Inter Firm Rivalry

Intensity of competition differs from one market to another. This is true for both foreign and domestic markets. Mumbai, for example witnesses bloody competitive wars than any other town in the country. Being the largest consuming market, it is logical for any firm in any product group to compete for a share of the Mumbaikar’s wallet and mind. At the national level the Indian market is far less competitive than the US, Canadian, Hong Kong or Singapore markets. We need to take a closer look at these markets to understand factors contributing to intensity in competition.

Competition motivates firms to re-examine their cost structures and eliminate inefficiencies in the marketing system.   Competition is a great leveller so far as product prices are concerned. This is because most competitors create an imbalance in prices in the market through the price mechanism. This is especially true of product groups where the demand is primarily price sensitive. Baron Electronics entered the CTV market through this route when it launched the Akai brand in the Indian market. This put the CTV industry in a tailspin and other players had little or no option but to reduce their prices for comparable models. Today, most of these players have shed their fat and are more efficient. Their internal costs have also been pushed down. Same is the case with Internet. As long as VSNL had a monopoly over the internet the prices were exorbitant – Rs 15,000 for 500 hrs! But with the emergence of competing internet service providers (ISPs) VSNL had no option but to reduce its price. Today, Internet subscribers are being wooed by low prices (as low as Rupees 2.50 per hour and free access at night) and a wide range of other goodies. VSNL had to respond by not only cutting its costs and  bringing prices   down, but by also offering a range of services  which aimed at being more customer friendly For example, VSNL has started accepting online  registrations , renewals, and also   payments made either through cheque  or credit card – facilities which were not available  until  the latter half of 2000. Thus competition forces market leaders to revisit cost structure and reduces prices to remain competitive in the market place. This goes to prove that   prices eventually soften as competition intensifies in any product /market.

Low entry and exit barriers in a market are one of the key factors driving competition. We have seen how lowering of barriers in India over the last decade has changed the market and product scope.

The year 2004 saw a resurgence of demand across all economic sectors. Riding high on this resurgence in demand and the efficiency drive that was pushed hard during the recession India Inc., is today rearing to turn on the heat. Be it manufacturing, outsourcing, investment or acquisitions Indian companies are poised to enter the phase of high   growth. For example, nearly 20 new cars are being added each year to the Indian market. Pharmaceuticals, textile, automobile, retailing, telecommunication, bio-tech, oil retailing are some of the most happening sectors.

Wockhardt has acquired CP pharmaceuticals in the UK. Ranbaxy is in the process of acquiring French pharmaceuticals major RPG Aventis. Indian pharmaceutical companies are fast emerging as multinationals fighting neck to neck with the established transnationals.  At one end of the spectrum, domestic companies like Ranbaxy, Dr Reddy’s Sun pharmaceuticals and Cipla are concentrated in developed generics markets, while multinational firms like Pfizer, Glaxosmithkline, Aventis and Novartis are eyeing the domestic market. Their strategy revolves around brand building and marketing, Acquisitions alliances, and product releases are the main issues in this sector. Nicholas and Sun pharmaceuticals are scouting for acquisitions in regulated markets like the US and Europe. Even relatively smaller companies like Unichem Laboratories are sniffing for opportunities overseas. They know that in a product patent regime where reverse engineering will not work anymore, exports hold the key to growth. Global alliances are the strategy for Elder Pharma. It already has 25 alliances and wants more.

Dr. Reddy and Ranbaxy are focusing on Research and Development (R&D) and targeting the regulated generics market with long term plans of   developing new chemicals entities (NCEs) and proprietary drugs. The likes of Nicholas Piramal Elder Pharma Divi’s Laboratories on the other hand want to evolve as alliance partners and service providers. The international drug companies meanwhile are preparing to open up their global product portfolio to Indian consumers as generic competition diminishes. Pfizer is planning to shut three of its Indian manufacturing locations, GlaxoSmithKline is evaluating the feasibility of its two manufacturing locations and Novartis is reviewing its Rifampicin facility.