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What Happens When the Host Country Environment Changes? A Tale of Currency Devaluation You Have Successfully Outsourced – Part Three

Friday, November 17th, 2017

By Denise Harrison

Strategic Planning Expert
Denise Harrison

Note:  This post is part of a series of posts from Denise A. Harrison’s article What happens When the Host Country Environment Changes originally posted in Compass Points in November 2004.  Part One introduced the topic and discussed how Competition, Customers, Technology and the Economy will respond.  In Part Two, we discussed The assumptions we made, Strategic Options, Evaluation of Strategic Options and Strategic Choice.  In this part we will discuss What Actually Happened, In the End, Lessons Learned, and the Template for Evaluation Environmental Changes.

What actually happened?

Competitors aggressively pursued a lower pricing strategy to gain market share. Our customers remained loyal to us due to our rebate policy; however, over time they did negotiate lower prices with us as the competition continued to offer them better deals. The rebate gave us a window of time where we could develop better information about where the peso was headed and reap the benefits of the percentage of the savings that was not rebated to the customer. Still this strategy generated a significant amount of goodwill from customers because:

    1. The rebate effectively lowered what they paid to us – and they didn’t have to ask. Many gained recognition for bringing a significant line item in under budget.
    2. Many customers thought the rebate concept exemplified a company with the business savvy to develop a strategy for an uncertain currency environment.

In the End

The peso continued to devalue and has stayed close to 9-10 pesos/$. We did make money during our rebate program and did not lose market share during the pricing wars that our competition introduced.

Lessons Learned

    1. Don’t be greedy! If we had not offered the rebate we would have made a significant short term profit, but lost market share long term.
    2. When your business environment changes look at it strategically:
      1. Try to understand how it will impact all of the external forces
        1. Customers
        2. Competition
        3. Technology
        4. Suppliers
        5. Economy
        6. Regulatory
        7. It may not impact all of these areas, however it is good to take a look so that you will not be blind-sided.
    3. Develop options that allow for flexibility. Market changes may precipitate additional market changes. Try to keep from being locked in to the environment as it stands now.
    4. Think of ways to generate customer goodwill in a changing environment.
    5. Don’t operate in a vacuum. Your competitors will respond – be prepared!

Template for Evaluating Environmental Changes

What is the change?

How does it impact the external forces:

Customers/Market Segments

Competition

Technology

Suppliers

Economy

Regulations

What are the possible courses of action?

What are the benefits/risks of each of the above choices?

What is the best course of action?

How will you implement this strategy? What are the key objectives that support this strategy?

This is the final post in this series.  Have you successfully outsourced and the host country’s environment changed?  Attend the Simplified Strategic Planning Seminar for more instruction on how to handle this subject as well as all other aspects of Simplified Strategic Planning.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@thestratplan.com.

© Copyright 2017 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.