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The Financial Express

Addressing collateral damage

| Updated: August 24, 2021 22:04:14


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Usually, whenever businesses report profits, they are carefully gauged with several factors in mind. Benefits of cost reductions, uptake in demand even in adverse market conditions, hedging and newer creative marketing solutions are to name a few. Hardly ever do they speak of any beneficial tax initiatives, stimulus or favourable policies such as lower lending rates. Turn the situation around, that of losses and the hitherto non-mentionable become focal point.

PepsiCo has just announced a $3.3 billion sale of its Tropicana fruit-juice brand and others to a French company. PepsiCo is not happy with the slow-volume consumption increases along with lower profit. They are stacking their cards in favour of high-volume, higher-profit-generating soft drinks. In so doing they have evaluated the risk of castigation by health groups that have, for ages now, complained that soft drinks are a disaster. The informed risk feeds on the premises that emerging from shutdowns there will be a spurt of spending on fizzy drinks to celebrate freedom and all the brand messages of being 'refreshed'. Governments loathe to impose curbs on the fizzy drink category for fear of disrupting comfortable and easier tax flows.

The fashion industry primed on the 'it's me' kind of promotion is not happy also Rolex is retrenching workforce and trimming down production; Victoria's Secret has shut down most of its retail outlets and the ever reliable Debenham establishment has filed for bankruptcy. Nando's, the place to go for spiced up food has quietly shut shop in Dhaka. No doubt, smaller, lesser known food, clothing and other outlets have shuttered down as well.

That's not to suggest business has gone South. Demand may have reduced as many manufacturers will point to. The Merry online trade has exploded worldwide, creating further wealth not just for the giants but even the small work-from-home outfits. With it has come the inevitable but inexplicable greed leading to abhorrent fraud with consumers. E-vally, trumpeted by the e-Commerce proponents as being a super success has virtually collapsed for all the gimmicky marketing, unbelievable discounts that they offered. It turns out that they have debt more than ten times their equity. Another new entrant Orange, is facing increasing complaints from consumers that paid for goods and are yet to get their products. eVally followed bad business planning and models by eVally, say the experts. Management changes have been responsible, argue Orange authorities. The upshot was a quick retreat by banks withdrawing their credit and debit cards from use with not just these two but a whole host of online suppliers. The quicker the rise, the easier the fall. Cryptocurrency is a case in example. The bubble grew and then collapsed. Now someone is paying a cool $600 million ransom for a major heist of the currency.

Consumer confidence requires to be carefully built and nurtured. Erosion can happen overnight and has led to spectacular crashes for many ventures. Online commerce is a major off-shoot if a digitised society. Confidence boosters are an absolute must. Facebook isn't doing much favours with its Market Place. Another creative platform for entrepreneurship is having the wheels come off by the delivery and quality of products. Just as the social media is suspending or cancelling access for individuals and firms, it must be form with what is being advertised on its platforms. There will come a time when stated or not, replica products of renowned brands being sold with impunity will come in for legal action. Governments around the world have extracted punitive and retroactive taxation from the large social media platforms for sales and advertising. That in a way includes them in the process, should it come about, of legal action taken by consumers for false or misleading promotion and sales.

How broadly, businesses locally have survived without having to close down should be an interesting case study. How much of their survival was bolstered by stimulus and how much through innovation or diversification will make for a fascinating saga. Businesses such as Anwar Group that began from humble precincts and grew into conglomerates suggest there are business models beyond the bookish sort. These are what can provide for gems of exemplary inspiration for the smaller and even sick industries. Models that have grown through ground-realities and evolved on their own are the secrets to success of most of the longest surviving businesses in the world. These are what can be ingrained in the models currently being worked on to create and encourage new entrepreneurs weaning them away from just seeking jobs.

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