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Damage

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Damage occurs when expenditure and losses of company resources grow faster than the inflow of resources, and the total reduction of resources exceeds the tolerable threshold. The formula for this scenario is as follows:

 

Damage = (expenditure + losses - inflow) > threshold

 

This formula uses four components that determine the state of the company’s resources: inflow of resources from different sources, the expenditure of resources for different types of its activities, the loss of resources caused by various undesirable events, and the tolerable threshold of reduction of company resources.

 

Undesirable changes in these components due to the purchase of goods on the terms of the seller are obvious from the formula:

 

  • Expenditure is rising

  • Losses increase

  • Inflow is falling

  • Tolerable threshold is reduced

 

At the same time, the buyer believes that the tolerable threshold will be inevitably exceeded:

 

  • Expenditure and losses rise above tolerable threshold

  • Inflow falls to almost zero

  • Tolerable threshold decreases to almost zero

 

What questions should the seller ask to clarify the threat occurrence?

 

If the company buys my product on my terms, then:

 

  1. What expenditure of resources would the company incur? (name and evaluate the amount of expenditure)

  2. What losses of resources would the company suffer? (name and evaluate the amount of losses)

  3. How much would the company's inflow of resources decrease? (name and evaluate the size of the decline in inflow)

  4. How is the tolerable threshold for resources reduction determined? (name and evaluate the threshold value)

  5. Why does expenditure increase?

  6. Why do losses increase?

  7. Why do inflow of resources decrease?

  8. Why could the tolerable threshold of damage be reduced?

  9. Why do you think that expenditure and losses of resources would exceed the threshold value?

  10. Why do you think that inflow of resources would fall to almost zero?

  11. Why do you think that the tolerable threshold could be reduced to almost zero?

 

Then, both seller and buyer should find the ways to prevent each of the events (answers to these questions).

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Company Threats | Threats and Their Scenarios | Loss of Customer Base

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