Sri Lankan companies: Be brilliant on basics

Dolphin Hotel, a property of Hemas Holding, is an award-winning hotel for driving best practices in Sri Lanka

The $ 87 billion Sri Lanka economy is registered a 3.5% GDP growth in Q1 2019 in the backdrop of South Asian growing at 6% which explains how far away we are in relation to our neighbouring countries – India, Pakistan and Bangladesh. I guess the Q2 performance will be interesting to see. In my view the GDP growth will be -0.5% given the declining tourism industry and the disruption that happened in the retail trade that accounts for over a 30% of the economy. 

Sri Lanka today

We have never seen companies struggling as we see today. Many tourist hotels have closed down. The damage to the industry can be gauged by the applications received on the loan repayment freeze. As we speak it is reported at 62 billion but if we include the indirect entities, this number will come close to a hundred billion is what analyst predict. 

However, the sad insight is that almost 60 days (two months) have passed but no one has been charged for the murder of 259 innocent lives and over a 510 people injured. It just showed the lack of accountability and governance that exists in Sri Lanka. 

Focus 

If we analyse where the focus is, it is not about developing the economy but how each of the politicians can continue to hold on to the jobs they hold in the system. The share of media is divided on the Provincial Council Elections which are due and the up and coming Presidential Elections that must be held in the country later in the year. 

The latest googly by the higher echelons is if a referendum can be staged at a staggering cost of around 600 million if the public can vote for a ‘General Election’ to be staged in the country. This is very sad for a country struggling with its trade deficit hitting $ 2.4 billion where exports are below performance levels at just 4.5% in April.

During tough times companies must be brilliant at the basics 

Research reveals that companies that survive such tough times are entities that do their basics well. Let me share the 10 best practices of companies that are brilliant on their basics.

1. Love your customers but respect your competitors

Firstly, understanding who your core customers are. In the FMCG business we have three sets of customer called Solus users, core users and non-core users. We normally use LMRB/Kanta research company to get this data. With this data we can identify who the primary users of your brand are that you must protect and who the multiple brand users are that shift away and to your brand. 

If I take my own experience, when I was Chairman Lanka Sathosa the first thing we did as a team was to accept that the reality is that the primary users were households with an income of Rs. 30,000 and below that essentially comprised government servants and pensioners who live in semi-urban and rural Sri Lanka. Hence against this backdrop our competitors are not other supermarket chains but more the wholesale and retail outlets in a town that this target customer group visits.

With this paradigm shift in the organisation, internally we decided to accept reality of the target group and understand that their average bill is Rs. 600-800. We began to respect this customer and appreciate their choice in the basket of goods. Then shared this data with the private sector to make the organisation come close to a Rs. 30 billion top line. The lesson: Strong companies are clear on segmentation and whom they target.

2. Be sensitive to change and ready to transform

As per the latest research on household surveys, 42% of consumers state that they have ‘no spare cash’ to pay for luxuries in their day-to-day lives and that this household segment is moving up by over 32% on a quarterly basis, we see that the Sri Lankan household is under severe pressure to live.

It also means that that the overall consumer basket will get challenged in the next few months given that many people in the tourism industry have lost their jobs due to the industry shrinking by 7.5% in April and it will be higher in May. 

This would mean that Sri Lankan companies that operate in the domestic market in the retail space will have to devise strategies to keep the footfall going with promotions of such items with other basic products like toothpaste and soaps for instance. Companies which are strong at the basics are sensitive to changes and are ready to transform. The lesson: Strong companies understand consumer shifts.

3. Guard your name and be clear on who you are

This is where we must be very clear on our positioning in the marketplace and we must guard it at any cost. If we take the tourism industry of Sri Lanka, at one of the focus group studies a potential traveller to Sri Lanka commented: “Sri Lanka as a brand was like sleeping giant – as we tend to only highlight the beach destination attribute. But the latest research reveal that the rich history and compactness have stronger reviews in the last one year than the attribute – Beaches.”

The research also reveal that on the attributes ‘Beaches’ Competitor brands like the Maldives, Mauritius and Seychelles out beat us. Hence, we need to ask ourselves what the distinction is of Brand Sri Lanka Tourism that we must highlight post-April Easter attacks so that we can have a strong reason for a traveller to boost to Sri Lanka. The lesson: Strong brands are strong at the basics – have clear positioning and stay with it.

4. Customers are diverse, go first to who will bring the most

Last Sunday’s papers throw out many debates with our strong links with China and India, especially the former given the preferential land arrangements and tax concessions extended toward the Shangri-La investment at one time and now Hambantota.

Let’s accept it that customers are diverse and let’s go after the ones that bring in the most. From an investment front let’s accept that the west is poor and Brazil, Russia, India and China (BRIC) are rich and if we keep on getting traction on GDP we have to move in this manner. Let’s understand the basics and make a decision rather than relying on sentiments.

By the way, Sri Lanka’s GDP at $ 90 billion means we are smaller than companies like Apple, Pfizer and Peugeot as a brand.

5. Always offer a good package at a fair price

The biggest debate right now in the tea industry is whether we are to drive the single origin proposition globally and command a $ 4 plus pricing for a kilogram of tea or do we import multi origin teas and get into the blended business that a consumer palate is moving towards. 

Traditionalists want the former while the export sector calls for the latter to make Sri Lanka a $ 5 billion industry one day. It’s a tough decision to take but the answer relies on the basics. What is our proposition and who will pay for this unique proposition given that Sri Lanka produces around 300 million kg of tea while global demand is at 2.2 billion? We must get back to understanding the basics.

6. Make yourself available and spread good news

If we watch and read the news we can see that Sri Lanka is not spreading good news even though we are practising Yahapalanaya. Starting from the bond scam to the alleged broad bank spectrum scam and now with the person(s) who must take responsibility on the Easter Attack.

It’s time that we moved away from confrontation to understanding the basic issues and spread good news and be available for comment to the world. If we are to progress in the world of business and marketing we must develop stories that are positive and spread by people from within the country and not by global PR companies. 

7. Get your customers and keep growing

Let’s accept it, the export business is facing a dilemma. We will end the year at around $ 12 billion and targeting 28 billion by 2022 as per the National Export Strategy (NES). To be honest the $ 28 billion number is almost a dream given the current political issues that will not drive the reforms that the NES advocate. 

It’s time that we take stock on the proposed reforms agenda and the progress made so that Sri Lanka will know what will be the realistic number that we can target so that country planning can be done. I would strongly advocate that the proposed partnership given that there are 400 million middle income households that Sri Lanka must target.

Let’s go back to the basics. South Asia will grow by 8% in the years to come and we must be part of the growth agenda. 

8. Whatever your business is, it is a service business

The latest trend seen globally and the new ethos is ‘whatever business one is in, it is the service business’. Rather than crying out over the issues that an investor is up against, maybe the better option would be to do a touch point study so that we can understand the ‘as is’ situation of an investor from the point one lands in Sri Lanka. 

This touch point study that can be done by a specialised research agency and can help shape the key changes required based on cause and effect rather than just outcomes.

Let’s accept it that when an economy has been growing at around 4% a year in the last 30 years under war conditions, we cannot expect the administration system to run at 8% when the salary and motivation factors are the same. This means reforms have to come in and it will be painful. 

The private sector must support the Government’s agenda just like what happened in Pakistan last year. Let’s correct the basics so that Sri Lanka can be contemporary.

9. Refine your business process in quality, cost and delivery

I saw a news release that in the case of 198 companies of the 228-odd listed organisations, the last quarter revenue drop is 17% given that the GDP grew by just 3.5%. I guess more fact-finding will have to be done so that we can understand the reasons. But becoming lean, mean and clean will have to come to play. We must accept the facts and refine business and the processes so that we can become competitive given the challenges in the environment. 

10. Gather information but use wisdom in making decisions

Whilst Sri Lanka Tourism is once again trying to get traction on the brand globally a point that we must note is that targeting a report that flashed was that only 30% of them have visited the Pinnawela Elephant Orphanage and 9% have travelled to Yala, which tells us the type of tourists that visit the country and how Sri Lanka is losing out on increasing yield per visitor. 

In my view, we must relook at the tourism sector and agree the reforms that are required so that we can up the game to attract the $ 250 visitor than the current $ 167 dollar traveller. Let’s go back to the basics and ask ourselves on the concepts like segmentation, targeting and positioning so that tourism can become a $ 10 billion industry. Let us pick up the practices that Bhutan and Rwanda did in the area of repositioning a destination which worked for them. 

Next steps 

Whilst we see the complexities of the political arena being tough to comprehend, our role should be to look at what we can do in our span of control by focusing on the basics. 

(Dr. Rohantha Athukorala can be contacted on [email protected]. The thoughts are strictly his personal views.)