LESSONS FROM DANGOTE ALMOST BUSINESS COLLAPSE IN 2001?


DANGOTE

No doubt, Aliko Dangote is a very rich man and he is known for his Dangote conglomerate but very few people know that Dangote almost crashed in 2001. I listened to a talk Aliko Dangote gave at Lagos business school on how his business empire was built and in the course of his lecture he pointed out the two instances that his business almost collapsed.

I strongly suggest you watch the video on youtube but I want to discuss the key lessons that I got from his talk.

  1. DO NOT MAKE HASTY DECISIONS IN TIMES OF FINANCIAL CRISES – In 2001, Dangote was in a severe financial crises and went to Lafarge cement to buy over his company. The offer Dangote made to Lafarge was just too good. They offered Lafarge the management control of the cement companies and 40% share of the company. Lafarge however wanted management control and 51%. Dangote refused and decided to weather the storm. Today, very few people knew about that challenge and dangote controls more than 70% of the market. The other key lesson is that beware how you push a desperate competitor because you might just give him the motivation to fight back.
  2. IF YOU ARE WEAK, WILLINGLY PAY A HIGHER PRICE TO STAY OUT OF YOUR MAIN OPPONENT RADAR – Dangote decided to build the massive Obajana factory with conducting a feasibility study, took bank loans at 41% interest rate. They realised that if they conducted a feasibility study on the factory, they will alert Lafarge on their next move so they quietly began construction work based strictly on a believe that they would succeed and not based on solid fact. I have seen a pharmacist who saw a great location for a retail premises and invited his friend to assess the place for him only for that friend to go behind to take over that location.
  3. NEVER LET OUTSIDERS KNOW HOW BADLY HURT YOUR BUSINESS IS – Dangote group still kept a bold happy face even when things were so difficult for them and banks only agreed to lend to them at 41% interest rate. One of my mentor once told me to never share my problem with anyone who does not have the capacity to solve it for me. A lot of people love to get sympathy vote in times of crises without knowing that they are drying up their credit sources once they start sharing their plight with people who can only sympathise with them. If for instance I am your business partner and you tell me that your business has been going down seriously,do you think I would want to give you more credit facility?
  4. BEWARE OF THE MOTIVE OF THOSE THAT COME TO YOUR AID IN YOUR TIMES OF DESPERATION – Dangote said that they went to IFC which was an arm of the world bank to seek for financial aid. IFC gave them the loan but strategically tried to block the growth of the company by putting certain clause within the the loan term that would make it almost impossible for dangote to grow outside Nigeria thereby reserving the bigger market for other European and American companies. Dangote took the loan but when the business started to turn around, they immediately paid off the loan four years before they were to pay it back. Never mortgage your future because you want to get out of a desperate situation.

Click the video below for more detailed insight

I hope you got some insights from these points that dangote made

DOWNLOAD THE AUDIO HERE

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