Metaphors of strategy: Strategy as competition

Life is about competition as much as it is about collaboration. Human beings learn early to compete through sibling rivalry or bickering about who was first to get hold of a toy. Sporting competitions generate enormous revenues for organisers, sponsors and participants. From the World Cup to Formula 1 racing, from tennis to basketball, from professional leagues to street games – it is all competition. We compete to get jobs and when we get the jobs, we compete to either stay in them or get ahead with them. Billboards, jingles and television adverts compete for customers’ attention and patronage. Professionals in many fields accept invitations to compete when they present proposals to clients. Even non-profit institutions compete for funding and donations.

Business in a free enterprise is competition. Strategy has to fully recognize this fact and act appropriately. In the ninth part of the series on metaphors of strategy, this article provides four insights on strategy as competition.

 

Be ready for competition

Organisations like athletes preparing for events have to express readiness for competition. This readiness is based on relevant action relating to products, services, locations, people and several other factors. Lack of readiness to compete spells negative outcomes as much as it does for sports people who enter competitions unprepared. Readiness is not optional because it is a tool of survival.

Competition is hardly ever friendly. Indeed, it is often as bloody as a jungle. Several years ago, at a pre-merger meeting, the leading party was seeking almost everything possible in the merger terms. A representative from the subordinate party observed that the leader was “not taking any prisoners” and the reply was “we don’t even rescue the wounded”. This sounds insensitive or extreme but it signals the typical state of competition. Readiness should be a constant posture like a sentry on watch duty. Executives have to consistently examine corporate strategy for the readiness to compete.

 

Thrive in competition

One of the objectives of competitive business is to thrive in the long term. To thrive requires analysis of strengths, weaknesses and growth options. Organisations have to be in default learning and innovation modes to thrive through economic cycles. Steve Jobs said, “Innovation distinguishes between a leader and a follower”. Innovation is a tool of market leadership which empowers market leaders and can either strengthen or decimate followers. New digital technology swept Kodak’s core business into irrelevance as the company flopped in comprehending market changes early enough. To thrive is to be hands-on not arms folded with innovation and change. Strategy must be primed to thrive in competition.

 

Understand the rules of competition

As it is with every game, there are rules which the players have to follow or be penalized. Although we talk about free markets, they are not free in the sense that players can do whatever they desire. For example, competition in many industries is framed by regulation to protect the interests of stakeholders. Pharmaceutical companies cannot bring just any product to the market. They have to comply with regulatory conditions. Financial institutions understand that regulators can impose fines or go as far as withdrawing licenses for breaches of guidelines. In Nigeria, banks in particular have discovered, sometimes too late, that a regulatory decision can mean removal of a CEO or total closure.

Apart from compliance standards, business strategy should consider other rules of competition most of which are unwritten. These rules can be symbolized or manifested in barriers to entry, rivals creating pitfalls or instigating price shifts. The popularly referenced Porter’s Five Forces model represents a set of unwritten rules or an alternative regulator of competitive markets. The five forces are threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes and rivalry among competitors. Organisations in competition do not and cannot operate in isolation. They have to identify and follow the written and unwritten rules of the market. Strategy design and implementation should reflect these rules.

 

Acknowledge competitors

An extension of the rules of competition is to acknowledge competitors, whether they are new entrants or old rivals. Competition is not a confirmed flight booking or theatre ticket. (Recent events demonstrate that even a confirmed flyer can be ejected from the plane!). When the Samsung-led Android and Apple-owned iPhone revolutions began, the market leader was Nokia but it failed to acknowledge and respond to the revised competitive scenario. The rest is a business tombstone inscription: “Lying here for failing to admit that competitors were taking up market space”. Upon Toyota’s entry into the US car market, the leading American car manufacturers laughed off their small models such as the Corolla. They wrongly assumed that customers would not buy them. The future taught them differently.

 

Closing notes

Strategy as competition makes it necessary for business entities to be competition-ready, thrive in competition, understand the rules of competition and acknowledge competitors.

A note of reality: Last week, my firm (and some others) lost out in a competitive bid for a project. Every business-to-business entity must have such experiences. That’s competition!

More to come next week Tuesday…

 

Weyinmi Jemide

 

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