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Being the Wrong Size

A business that is the wrong size is a business that does not have the right niche to survive and prosper.

Being the wrong size is a chronic, debilitating, wasting—and a very common—disease. Being the wrong size is curable in the majority of cases. But the cure is neither easy nor pleasant. The symptoms are clear and are always the same. In a business that is the wrong size, there is always one area, activity, function, or effort—or at most a very few—that is out of all proportion and hypertrophied. This area has to be so big, requires so much effort, and imposes so much cost on the business as to make economic performance and results impossible. The old American Motors furnishes the example. American Motors announced successive plans to aggressively recruit new and strong dealers and push up its sales. In order to obtain the sales volume that would have given the business a viable size, the expenses that made the business nonviable had to be increased. And this is precisely what the business could not afford.

The most rewarding strategy to come to grips with the problem is to attempt to change the character of the business. A business that is the wrong size is a business that does not have the right niche to survive and prosper. A comparison between American Motors and Volkswagen shows the difference between being the wrong size as a result of lack of distinction, and being the right size by occupying a distinct niche.

ACTION POINT: Analyze your business. Are you too small to compete in the business? If so, develop a profitable niche within which you can compete effectively.

Management: Tasks, Responsibilities, Practices

* Source: The Daily Drucker by Peter F. Drucker

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