competition Archives

Market capitalism

Economics is not a discipline of the capitalist though they might think so. Because the communist had their study of economics and the manner of trying to deploy the calculations and understanding in central planning. But I digress. What I’m pondering over recently, is that intricate link between the market and capitalism. I wonder, if there was something apart from market capitalism. And as it turned out, there are ideas of alternatives around state-capitalism which is where the state tries to accumulate capital and operate an economy dominated by state-owned firms. But to some extent, that is what communist regimes have sought to do. So ultimately, the ideas of capitalism, when taking the notion of the market away, actually represents something very different from what we commonly believe to be capitalism.

In that sense, capitalism as we conceive it probably still has the market principles and ideals at the fore in the manner it is perpetuated. In that sense, the ills of modern capitalism isn’t necessarily the notion of capitalism per-se but allowing the (unguided) market to take the lead in too many of the things that actually matter. The idea of markets regulating themselves is honestly a little ludicrous to me. In an older world where there were many things in our lives that dominate including ideas around moral, characters, and virtues, we tend to be keen to govern the market and regulate it, seeing that there are higher laws to follow.

But in the world today, we increasingly allow the market to dominate our judgment of things, especially with regards to value of things – tangible or not. That means that what the society needs to care about, which might not be valued by the market properly, may just fall off the radar. It happened for the climate of the world; and who is to say that market capitalism is not coming for other things that truly matter to us as humans.

Slow or fast

We think the world is better off faster mostly when we live in cities. When the train or traffic is slow, when the queue at the checkout counter is long, we have an issue.

Yet that’s actually a narrow perspective on things; it comes from that dominant, productive workforce view. In fact, maybe not even the workers’ view but that of the manager. That things have to move faster and we have to produce more.

Yet as the world progresses and the composition of our workforce and consumer class changes, there will be fundamental shifts in the way we think about speed and productivity. Dutch supermarket chain Jumbo introduced slow checkouts for lonely elderly who would prefer to chat with people probably both in line and with the cashier.

And there will be new business opportunities arising from a world that might be slowing down. For people entering middle age and confronting unhealthy lifestyles, falling sick frequently, they might soon be seeing their western medical doctors requesting they go to traditional chinese medicine (TCM) clinics to “rebalance” their health. TCM is generally seen as slow but that is unique suited to more long term issues and preventative in approach. In that sense, certain ailments lends themselves to this slow way.

Like parental controls and screen time limitations, speed limits on things, having the slow option might actually be an alternative for niche customers. And this pool of customers might be growing.

Competitive analysis II

Having written my previous post, I think it’s important to say that knowing your competitor is still important after knowing yourself. As you understand you resource pool and how you can serve your customer better, you can start appreciating why some strategies work better than others. Your competitors’ actions or execution failures become an excellent resource for you.

So what is a good competitor analysis really about? It is more about firstly defining the market properly and figuring out how much of your competitor’s business really competes with you. Then there’s the historical lessons of that competitor that you can learnt from.

Finally, focus back on the customer and how they perceive and view various substitutes or alternative where your products and services are concerned. That’s the true current status of “competition” then consider how you can develop strategies to get more of the relevant customer groups’ mind and wallet share.

Competitive analysis

I’ve done countless competitor analysis in my career. I think about strategy intently when it comes to business, career, life and that works its way into my coaching and consulting career. Most businesses are obsessed with what their competitors are doing.

If you know the enemy and know yourself, you need not fear the result of a hundred battles.
Sun Tze

The quote is probably well remembered especially by people who have a chinese upbringing. But we often take for granted the part about knowing yourself. In fact, the original chinese saying has it in reverse from the above translation. It starts with “know yourself”. Of course we know ourselves, you’d think.

Yet countless businesses whom I’ve worked with when performing competitor analysis are not thinking about themselves enough. They are just identifying random brands or companies doing the same activities as themselves and considering them as competitors, trying to find out their pricing and what they do. If you know yourself then you know where is your stronghold and which is your true battleground. If you know you’re weak, then focus on where you can garner resources; more often in blue oceans rather than red ones.

When Barnes & Noble started their online bookstore, Jeff Bezos rallied the young Amazon team who was trembling in fear by telling them that there was no point focusing on their competitor since B&N wasn’t going to write them cheques, better to focus on the customers. Jeff Bezos knows Amazon well; there was no way a small upstart can win by mimicking their competitors. They’d run out of breathe before they start if they’re on the same race.

Of course, Amazon was afraid. B&N had lots of resources to try crushing them. But if Amazon was obsessed with this fear they’d be running in circles. The greatest competitor they need to analyse is themselves, their ability to focus on the client base will set them apart from each version of themselves.

Bundles of Cables

James Surowiecki from New Yorker talks about the effects of the recent Fox vs Time-Warner Cable affair on public perception. His focus was that the event reminds viewers that much of the money they pay are for stuff they don’t use or don’t want – the idea of bundling, allowing consumer surpluses in one product/good spill over to others which are bundled together with it. This allows less mainstream stuff to be sold to the mass market or introduced to consumers since without bundling their proceeds wouldn’t pay for the cost.

The complexity of the modern economy supports bundling; it helps people make some of their choices. Imagine if you’ve to assemble exactly which channels you want each month based on what is going to be screened on them; or to decide every single module running in your computer during installation (the Linux style); or to decide which brand of sugar, type of coffee beans, water and cup to use for takeaway coffee at breakfast. And James show how customers like them:

The appeal of bundling is partly that it reduces transaction costs: instead of having to figure out how much each part of a package is worth to you, you can make a blanket judgment. Bundling eliminates the problem of fretting about small expenditures, which may be one reason that flat-rate pricing is very common in the vacation industry (cruise ships, all-inclusive travel packages, and so on). It also offers what economists call option value: you may never watch those sixty other channels, but the fact that you could if you wanted to is worth something. Many consumers also perceive bundles as bargains; getting a bunch of things for one price feels like a deal, even when it’s not.

Of course, like what James mentioned at the end of the article, when components of the bundle start fighting over the cost of each of them or the proportion of their share over the entire bundle’s proceeds, it will raise the appeal of à la carte. Imagine when the addition of a Sashimi palette into the buffet table results in the waiter going around to collect extra money from the patrons still in the restaurant and able to enjoy the Sashimi. Those who don’t want the Sashimi and just entered the restaurant would opt for à la carte while those leaving would protest.

Back in Competition

A recent article on Slate.com revisited the theme of competition, something I’ve been writing about (here and here) in response to their articles. Ray Fisman discusses studies on whether man or women are more competitive and whether any difference is explained by nature or nurture.

More importantly perhaps, he questions the significance of competition in our world and whether it is a good thing at all. I believe, like many other things, a balance has got to be struck somehow. Once we reach a certain threshold whereby competition achieves positive gains, its cost will start outweighing benefits.

Look whos trailing.... — Look who's trailing....

But perhaps the problem isn’t one of female passivity—many have claimed that if women ran the world, there wouldn’t be any wars, and anyone who has read testosterone-driven Wall Street accounts like Liar’s Poker, or more recently House of Cards, might question whether all-out competition is the best way of managing our economy. If competition is nurture rather than nature, perhaps we’d all be better off if we lost a little of our warrior instincts.

I know it sounds rather like an economic analysis but this applies for practically everything. We are entering an age of sophistication where competition basically consist of sub-units of collaboration, which is in turn divided into sub-units of competition. Just think about it, when we work at a company, we may be competing with our colleagues for attention from boss but the whole department, together with the boss is collaborating to compete against other departments and other bosses to a higher level and the company on the whole is collaborating to compete against a rival company and the industry as a whole (perhaps beverages) is competing against another (say food, they’re all competing for consumers’ stomach space). Competition and collaboration are not ends of a spectrum but co-evolutionary forces that shapes the world and our sophisticated activities.