Monday, August 6, 2007

Competition

We have a love-hate relationship with competition. On one hand, who hasn’t wished all one’s competition would simply vanish (as if all one’s troubles would vanish as well with one’s competitors gone). Then being the only one left in the industry, life would be easy street. Being a monopolist, one would be able to control one’s own destiny, setting prices at will and conducting business without regard of customer concern or worry about customer migration. Of course, the bad part is the government does not tend to take these things called monopolies lightly and would probably either regulate you or break up your company.
But competition does have its advantages—even companies with intense rivalries must acknowledge that one’s competition keeps one sharp, innovating, and constantly attuned to the marketplace, towards constantly improving quality and performance of products and the company’s ability to provide needed services. This is a positive as it allows your company to continue to survive and prosper, alas with not nearly the same profitability as if you were alone but still sufficient for the market’s purposes.
You can have both good and bad competitors. How can that be? Aren’t all competitors necessarily bad? (see above) Not all competitors are created equal. Some are more desirous than others. They are the good competitors. These companies realize you both are in the market to make money. They may fight you tooth and nail for companies but they price similar to you and they hate price wars as much as you do. They tend to be consistent and predictable in their habits and behavior, as does yourself. This is advantageous as you can predict with high accuracy what they are likely to do (as they are with you) and thus the future becomes much more tolerable.
They tend to be credible and reliable. If they are overstocked, they will announce they are having a sale or price reduction to lower their inventory. As a good competitor, you believe their notice and will not match prices, knowing that they will also do the same courtesy to you if you have a similar problem. You also presume that as soon as inventories are corrected, they will return to normalcy with regular prices. Good competitors are like good neighbors, well respected, keep their house and yard in excellent shape, keep their word and obligations, and are a positive contribution to the neighborhood (i.e., industry). They tend to feel responsible to a higher authority (the entire industry) and wish to maintain the integrity of the entire industry. One could indicate they are indeed a team player with the industry. Good competitors tend to be the larger players in the industry, those that have been in the industry a long time and oftentimes are the ones who pioneered their industry. They often feel a moral obligation to act as a role model for all others in the industry.
Bad competitors can ruin an industry. They tend to be unpredictable, random, and inconsistent. You never know what they are going to do or when. Their behavior and reactions to your actions are totally unknown and often bewildering. Like a bipolar mate, they can be up one day and down the next with no rhyme or reason to what they are doing or why they are doing it. You become totally paranoid and almost hate to make any moves or claims as it will probably entice a complete and different reaction from them then what you expected or wished. For any reason or no reason, they could very likely start a price war and end it on the same note of uncertainty. They tend to be a loner in the industry, an outcast, on the periphery of the industry. By their very presence, they tend to shake up the industry and keep it in a perpetual motion of uncertainty. Perhaps this is their strategy, to keep you, their probable larger competitors off balance. By not being predictable, they can control the tempo, the pace of the industry and gain a small but not insignificant advantage over all the other firms in the industry.
You must determine what type of competitor you wish to be. Do you want to be respected and liked or dreaded and feared? No one true answer exists. The correct choice must be made by yourself and what your intentions for the company are. Do you want to be a valued member of the industry or a rebel and outcast that follows its own pace and path? To thy own self be true.

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