Higher sales are essential to higher profits, assuming that costs and expenses are also held in check. But only a small number of departments are involved directly with sales and with customers. Without direct customer contact, how can you improve profits? The answer is by holding down expenses; and that is achieved in only one way: establishing and monitoring internal controls, one of the most important of which is budgeting itself. Internal controls are generally thought of as completely sepa¬rate from budgeting.

For most employees, “controls” means telephone logs, requisitioning systems, preapproval rules for expenses, and locking up of valuable inventory. All these are highly visible forms of control, but there are others: cash handling procedures, a departmental petty cash fund, a supervisor being required to initial check requests, or a anager’s daily meeting with staff.

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A comment from a senior vice president at General Electric backs up this idea. GE is a major Intel customer, and I would classify it as a Late Adapter. GE made a commitment to use Intel’s 8086 microprocessor in a variety of its products. But when I talked to a senior manager at GE in 1982, he was getting nervous about the decision. He noted that many innovative companies in Silicon Valley, including Apple and Fortune Systems, had decided to go with Motorola’s 68000 microprocessor. Intel’s 8086 still had dominant market share, and its customer list included many major companies. But the Motorola chip took on a certain aura. As the GE executive said to me: “Those startup companies in Silicon Valley are capturing our imagination. If we had to make the decision today, we would not go with the 8086.”

Large companies can sometimes afford to wait until Laggards begin to buy a product. Then, they can sell in large volumes to the Laggards. But small companies cannot afford to wait for the Laggards to come around. They must target the Innovators, preferably the most visible of the Innovators. If I were a startup selling disk drives, and I could choose to sell to Apple, Xerox, AT&T, or a startup like Metaphor, I would probably choose Apple and Metaphor. The order might be for fewer drives, but my reputation would be established. Rather than spending millions of dollars on promotion, I could simply rely on word of mouth.

Of course, identifying the Innovators in an industry is not always easy. Not all Innovators are small. Some pockets of large organizations are Innovators. At banking giant Citicorp, for example, the MIS division is an Innovator. At Xerox, some divisions are Innovators, while others are Laggards. So you must understand the organizational forces acting within large companies to decide whether or not to target certain divisions. Intel has an Innovators Program that identifies which divisions at other companies are Innovators, and which are not. Other companies might benefit from similar programs.

In a field of fast-repeating products, standardization -uniformity of brand-types within each product category- has encouraged the building up of chains and the consequent exercise of bulk-buying power to obtain a price advantage over the small independent who cannot buy on such bulk terms; they then aim at high-volume sales on the basis of competing on price at retail. Resale price maintenance (RPM) -that is, the system whereby manufacturers supplied only on condition that stipulated retail price was maintained- has virtually ceased to be fully effective in large areas of retailing and this, together with the bulk-buying strength of the retail chains, is what has enabled these large retailers to use price as a weapon in the competitive struggle.

Some small independents complain that they could not buy a product at the price a chain store sold it at! This is the measure of the independent`s problem.

The word “standardization” used here in relation to brand types was not meant to be interpreted literally that products of different brands were in fact the same! The effect of national branding has been to assure the comsumer that, wherever he bough, there would be the same range of choice available. A range of branded soft drinks, of razor blades, in effect, the same range of choice whether the shop was in Birmingham or Bristol, Leeds or Liverpool -more or less.

The rental of premises can be regarded as a cost of obtaining a selling advantages. A single retailer with only one shop, and in a merchandise field where he appeals to a limited and discriminating market, can still construct a unique selling proposition for himself out of his selection of stock items and his own buying skill which, in turn, will reflect his perception of his customers` attitudes.

For the mass market products, however, the retailer who is not strong enough to aim at the high turnover needed to sustain a High Street position, must go in for either a form of product differentiation such as a special service enterprise attached to the shop (for example, a beauty parlor attached to a pharmaceutical toiletry shop), or a positional advantage (a semi-monopoly) such as a site in a new building development or air terminal, or be lucky enough to find a convenience site in  a poorly-shopped area where he has few, it any, direct competitors and is far enough away from a shopping area to make it too much trouble for customers in the vicinity of his shop to go further afield.

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Where, then, is the retailer to look if he wants to mark out a field for himself in which he will have some advantage over his competitors? He cannot go far in the direction of manufacturing on his own account (vertical integration upwards) unless he is in a very big way of business indeed. And even if he were, conceivably, big enough as a manufacturer to stock up entirely with his own merchandise, he would still be lacking in one essential item -consumer choice, that is, competitors products!

In this battle for the initiative, the manufacturer would seem to have the upper hand -at any rate the big mass-producing manufacturer whose product is among the leading brands. For in this category of merchandise the retailer is forced, in his own commercial interests, to stock the manufacturers`s brand. This statement must be modified, of course, according to the product field concernerd. In furniture and leather goods, for instance, there is still considerable scope for the exercise or merchanting skill, for selling service and personal “know-how”. In other fields, where branding is well-look in other directions to find competitive advantage -such as the position of the shop, service diversification, price competition, or a combination of all these, together with a succesfull measure of “own-branding”.