Wednesday, April 5, 2017

WHAT CAN COMPETTION DO TO YOUR BUSINESS?


WHAT CAN COMPETTION DO TO YOUR BUSINESS?



The backbone of any economy is competition. With technological advances, ease of barriers for entry, the competition is taking place on a global platform. Competition fosters consumer well-being. For any business, competition is an inherent character. At times, competition can be right next to each other. I realized this during my visit to Manhattan, the competitors were literally next to each other.  Restaurants were trying to lure their customers.  There are positive as well as negative aspects of competitions. The way management goes about their competitors determines the success/failure of the company. Competition may be direct or indirect. Direct competition is when various companies provide similar service/products while indirect competition is when competitors provide different products/ services to consumers in the same market. Competition is challenging. When a market is competitive, it is the fitter companies that survive. Usually, when the competitors are strong, the weaker companies would lose to them. Moreover, Cut-throat competition can, at times, lead to messy situations.



The competition can adversely affect the business in the following ways:


Affect your strategy: A company’s business strategy such as fund rising, costing, marketing is strongly impacted by competitors. Competitors use spread doubt and fear in the market.[1] This would well affect the existing strategy of a company.


Imitation: The age of monopoly is long over. With the barriers to entry reduced, many company’s entry the market and tend to challenge the established companies by imitating its strategy and product. Though imitation is the greatest form of flattery, imitation can change the landscape of industry.  Flipkart, an Indian e-retailer company adopted the business model of amazon and was very successful. However, when Amazon wanted to enter Indian market, it found it difficult to establish itself. Amazon offered goods at lower price, quicker delivery, free prime memberships and so on for the new as well as existing customers. For Amazon, this seemed to have paid off as now the market is slightly shifting in favour of amazon. [2]


Reduction in profits: With many players in the market, the customer has a wide range of options. A savvy customer could play the competitors against each other and drive down the profit. Also, the companies may compete among themselves and reduce the prices of their services to gain market share. A recent example would be that of JIO, a telecom service provider in India. Since its launch, it has offered internet at very low price forcing its competitors to drop their process. [3]


Cut throat competition: Competition can be very challenging and can take a toll on the management as well as the staff. In the web browser industry, there was a stiff competition between Microsoft’s internet explorer and Netscape’s Navigator. Microsoft ended up paying huge amounts for its “Anti completive conduct.” This case underscores the lost opportunities and there is a chance of business growth being neglected. The cut throat competition may also create stress and negativity in the company. [4]



However, there are several positive effects of competition too:


Innovation: Innovation is the only means of survival at the present. Companies must be on their toes to innovate and add value to their existing (or new) product and services. Companies have invested heavily in R&D due to the wind fall dividends it provides. Samsung has invested $13 billion in R&D while Google $8 billion.[5] Innovations usually give the companies the competitive edge, making the company unique.  Innovation in marketing is also as vital as the innovation in market. For instance, the market leader De Beers’ slogan, “A Diamond is Forever” changed the gem industry forever, literally. Since then, diamonds became synonymous with marriage. [6]  


Quality of Service: Since advent of the age of mass production, companies have been trying to decrease the costs to maximize the profits. In the present situation, companies not only try to do the same, but also increase the quality of service and customer satisfaction. Over time, people are expecting greater quality services at lower cost. There have been companies that do not compromise on quality for cost like Disney, Apple, UPS which has enabled them to have a lion’s share in their market. Studies have shown that companies with quality services tend to retain customers and benefit from the “network effect”.[7]  


Market consolidation: Once the company can establish in the market it makes them a trusted brand and this would motivate or pressurize them to continuously keep with the expectation on the customers.[8] This makes the company to invest considerably in service, product and service quality.


Understanding the market: The nature of the market can be determined by the companies in it.  When the market is competitive, a company can learn from other company’s strategies. There is also a possibility of alliance and market consolidation when the market is competitive.   

Now, many companies have included competition in their business plan. This goes to reiterate the saying, “Keep your friends close, but keep your enemies closer.”





[1] "Beyond Fear, Uncertainty, and Doubt (FUD)." Chief Marketing Technologist. N.p., 16 Mar. 2009. Web. 05 Apr. 2017.
[2] Punit, Itika Sharma. "Flipkart May Die a Slow and Painful Death." Quartz. Quartz, 06 July 2016. Web. 05 Apr. 2017.
[3] "Reliance Jio Infocomm: Latest News on Reliance Jio Infocomm | Top Stories & Photos on Economictimes.com." The Economic Times. N.p., n.d. Web. 05 Apr. 2017.
[4] "Netscape Sues Microsoft." CNNMoney. Cable News Network, n.d. Web. 05 Apr. 2017.
[5] “Top 10 R&D spending.” Fortune, n.d. Web. 05 Apr. 2017.
[6] Kolowich, Lindsay. "The Engagement Ring Story: How De Beers Created a Multi-Billion Dollar Industry From the Ground Up." HubSpot. N.p., n.d. Web. 05 Apr. 2017.
[7] "The Network Effect." The Economist. The Economist Newspaper, 15 Jan. 2015. Web. 05 Apr. 2017.
[8] Charles, Dan. "Big Seed: How The Industry Turned From Small-Town Firms To Global Giants." NPR. NPR, 06 Apr. 2016. Web. 05 Apr. 2017.

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