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Who's in Control?

Roger La Salle is professional engineer, a director of a number of companies and a successful business entrepreneur. Roger developed and documented his special way of thinking, now referred to as Matrix Thinking

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By Roger La Salle

The announced demise of the auto industry in Australia really came as no surprise, Aloca have followed and there will be more, but the question to be explored as business owners and entrepreneurs is just what type of business you are in, or perhaps may wish to be in?
 
Which is your category?
In short there are typically two types of businesses, ones that we can refer to as “Dependant”, the others as “Independent”.
 
With the closure of car manufacturing we will see a devastating knock on effect of other industry closures, we refer to these as consequential effects and those industries as dependant industries. These industries by and large only exist as component suppliers to the people that produce the final product that goes to the ultimate purchaser, usually the consumer.
 
Motor cars are sold direct to users, thus one may suggest that the car makers are independent industries, the parts suppers are of course dependant.
 
Other examples of independent industries are the likes of coco cola whose product is sold direct to the user, but the suppliers of their bottles, labels and ingredients such as sugar and flavours are of course dependant. They rely on the fact that coco cola will continue to source from them, and thus they really are at their mercy of coco cola. Perhaps coco cola could choose another local supplier, or use competitive tension to drive prices down, or even decide to source your product off shore, all of course to the betterment of their profit - and why not?
 
Even Independent industries have been hijacked
Primary produces such as fruit and vegetable providers in theory are independent industries because they are not parts suppliers, their product is directly used by the end user without modification, but there is a catch.
 
The supermarkets, who are by far the major route to market for such commodities have now inserted themselves into the value chain to such an extent that to all intents the supermarket, and not the consumer, are the real customers. When viewed in this light we see the commodity suppliers have in effect become dependent suppliers at the mercy of their intermediate supermarket customer. Of course once the supermarkets have won this dominant role they can now squeeze the margins of their dependant suppliers to almost breaking point. 
 
The major hardware chains of course have now also managed to squeeze out many of the small independent hardware shops and thus have in essence become the only effective route to market for hardware manufacturers or importers. Again these suppliers have become dependent industries at the mercy of the middleman.
 
Can we win back control?
This brings us back to the question, what type of industry are you in and moreover, what measures can you take to break from the clutches of the middlemen that have wrested from you, total control of your route to market?
 
The internet has provided one means of by passing the retail outlets dominated by so few. Many internet savvy consumers are saving huge amounts by direct purchases that avoid the mark-ups of 40% and more from retail outlets. (These mark-up are clearly possible, that's why outlets can afford "50% off" sales).
 
What now needs to be done is to reinvent or innovate the internet sales model to allow all manner of items, including perishables and low value purchases to be sold via the internet.
 
The mechanism is there all it needs is some co-operation and collaboration between relevant industries and associations and perhaps this new paradigm can be realised. The tools are there it now just needs to intent.

Where to now!
Let's make a plan!