Threats to Business

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Some usual threats to businesses

Chinese threat to Italian manufacturing - From The Economist

CHINA has become the stuff of nightmares for many Italian businessmen, an oriental beast that grows even more threatening in the light of day. Yet for three decades from the early 1960s, Italy was Europe's own economic tiger. The country's success in manufacturing and exporting was based on a vast patchwork of family-owned, small and medium-sized firms, often located in regional clusters focused on traditional sectors such as textiles, clothing and footwear. Italian manufacturers flourished then. Today, they are wilting. Italy's industrial production has fallen in each of the past four years. It was lower at the end of 2004 than at the end of 2000. Plant utilisation in Italy's export sectors has slumped along with competitiveness. Italy is now buying what it used to sell.

Disruptive environment - Arvind Singhal of KSA Technopark in Business Standard. He outlines some threats to Indian Businesses

In these goods—fast-moving as well as durable—there are several “market disruptions” on the (3-5 year) horizon.

Some of these include the impact on local manufacturers/local brands as India further lowers import barriers and signs more FTAs; the likely increase in the interest of manufacturers and marketers from all parts of the world including China in the growing Indian market leading to more options for the Indian consumers and more competitive activity on the ground; the imminent acceleration of growth of large format/value retailing in India—both from Indian as well as international players—that will not only challenge the small retailers but also some of the existing relatively large ones.

The entry of more international brands—across a wide range of products including fashion, accessories, home textiles, footwear, etc.—shall have the potential of not only challenging the existing leaders but, in many cases, totally disrupting their current positioning and thereby creating a disconnect with their existing customers.

And yet, very surprisingly to me, the stock market is lapping up scrips of some of the most vulnerable consumer product businesses at price-earnings levels that (incredulously for me) actually assume exceptional growth and increasing operating margins in the coming years rather than factor in increasing potential for disruption in their entire business model itself as newer innovations (at least for India) start making their presence in India.

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