Even with the same type of offerings, our level of competition varies as determined by various market factors.
Hence, we should own market dominance in one way or another.
It is high time our entrepreneurs made a critical analysis of the operating landscape so as to understand the likely demand for their products, pricing and market responsiveness.
It is no longer a simple listing of those who are operating with us in the same market, but a structured decision through real market intelligence and economic modelling.
Like any other belonging of a normal society, entrepreneurial businesses do not operate in a vacuum. As said before, especially as we grow, competition becomes the order of the day. Those existing in the same market or yet to come are attracted by the same profits you are making.
Even with our accounting books being confidential, society will know that you are making profits in one way or another, especially when we become listed on the stock exchange as we attract more shareholders.
That is the same reason why in strategic management we equip each other with both offensive and defensive skills for managing competition. Go back to the drawing board and revise/list your current competitiveness as guided by these strategies. Otherwise the profits being made now are short-term.
Last time we looked at the effects of scaling up an entrepreneurial business which goes into the same analysis where competition is inevitable. In this edition, we take a nosedive into business structuring for competition as a preparedness measure where our entrepreneurs should assess their operations against competition that is within the industry they are operating for a proper re-wiring.
To start with, it is highly possible that when starting a business we are not the only ones providing these offerings. There are many producers of the same product/service on the market. In fact, business ideas are shared somehow and it takes real innovation to be unique especially as we grow in the same industry of choice.
Wood manufacturers, hotels, universities and all other institutions in our various industries/sectors exist because of others. Last time we talked about brand fellowship for those in the same type of production here we further do a structural analysis for competition.
There is a perfect competition for many start-up businesses. This is where similar products/services are provided by different producers in a market, prices are similar and where customers know where they can get a similar cheap product/service from another provider. Here as an entrepreneur you do not have market autonomy rather you follow a market bandwagon. For sure, if you slightly increase the price, you will lose all your customers to others. It is difficult to make super profits in this type of competition (businesses share profits to say). Most of our SMEs are only able to meet their costs (fixed and variable) and returns on little margins.
Of course there is both productive and allocative efficiency in the way business resources will be used but not much profits. That is the same reason why we encourage our entrepreneurs to gradually grow with the business through feeding it with new strategies, innovations and consultations. I have seen many entrepreneurs giving-up a multi-million business idea just because they failed to challenge/assess this usual and unavoidable stage in the business life cycle.
Therefore, as we grow with the surrounding, competition viability is then anchored on how we go an extra mile to satisfy and attract more customers than others. This is a very vital stage in a business life cycle where our presence and profitability is determined by what we do rather than what others are doing. In this case we have to bring that uniqueness which others have not seen or managed to do over their existence.
The reason why everyone prefers Harvard Business School compared to any other with the same orientation and curriculum is that uniqueness. As for your business, what differentiates you from the next supplier/producer will attract more customers than others.
We should take time to bring innovation and new ways of serving our markets than anyone has done over the years. In this case we will be able to attract more customers even selling at a relatively higher price and at the same time making supernormal profits. Look at those who have introduced Artificial Intelligence (AI) in their services and production and how they have attracted more customers.
They have managed to be efficient in resolving queries, producing quality products/services and predicting future demand with precision.
When a business gets to such a level, it swiftly runs into a monopoly through excellence in differentiation (a monopolistic market structure). An entrepreneurial business will become the first choice of every customer at this stage where other providers will become inferior substitutes. That’s what our SMEs should be amid this era of intense competition.
We keep on discussing competition of our entrepreneurial businesses not as a problem but as an opportunity for real growth. In the coming edition, we further go into other business structures for competition and the likely downfalls through negligence and ignorance.
Till then I leave you to introspect.
- Dr Farai Chigora is a businessman and academic. He is the head of Business Science at the Africa University’s College of business, peace, leadership and governance. His doctoral research focused on business administration (destination marketing and branding major, Ukzn, SA). He is into agribusiness and consults for many companies in Zimbabwe and Africa. He writes in his personal capacity and can be contacted for feedback and business at fariechigora@gmail.com, www.fachip.co.zw, WhatsApp mobile: +263772886871.