Successful Business

[gricole]

What are the factors you will focus on if you are asked to identify a successful business?

 

[Jaysen]

What are the factors you will focus on if you are asked to identify a successful business?

Do you mean in reference to an interview question?

 

[Daniel Boden]

Do you mean in reference to an interview question?

I'm not sure if @gricole means in an interview question, but if he does then I'd also be very interested in how you'd go about answering that in an interview!

 

[Naomi]

I’ve had that question in a mock interview and I raised points about:
- market share
- their USP/differentiator
- the first mover advantage (my example was one of the first cold pressed juice companies in London)
- their expansion strategy ie focused and relevant to the type of industry as they used crowdfunding

Glad it was only a mock as those points could definitely be refined! But hope that helps

 

[Abstruser]

Interesting question!

This is off the top of my head, but if I were to try identify the factors to a successful business, I might start with basic business analysis frameworks like SWOT, PESTEL and Porter's 5 Forces. To take a P5F analysis, I might identify a successful business on its ability to manage the following threats:

• Its current competition: As Naomi mentioned, market share/power, expansion strategy, first mover advantage and their USP are all important in maintaining a competitive advantage amongst current competitors. You can break this down into product and geographic market to help think about current competition.
• Its supply side independence: How many suppliers does it rely on? Are the intermediate products that it relies on easily sourced, or are they quite rare and therefore a vulnerability for the company? Is the supplier a common supplier for many other companies, and therefore given greater pricing power over the business? If a supplier can exert pricing power over a business, this might affect its ability to offer competitive prices, for instance.
• Its buyer independence: How much power do its customers have over it? If it has very few customers, buyers might have more power over a company. Similarly, if the business has an easily substitutable product, customer loyalty is very important, and so buyers will have more power over the company. Strong buyers might demand lower prices, for instance, and affect a company's profitability.
• The threat of new competitors: Does the business operate in a company with high barriers to entry? If it does, it might be more likely to be successful, because it faces less competition in its segment of the market. Things like IP, economies of scale, customer stickiness (eg due to switching costs) might also be relevant in assessing whether a business will be affected by new competitors.
• The threat of new products: Is the service or product sold by the business sufficiently unique? Can the purpose served by the product be equally met by another product? If you think about aluminium foil - clingfilm, ziplock bags or paper bags might be substitute products for aluminium foil (as a wrapping material) or baking paper or just oil to grease a tray (as a cooking utility). In contrast, things like zips - are there really many good substitutes for a zip? Buttons, maybe?

Most successful businesses will be fairly strong on the first three points, but I personally think a business' sustained success will be largely down to the ability to anticipate future changes and threats (ie the last two points). That's something that's quite topical today, given the whole technological disruption trend.

That's just my two cents, but I hope this was helpful in some way!