Using MBA school skills to profit from competitor bankruptcy

In the current economic climate, bankruptcy is not only more frequent, but more important for rival businesses seeking to grow and stay in the black. A competitor who goes bankrupt offers a number of business opportunities, from acquiring assets to negotiating with an upper hand.

While even unprepared investors and businesses may gain from a rival’s bankruptcy, these opportunities are best seized through strategic planning, established well before bankruptcy is declared.

Contingency plans for competitor bankruptcy are often simple, drawing on foundational business school skills. Curious about how you might strategize for a rival’s bankruptcy? Read on to find out.

Understanding the competitor’s bankruptcy

Knowledge of basic business models can help you prepare for competitor bankruptcy and insolvency. The first step is to assess and plan for the different forms it may take. For instance, in the case where a company is liquidating its assets, legal measures can be taken to contact key employees from the failing business to negotiate customer lists and attractive assets. There may also be opportunities to acquire customer lists from debtors.

In most cases of liquidation, your organization is likely to be able to acquire reusable products or manufacturing equipment at a very low cost. Businesses should be ready to adapt these assets, which will often come with competitor branding intact.

If the bankruptcy entails reorganization, the failing business may be exempted from certain debt costs and negotiations. While less desperate for cash flow, a company in this situation will be looking to reduce operational costs and thus renegotiate with customers and suppliers. Capitalizing on this situation may involve leaning out operations to offer better prices, and preparing to spend on advertising and outreach to lure customers once they face renegotiation. In each of these cases, the skills you learn in business courses can help you further plan for a competitive advantage.

While steps have been taken to harmonize bankruptcy and insolvency proceedings across international markets like the EU, it’s important to remember that the processes may still vary greatly depending on where you are based. This can affect what both you and your competitor are entitled to do, so being familiar with the specifics of bankruptcy law in your country is a must.

Your MBA school knowledge can help you strategize for competitor cash shortages

Your business expertise can also help you identify ways of profiting on a rival’s decreased cash flow – a common struggle across all forms of bankruptcy. Profiting from cash shortages boils down to a few strategies. First, a business should be prepared to offer customers better terms than its struggling rival, including lower service costs and extended payment options. This may be compounded through after-sale services not offered by a failing competitor.

Second, a business should be prepared to release more products and spend more on advertising as long as its competitor is struggling. This will provide further customer incentive, projecting a stability and market strength unavailable to cash-poor competitors. As MBA school graduates know, cash shortages are a primary cause of continued business trouble, and the largest target for continued competitor profit.

It’s also important to note that businesses must understand bankruptcy and cash shortage as much to avoid them as to exploit them in competitors. A competitor’s difficulties can often be a sign of challenges in your sector, so ensuring your own organization avoids the same pitfalls is crucial. And if a struggling rival does survive bankruptcy, prepare for a leaner, hungrier business ready to exploit similar weaknesses in your company model.

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