Stages of Competition

As one scans the industry, one sees that firms compete for opportunity and also for resources and competencies.  They also compete to protect their existing markets. The dynamics and rules differ for each of these three stages of competition. The firm’s performance at each level influences, and is influenced by performance of others at each stage. A winner is a firm that wins at each stage.

Competition for opportunity involves envisioning the future. The more ambitious the management and leader, the more enlarged is the range of opportunities. This vision for the future also provides a sense of purpose to an enterprise.

The modern day success stories  of firms like Bharti, Reliance, Hero Honda, Infosys, HDFC,  Bank, etc., reflect their vision  of the future and the aggressive strategy that each has used to emerge as a winner. Consider for example, the case of Reliance Infocom which has revolutionized the communication industry. Powered by the dream of the legendary Late Dhirubhai Ambani, promoter of Reliance to provide communication facilities to the common man at the price of a post card (Re1) the company introduced CDMA technology and came up with the scheme of offering a cell phone at Rupees 500 per month to all those subscribed to its service in a specified period. The scheme was so successful that even Reliance did not have adequate handsets to meet the demand.   The company has 9.8 million customers as on 30 November, 2004. And this was achieved in just under three years. The company then went a step further to offer wireless and broadband connectivity to its customers. This changed the nature of Internet usage.   It set up Internet Kiosks under the brand name Reliance Web  World. Summed up by Mukesh Ambani’s Kuch karke dikhana hai (we have to achieve something special) it reflects the leader’s ability to dream big and have the courage to change the rules of the game.  This requires faith in one’s self as well as the organization. It also requires a profound understanding of the drivers of change.

Firms will compete for knowledge. This is particularly true because the scope for differentiation on the basis of product features and services is today minimized and in most cases does not even exist. Hence, the winners in such an environment are firms that possess proprietary knowledge and are able to use it for creating a sustainable competitive advantage. This is possible only when firms have competencies, resources, necessary skills. Today, it is not uncommon to come across organizations which are willing to invest in acquisition creation, and development of knowledge. Ranbaxy is one such Indian firm that has successfully built its position only by internalizing the rules of the game in this stage of competition. This has evolved around the key strategic concept that a firm reflects a portfolio of resources and competencies.  Hence, the winning strategy, is based on a thorough analysis of a company’s competencies and then evolving a creative process to deploy them to exploit existing and potential market opportunities.

Competition for existing markets is where much of the competitive wars are fought. This involves creating a differentiation position in the served markets. This is based on thorough industry analysis.

Another way to study competition is to understand the forces driving or shaping competition. Technology, customer regulation and suppliers toady influence market evolution and hence the competitive arena.

Technological change affects firms not only   within a particular industry but its effects cut across different sectors. Consider the case of the telecom industry. Cellular communication has not just impacted the opportunity for the conventional landline telecom firms but has also affected other sectors like financial products and after sales service support in the consumer durable and engineering industries. Today, the customer has come to expect a 24 x7 response from the service provider and is not   willing to accept the argument that the telephone lines were busy and hence contact could not be made. Similarly, developments in the automobile industry, like the multipoint fuel injection system, which has replaced the conventional carburettor technology,    has also spurred the growth in clean fuel technology. Similar developments are today changing the imaging and photography industry. Cameras no more just use chemical films. They come with a microchip thus creating a new world of digital imaging. Discontinuing technological change can dramatically alter the competitive arena which can even eliminate the market altogether or create new players.

Changing demographic and cultural values of consumers can also affect the market structure and in turn competition. Demographic shifts affect the demand for products and services. A firm that fails to anticipate such shifts in consumption can lose its competitive advantage even though it may have been a pioneer.