Business Strategy Game Guide – How to Run a Business Part 2
Time has mellowed me out from my younger days, and I can now safely say it is not good to be overaggressive. My early companies that were able bankrupt other competitors were not themselves innately rich on the grand scale, although they simply had the most money. Channel your focus towards your company and less emphasis on wanting other people to drop.
A company I am overseeing is extremely successful. They have about 150k in net profit in only year 14, an absurdly early time to be getting that level of a net profit. They are part of the top 25 for the week. They are extraordinarily wealthy and hold great influence over the industry.
The company has 100k in cash, this now sets the tone for one of the happiest questions a company needs to ask itself. What do we spend our money?
A company that is absurdly rich can expand their factories, be overaggressive, begin wielding it’s absolute power to bankrupting other companies. I have done this in the past, but are the long term effects of being overaggressive good? No one has started a war against us yet, why rock the boat?
Instead of expanding unnecessarily for the mere pleasure of bankrupting others. My choice strategy is to pay off debt. We will expand in sequence with the industry, but if there is no need to expand, let’s pay off debt so if in the event bad times come. We will have deep pockets and a high credit rating to summon resources from.
As well not being overaggressive keeps the balance of power from falling through, therefore we can hopefully maintain our profitable standing for a few more years. As well if someone else creates a price war, the perception would be we were defending our market share, and all that we do is in self defense.
There you have it, pay your debts down, and don’t be overaggressive in expanding. If you expand too much, and the industry falls through in a recession, and you have all the debt built up from wild spending during the good days. You have created yourself a situation to lose if anyone smart takes advantage of it.
Ultimately it is safer to not be overzealous in running business, don’t spend frivolously, bank away cash and be conservative making smart expansion decisions that are in relation with the industry. That’s true business strategy.