Tuesday, September 11, 2012

What is Competition? An Out of the Box Approach!

This article is taken from Wall Street Journal's business section where Dr. YLR murthy of IIM Bangalore has written this article. The article was written in February 2010 but could still be found be found relevant. It explains the market approach to competition in an excellent manner.
The article can also be accessed at WSJ's website
After reading this, you might well understand why red ocean strategy, i.e. fighting tooth and nail with your competitor military style is no more relevant. Threats from substitutes has forced many a companies to venture into blue ocean strategy, i.e. to create demand by launching innovative products, thus creating a market. More on this in later blog posts.



Who sells the largest number of cameras in India?

Your guess is likely to be Sony, Canon or Nikon. The answer is: None of the above. The winner is Nokia, whose main line of business in India is not cameras but cellphones.

The reason is that cameras bundled with cellphones are outselling standalone cameras. Now, what prevents the cellphone from replacing the camera outright? Nothing at all.

Try this. Who runs the biggest music business in India? The answer is Airtel. By selling caller tunes (that play for 30 seconds) Airtel earns more than music companies do by selling albums.

Airtel is not in the music business. It is the mobile service provider with the largest subscriber base in India. That sort of a competitor is difficult to detect and even more difficult to beat. By the time you have identified him, he has already gone past you. But if you imagine that Nokia and Bharti (Airtel's parent) are breathing easy, you couldn't be further from the truth.

Nokia has reportedly acknowledged that it missed the smart-phone bus. It admits that Apple's iPhone and Google's Android can make life difficult for it in the future. But you never thought Google was a mobile company, did you? If these illustrations mean anything, it is that there is a bigger game unfolding. It is not so much about mobile or music or camera or emails.

Image Credit: South Carolina State House Report
Have you noticed that petrol bills get higher and phone bill gets cheaper these days!


The "Mahabharat" (the great Indian epic battle) in this context is: "What is tomorrow's personal digital device?" And, a related question: "Who is my competitor?"

In 2008, who was the toughest competitor to British Airways for international flights in India? Singapore Airlines? Indian Airlines? Maybe, but there is a more interesting answer: The videoconferencing services of Hewlett-Packard and Cisco.
Senior information technology executives in India and abroad were compelled by their headquarters to use videoconferencing to keep travel costs in check. Of course, there could be a rebound in travel. But to think that the airlines will be back to their previous business post-recession is something I would not bet on. In the short term, yes. In the long term, it is a resounding 'no'.

Remember, if there is one place where Newton's law of gravity is applicable besides physics it is in electronic hardware, where prices consistently fall. Between 1977 and 1991, prices of the now-dead VCR crashed to one third of their original levels in India. PC prices also dropped. If this trend repeats itself, then videoconferencing prices will also crash. Imagine the fate of airlines then.
India has two passions. Films and cricket. The two markets were distinctly different. So were the icons. The cricket gods were Sachin and Sehwag. The film gods were the Khans (Aamir Khan, Shah Rukh Khan etc). That was when cricket was fundamentally test cricket or at best 50-over cricket.

Then came the Indian Premier League and the two markets collapsed into one. IPL brought cricket down to 20 overs, reducing the game to the length of a three-hour movie. Cricket became a competitor to film. Desperate multiplex owners requisitioned the rights for screening IPL matches at movie halls to hang on to the audience. If the IPL were to become the mainstay of cricket, films would have to sequence their releases so as to not clash with IPL matches. As far as the audience is concerned, both are a three-hour "tamasha" (entertainment). Cricket season might push films out of the market.

Look at the products that vanished from India in the last 20 years. When did you last see a black and white movie? When did you last use a fountain pen? When did you last type on a typewriter? The answer for all the above is "I don't remember!"

One final illustration. Some 20 years ago, what were Indians using to wake them up in the morning? An alarm clock, that monster of mechanical springs. It had to be physically wound up every day. It made so much noise that it woke you -- and the rest of the colony. 
What do we use today? Cellphones. An entire category of clocks practically disappeared without warning.

The boss of an IT company once said something interesting about the animal called competition. He said "Have breakfast …or…. be breakfast"! That sums it up rather neatly.


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