embrace the future of work. The future of work is defined by the extensive use of automation and technology. This process has been going for years since the onset of large-scale digitization in the early 1990s, and COVID-19 has hastened its pace. Employees at all levels of management and operation and across all functions are learning to work remotely using digital communication tools. Production operations even go further with the continued decline in manual and repetitive tasks and a rise in the need for analytical and technical support. This shift calls for sizable investment in workforce re-training aimed at developing new skills and work attitudes, primarily those that are relevant to the handling of large volumes of information using advanced digital tools.

Rethink the organization. The massive structural transformation that is taking place in the world of business as a result of the pandemic calls for major shifts in the operating models of business organizations which compel them to work in new and unaccustomed ways. Strategic goals have to be re-thought, managerial roles re-configured, and operational procedures re-invented. In a world characterized by rapid change, volatility and unpredictability, quick, decisive moves should replace the sluggish decision-making processes that have long been the bane of corporate bureaucracies. n

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.

 

Niceto “Nick” S. Poblador is a member of the MAP Inclusive Growth Committee and the MAP Management Development and Human Capital Committee. He is a retired UP Professor, and until recently was a Professorial Lecturer at the UP School of Economics.

map@map.org.ph

nspoblador@gmail.com

http://map.org.ph



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Regional Updates (08/12/20)

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Over 1,200 apprehended in QC for violating health protocols

MORE THAN 1,200 people were rounded up in Quezon City on Wednesday for violations of health safety measures such as wearing of face mask and observing social distancing. The city government’s Department of Public Order and Safety said the violators, which also included those who were out without a quarantine pass, consisted of 997 men, 213 women and 28 minors. “Dumadami ang mga COVID-19 cases kaya kailangan hulihin ang mga violators (Cases of the coronavirus disease 2019 has been increasing so we should apprehend violators),” department head Elmo San Diego said in a phone interview. Quezon City has recorded over 7,800 COVID-19 cases. The violators underwent booking procedures and were fined ranging from P300 to P500. Lawmen also gave them a lecture on the dangers of COVID-19. Mr. San Diego also said as part of the violators’ punishment, they were not provided with transportation to return home. — Emmanuel Tupas/PHILSTAR

DoTr to absorb qualified workers affected by LRMC’s retrenchment

TRANSPORTATION SECRETARY Arthur P. Tugade on Wednesday instructed the railway agencies under his department to hire the “qualified” workers who will be laid off by Light Rail Manila Corporation (LRMC), the private operator of LRT-1. “Hire qualified personnel to our rail lines and projects… We must look into the possibility of absorbing them as quickly as we can. Huwag natin silang pabayaan (Let us not forsake them). It’s the least and most humane thing we can do for them at this time,” Mr. Tugade said in a statement. On Tuesday, LRMC announced it would let go of over 100 employees, citing a significant drop in ridership amid the coronavirus crisis. The workforce reduction takes effect Sept. 15. The company said all affected employees will receive separation benefits as well as training on alternative livelihood and investment along with mental health support. LRMC is the consortium composed of Ayala Corp., Metro Pacific Light Rail Corp., and Macquarie Infrastructure Holdings (Philippines) Pte. Ltd. Metro Pacific Rail is a unit of Metro Pacific Investments Corp., one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group. — Arjay L. Balinbin

Davao local governments keep watch on swine flu threat

LOCAL GOVERNMENTS in Davao Region are intensifying efforts to avoid African Swine Fever (ASF) following last month’s outbreak in a cluster of hog raisers in Panabo City, Davao del Norte. The neighboring province of Davao de Oro has set up quarantine measures at its borders, including foot and wheel baths. “Since February when ASF erupted in Davao Occidental, we are very vigilant together with our hog raisers here in Davao de Oro. We conducted a meeting on how to combat this virus and one of the things discussed to address this is of course prohibiting the use of swill feeding and also in our provincial boundaries, all vehicles entering in our province need to pass through a foot bath and a wheel bath,” Governor Jayvee Tyron Uy said in a briefing aired over Radyo Pilipinas. The Davao City government on Tuesday also called on consumers to check for certification when buying both fresh and processed pork products. The City Veterinarian’s Office found ASF virus in samples of chorizo, tocino, and lumpiang shanghai taken from the Bankerohan Public Market on July 30 and Aug. 5. Assistant City Veterinarian Ester G. Rayos said buyers must ensure that the merchant has a meat inspection certificate (MIC). “If they have an MIC, it means the meat were inspected in our accredited slaughterhouses,” she said in an interview on Tuesday. The outbreak in Panabo City, which was confirmed July 22, has been contained through a lockdown of the entire village of Cagangohan and culling all pigs in the community. — Maya M. Padillo



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How a hair-care company went from salon supplier to sanitizer powerhouse

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When AG Hair moved into its new, 70,000-sq.-foot, state-of-the-art manufacturing facility in Coquitlam, B.C., two years ago, it was part of a plan to supercharge expansion of its hair care product line to salons in international markets. Europe was next on its list. Then COVID-19 hit.

Not only was the European expansion put on hold, but salons in major markets across Canada and the United States were temporarily closed. Very few were purchasing hair products, so manufacturing was halted in mid-March, leaving most of the company’s 82 employees out of work.

AG Hair could have waited out the pandemic but instead decided to lean into its entrepreneurial culture and make a sharp pivot. It began providing hand-sanitizing products for front-line health-care workers, addressing a global shortage.

“We realized there was this massive need for health-care professionals, and we wanted to make a difference and be able to provide them with the products they needed,” says AG Hair CEO Graham Fraser.

AG Hair received Canadian and U.S. approvals a week after applying for the licences needed to make sanitizer, and produced samples to show local authorities within 48 hours.

AG Hair’s Coquitlam facility has pivoted to making hand sanitizer (Photograph by Alana Paterson)

“That rapid response time, and the fact that we had gone through all of the Health Canada regulatory hurdles, showed [the local health authorities] that we were a partner they could trust and someone they could look to, to deliver the products they needed,” Fraser says.

Within a month, the company started pumping out the products, first for the health-care industry, then for consumers on its own website and on Amazon. About 10 per cent of AG Hair’s hand-sanitizer production also went to people in need, as identified by organizations such as United Way.

Parallel 49 Brewing Company is also using AG Hair’s Coquitlam manufacturing facility to produce its own blend of liquid hand sanitizer for front-line health and emergency workers, in partnership with the B.C. government.

Fraser credits his team for its energy and creativity in making the hand-sanitizer production happen, and helping put AG Hair staff back to work.

“We realized we had an opportunity . . . and then it became this incredible, almost war-room mentality and collaboration with our owners, our executive team and our people to say, ‘How are we going to get through this?’ ” Fraser recalls. “I think our success speaks to the type of people we have and the entrepreneurial spirit of pursuing every avenue we have, understanding how we can produce the products and making it happen.”

AG Hair’s commitment to investing in future growth is a big part of what makes it a Best Managed company, says Nicole Coleman, a partner at Deloitte and co-lead of its Best Managed Program in B.C.

“Capability and innovation come through quite strongly with this company,” says Coleman, who is also AG Hair’s coach at Deloitte. “I don’t think they would be able to pivot as quickly if they weren’t so strategic and had the internal capabilities to do it.”

The manufacturing facility was a big investment, but one Coleman says has already paid dividends.

“They were looking forward with a strategic plan in mind about future growth and how they could expand, rather than just focusing on the day to day,” she says. “Best Managed companies are always pushing the envelope and are conscious about planning for the future.”

AG Hair was founded in Vancouver in 1989 by hairstylist John Davis and graphic artist Lotte Davis. The husband-and-wife team began bottling hair products in their basement and selling them direct to salons from the back of a station wagon.

The company eventually moved its manufacturing off-site, to a third party. One day, John went to watch the operations and was surprised to see salt being poured into the mixture. Although he was told salt is commonly used as a thickener, he didn’t like the potential side effects of dry hair and skin.

It was at that moment John decided the company would oversee its own manufacturing. “Through that experience, John also became an expert in product development,” says Fraser, who came to the company in 2000 as director of sales.

After having worked for more than two decades at PepsiCo and Kraft Foods, Fraser was eager to work at a smaller, more agile company where he felt he could help make a difference.

“It was perfect because I got to bring a lot of structure and process that I learned in those organizations, but I also learned an awful lot about being an entrepreneur from John and Lotte: that sense of urgency, the decision-making process, the need to get things done and drive things forward and pursue opportunities,” he says.

Fraser has helped drive AG Hair’s expansion into the U.S. and internationally, including Australia, Taiwan, and Central and South America. A portion of its sales go to One Girl Can, a charity founded by Lotte that provides schooling, education and mentoring for girls in sub-Saharan Africa.

Fraser also oversees the development of new, trending products, including a new deep-conditioning hair mask made with 98 per cent plant-based and natural ingredients. Hand-sanitizing spray and gel will be the latest addition to the company’s product lineup.

“We don’t see the demand [for hand-sanitizing products] going away,” he says. “As the isolation policies start to get lifted, people are going to need forms of security and protocols as they get back into regular life and work. We see there’s going to be a need for these types of products long-term.”


This article appears in print in the June 2020 issue of Maclean’s magazine with the headline, “Working out the kinks.” Subscribe to the monthly print magazine here.

The post How a hair-care company went from salon supplier to sanitizer powerhouse appeared first on Canadian Business – Your Source For Business News.



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J.P. Morgan: 2 5G Stocks to Consider (And 1 to Avoid)

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The late, great, Neil Peart wrote, in Tom Sawyer, “He knows changes aren’t permanent, but change is.” His words are an apt description of our modern world, an ever-changing landscape of pending tech. Right now, the shiny new change is 5G.Even the coronavirus couldn’t fully derail the coming build-out of the new 5G networks. It only delayed it. China and Korea are leading the world right now in bringing 5G networks online, with the US expanding its own new systems and Europe lagging behind. In the US, most urban areas have at least partial 5G connectivity online, and the major service providers are working to connect those centers.For investors, the key here will be finding companies that are primed to gain as 5G expands. Investment bank JPMorgan has taken note, and tapped two tech companies that stand to gain big as 5G systems emerge more and more into the mainstream – and to balance the books, JPM has also tapped one company to avoid. Using TipRanks’ Stock Comparison tool, we lined up the three alongside each other to get the lowdown on what the near-term holds for these 5G players.Qualcomm, Inc. (QCOM)JPM’s first thumbs up is for Qualcomm, a major name in the semiconductor chip scene. QCOM is consistently among the largest chip makers by total revenues, and kept that up heading into the corona crisis. Qualcomm’s 2019 sales totaled more than $24 billion, with a net profit of $4.4 billion.Qualcomm is taking a proactive stance toward 5G, creating and marketing a variety of chipsets for the new tech. The company has a range of speeds available for mobile platform processors and PC, along with specialized chips for the automotive market. Strong sales in 5G chips have helped the company’s bottom line; Qualcomm beat the Q2 earnings forecast by 16%, and is projected to see a sharp gain in Q3. Covering the stock for JPM, 5-star analyst Samik Chatterjee wrote, “[We] believe Qualcomm’s leadership in 5G technology in conjunction with the upcoming ramp in 5G smartphones… is going to lead to expectations for a bull case around potential Qualcomm 5G shipments to Huawei in the future to support its smartphone launches… we expect it to drive a multiple re-rating as well to reflect the improved positioning in the 5G landscape…”Chatterjee’s Buy rating is supported by a $120 price target and a projected 9% upside to the stock. (To watch Chatterjee’s track record, click here)Overall, QCOM's Moderate Buy consensus rating is based on 21 analyst reviews, including 13 Buys, 7 Holds, and 1 Sell. Shares in the chip maker are selling for $109.70, and the average price target, $117, suggests a modest upside of 6%. (See Qualcomm stock analysis on TipRanks)Qorvo, Inc. (QRVO)Qorvo is a another chip maker but a rung down in size. Qorvo boasts a $14.5 billion market cap and a leading position as a provider of quality networking chipsets. Qorvo chips are found in most devices with a mobile wireless capability, including laptops, smartphones, and tablets. The company round out its product lines with chips for older – but still useful tech – such as cordless phone and industrial radio.All of these devices are touched by 5G networks, and Qorvo is positioning itself to provide chips in the essential base station market. The company is already a leader in RF chips for 2G, 3G, and 4G units; moving to 5G is a logical step that Qorvo is already taking. The company has solutions for the lower bands of 5G, up to 39GHz, and is working on higher frequency applications.JPMorgan's Bill Peterson writes of QRVO’s recent performance: “Qorvo is benefitting from content gains in 5G phones across a broad set of smartphone vendors and the team again maintained its above market expectation of 5G shipments this year, which at least directionally is playing out as smartphone mix continues to skew toward 5G amid continued weakness in legacy 4G shipments. Outside of mobile, demand is improving across 5G infrastructure, which we believe led to much of the upside in the June quarter…”Peterson gives the stock a $140 price target to back his Buy rating; this suggests a 9% upside from current levels. (To watch Peterson’s track record, click here)Overall, Qorvo holds a Strong Buy rating from the analyst consensus, with 13 Buy reviews and just 3 Holds. The stock’s average price target is $136.81, suggesting room for 6% growth from the current trading price of $128.64. (See Qorvo stock analysis on TipRanks)MACOM Technology Solutions (MTSI)The last company on our list is JPM’s down check. MACOM, based in Lowell, Massachusetts, produces semiconductor devices and components in the radio, microwave, and millimeter wave bands, and is a major supplier for Northrop Grumman, the Federal Aviation Authority, and the National Oceanic and Atmospheric Administration.MACOM’s product line includes a wide array of 5G enhancements, from driver and low noise amplifiers to detectors, mixers, and multipliers. The chipsets function across a large range of the 5G waveband, giving them flexibility for use in systems that are still evolving from 4G to 5G.The solid product line underlay MACOM’s strong performance in Q2. EPS, at 20 cents, was far above Q1’s mere penny, and revenues were also strong. The company is forecast to match this performance in Q3.5-star analyst Harlan Sur, in his coverage of the stock for JPM, notes all of this – and comes to an unexpected conclusion. MTSI shares are, he says, likely to underperform in coming months. “MACOM’s Jun-Q results are in line with our 2Q20 Earnings Preview, where we remained positive on semiconductor companies exposed to cloud datacenter spending and 5G infrastructure… MACOM continues to exercise OpEx discipline as OpEx declined in the Jun-Q… operating margin exceeded 20% for the first time since 2017… However, it does appear that some of the growth-focused programs (GaN on Silicon 5G power amplifiers, high-speed lasers for optical connectivity, PAM4 DSPs, SENSR radar program, and silicon photonics) are still more longterm-focused growth drivers. Despite the solid results, solid execution, and earnings power expansion, the stock appears expensive relative to peers,” Sur explained.Sur rates this stock an Underweight (i.e. Sell), and his $35 price target suggests it has a downside going for ward of 10%. (To watch Sur’s track record, click here)Overall, MACOM gets a Moderate Buy from the consensus rating, with 8 recent reviews breaking down to 4 Buys, 3 Holds – and that 1 Sell. Shares are selling for $39.05, and the average price target of $43.38 implies that there is room for an 11% upside. (See MACOM stock analysis on TipRanks)To find good ideas for 5G stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.



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