Recently there has been some talk in South Australia about how it is consumers responsibility to help struggling businesses. This was said surrounding two recent events; the first was Holden removing 400 of it’s employees despite government handouts ensuring that the plant remains operational for several more years, the next was Spring Gulley foods having $3 million worth of debt and being forced to shut down because they lost contracts with Woolworths and Coles. These are two fairly large businesses in SA that do a lot for our economy and it’s a shame that they have to lose business and perhaps shut down/leave the state. There have been many articles and opinion pieces coming out about this one from the head Ford in Australia saying that it is the Australian peoples responsibility to support the car industry here. Now I have a few counter points to make here that might be unpopular but I honestly believe we need to stop treating businesses as charities.
Holden and General Motors have been having trouble since 2009 with sales and there have been many times when Holden has either retrenched people, taken shifts away or just stopped working entirely. This is true with other GM companies as well in the US. The fact of the matter is that people aren’t interested in buying cars at the moment and if businesses want to stay open they need to work with the supply and demand factors and manage labour and costs appropriately (business 101). I understand that people in SA rely very much on Holden and that it doesn’t just effect the workers in the factories but also all of the parts manufacturers and assemblers in the surrounding area but this is life and how a business SHOULD operate. You should never put all your eggs in one basket and that seems to be what a lot of these smaller companies have done and unfortunately this is what happens when the only company you supply to has a downturn. I don’t think Holden will close down entirely and I do believe there will always be a market for larger cars and V8 models but petrol is too damn expensive right now to assume that this market would stay the same along with people already purchasing less vehicles. For Nasser to then come out and blame Australians for not supporting the industry is terrible. It is absolutely NOT the consumers fault, if people aren’t buying your product you need to assess that and change your production strategies to fit. A car is not something people buy on a whim one weekend when they have a few spare bucks lying around it’s a massive investment and if you’re not offering the fuel efficiency and reliability that people are getting from foreign cars you’re not going to be making as much profit, which doesn’t have to be a bad thing it just means you scale down a bit until you find the right level.
Spring Gully Foods
Holy shit. Spring Gulley Foods (SGF) has been giving me the shits lately. I’m not sure who the owner has as a good friend within the Advertiser but the amount of public sympathy being drummed up for these guys is ridiculous. The business got a new contract with Dick Smith foods and then bought a new warehouse and hired a bunch of people, SGF then lost its contracts with Woolworths and Coles, which would be a big hit to any business but is this really a problem? Why are they running in a way that the Dick Smith contract cannot support them? They were $3 million in debt before they went into administration, if you rack up that much debt without long term contracts in place with your main consumers then you need to reassess how you’re running your business. Since SGF announced they were going into administration the Advertiser and the whole news.com.au crew has been pumping the advertising and inspiring SA shoppers to go purchase their products and petition businesses to stock their products. I think this is for nothing. Honestly, the business started to fail because they couldn’t deliver quality products at a good price and this will happen again once all this subsides and then they’ll go bankrupt again. I really hope that SGF has learnt from this that they need to get their business plans sorted because I’m sick of seeing these businesses beg for support and then die slowly a few weeks later once people forget about it. There are far too many businesses that don’t know how to deal with a downturn and this usually leads to things like firing CEOs but what they should really look at is the global economy and how the business fits within and if other sectors are down turning then it’s okay to not make a massive increase on profit for that quarter/FY. Stop blaming consumers for not supporting you, they have no obligation to and if you’re not providing them with what they need then you’re going to go bankrupt, it’s not their problem.
Some extra links for the interested