A Global Economic Holiday Story – A story often told

This story is fictional or maybe it’s better to say it may be fictional…

I owned a bakery, we had been in business for thirty years, proudly providing baked products to our community. We make excellent bread! Over the last few years there has been a significant change in our business, and it all started out really well. A new ultra large retailer started to carry our produce in their stores. This was great for us.

After about a year of carrying our product locally, we had a meeting with the local product manager and they asked to double the amount of product they were buying from us every week. We were so excited, this was just the break we needed, and we hired more staff and were doing very well.

About a year later the same product manager came to us and again asked to double the amount of product they were buying from us every week. Wow, we were so excited, this was a massive deal for us. After visiting the local bank to get a loan we doubled the size of our bakery, hiring loads of new people and moved ahead feeling wonderful about the future.

About a year later the same product manager came to us again and asked to double the amount of product they were buying from us. And again after visiting the bank, with our business plan we built a new bakery, hired more staff and met this exciting business challenge.

I was able to buy a bigger house, my two kids were able to go to the best universities, and the Christmas bonuses and raises to all of the staff made everyone very happy. Business was great

About a year later the same product manager came to us again, and expressed how pleased he was with out product, and that he wanted to again double the order, but this time he would only do this if we dropped out prices by 25%. He also added that if we didn’t drop our prices, he would cancel the whole order and take his business elsewhere.

What were we to do, this one customer now accounted for over 90% of our business, and without their order we would go bankrupt within weeks, not being able to pay the staff or the bank. So we reluctantly took the deal.

The price we were being paid for our product was now below our costs. So we had to cut costs. I fired 10% of the staff, reduced the salaries and benefits of those left and renegotiated the loans we had with the bank. We were now able to keep in business, but our profit margins were very slim, that any further reduction in price would destroy us.

About a year later the same product manager came to us again, and expressed how pleased he was with out product, and that he wanted to again double the order, but this time he would only do this if we dropped out prices by a further 15%. He also added that if we didn’t drop our prices, he would cancel the whole order and take his business elsewhere.

I was distraught; this was going to kill our company. But the product manager was unmoved. I had no choice, and took the deal.

Now I had to cut costs even more dramatically. To fulfill the new increased order at this lower overall price, I had to get draconian on our business model. Instead of buying my ingredients locally, I had to instead but bulk product directly from south America and Asia. The quality control wasn’t as good but the price was all I could afford. I had to fire another 20% of the staff, and move many of the other staff to lower hours, so as to stop having to pay them benefits. But we were still in business.

I started to have health problems due to the stress, and many of my best staff resigned. But what choice did I have.

About a year later the same product manager came to us again, and expressed how displeased he was with out product, the quality had gone down, and unless things got better he would cancel the deal.

My business has just gone through liquidation. We lost everything to the bank. A few of my former employees were able to get jobs at the large retailer that was our former customer. They pay and benefits are terrible, but they are now making their own baked products and they are the only one left in the area that does.

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