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The Essence of
Competition
Competition is all about value:
creating it and capturing it. A fundamental rule in crafting a
competitive strategy is to view
competition from
the
other player's viewpoints.
Todays' Era of
Hypercompetition
Hypercompetition is a key feature of a new
economy. Not only is there more competition, there is also tougher and
smarter competition. "Hypercompetition"5 is a state in which the
rate of change in the competitive rules of the game are in such flux that
only the most adaptive, fleet, and nimble organizations will survive.
New customers want it quicker, cheaper, and
they want it their way. The fundamental quantitative and qualitative shift
in competition requires
organizational change on an
unprecedented scale. In this
new
economy, competitive advantages must
constantly be reinvented, and organization becomes the fundamental source of
distinctive capabilities.
Your Differentiation Strategy
"What this new competition is often able to
exploit is the fact that buying behavior isn't just about people and income,
it's also about how dissatisfied consumers are with present alternatives."6
Choosing among multiple options is always based
on differences, implicit or explicit, so you ought to differentiate in order
to give the customer a reason to chose your product or service. Thus, "differentiation
is one of the most important strategic and tactical activities in which
companies must constantly engage. It is not discretionary."6 The
concept of
being unique or different is far more important today than it was ten
years ago. The key to successful competing is differentiation... More
80/20 Law of Competition
80/20 Principle helps you to
direct your attention where the real threat of competition exists. According
to the
80/20 Principle2, over
time, 80% of the market will tend to be supplied by 20% of the suppliers.
But the world wouldn't rest long in the
80/20 equilibrium. There are always changes to market structure caused
by competitors'
innovations.
The
80/20 Theory of the Firm can also be used to break you business down
into competitive segments in order to examine its profitability. A
competitive segment is a part of your business where you face a different
competitor, or different relative competitive positions. "Thinking about
competitive segments lobs you straight at the most important way to split
and think about your business".2 The most profitable segments
where your company is also well
positioned, and that are also attractive markets - they are growing,
have high barriers to entry for new competitors, have more demand than
capacity, face no threat from competing technologies, and have high
bargaining power vis-a-vis customers and suppliers, – need to be grown most
aggressively.
Competition Through
Innovation
With the enormous competition markets today are
driven by choice: your targeted customers have too many choices, all of
which can be fulfilled instantly. Competition through
innovation, supported by your differentiation strategy, is thus more
important than price competition. If your enterprise allows itself to lag
behind in the race to generate new or improved goods and services, and
better ways to produce and run them, you are putting your future on the
line...
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Competitive Strategy
To be successful today, your company must
become competitor-oriented. You must pursue the right competitive strategy –
avoid strengths of your competitors and look for week points in their
positions and then launch marketing attacks against those weak points4...
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Barriers to Entry
Barriers to entry are circumstances particular
to a given industry that create disadvantages for new competitors attempting
to enter the market...
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