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Header: Competition, Good or Bad?
By Team leader - Newtimes
Contributing Writer - SOKONI MAGAZINE

Competition is found in life’s every sphere. In business, competition is the biggest concern. This is because it affects our continuity both as individuals and as business entities.

Competition interferes with our livelihood in many ways. Perhaps we should in this context consider globalisation, rapid technological advancement, consumer awareness, close substitutes, suppliers and new entrants to business as its main factors.

Globalisation is countries’ tendency to move to an integrated marketplace for economic gain. Meanwhile, technology changes rapidly. What was relevant last year may be irrelevant this year. Computer and mobile telephone technology lead on this front. We also find rapid transfer of technology particularly through multinational corporations. They quickly transfer technologies developed in their Western-based parent companies to our own environment.

The consumer has become fully aware of what is best for him/her at any moment. This is due to high-tech communication channels particularly through the Internet and satellite technology. Indeed, today’s consumer effortlessly acquires knowledge on market trends of virtually every product or service.

The product range available in the market comprises original products and related ones, known as close substitutes. They are manufactured using cheap production technology copied from the original product developers. Based on this, the consumer has a choice of product/service depending on pocket depth.

Suppliers of goods and services use varied production methods. Some utilise human labour or old technology. Others use highly efficient modern technology therefore enjoying low production costs. Those unable to effectively compete technologically charge higher prices based on their costs. They may not manage to compete in the future therefore they will be forced to close down. Consider the photography industry, which has now turned digital. Digital technology computerises every process resulting to reduced costs and processing time. It is unlikely that old technology in this sector will last long.

New entrants to an industry are other competition aspects worth considering. In the short run it may be difficult to pose any challenge to a business that employs heavy technology or rare production factors as its competitive edge. Some also wield regulatory protection as their main source of strength for example, mining, electricity generation and landline telephony. With time, however, smaller firms gear themselves to compete with seemingly unbeatable giants.

Look at Telkom Kenya for example; it now has a daunting task of competing with numerous smaller Internet Service Providers (ISPs) and lately, wireless landline providers such as Popote Wireless and Flashcom. The smaller entities are not only fast in responding to consumer needs but also adjusting their operational costs in line with their customer base. It is no wonder that  in response to the competition, Telkom Kenya has resulted to retrenchment and rapid increase of landline telephone charges to almost the same level as mobile charges in order to finance its operations.

With competition, therefore, giants are slowly losing their previously monopolistic statuses. In businesses where there is ease of entry and exit, perfect competition as is termed by economists is prevalent. It involves a situation where prices of goods and services are similar. The latter are also similar, whereas customers are fully knowledgeable about the market. The only difference in this case is the service or product delivery methods. This makes the weaker investors to end up closing their businesses whereas the stronger ones divest into other sectors to escape saturated markets.

Under such circumstances the customer gets the best products at the best prices possible. This means that the next time you are establishing a new business, product line or just laying out routine strategic plans for your business, you have to contemplate all competition’s factors. You should ask yourself how each of them affects your business and consider the strengths and weaknesses of your business resources as you match them with these components. None of these elements should be treated in isolation because all of them affect businesses differently.

In conclusion, it is important to realise that competition affects us both positively and negatively depending on the circumstances. All factors that cause competition must be considered when planning business activities. Failure to do so will lead to a business’s eventual collapse. On the other hand, competition leads to entertainment. Olympic Games and world cup football are good examples of competitive events which provide entertainment to humanity. The competition that may be seen as a threat to business leads to technological innovation and modernity, thus development of human welfare.

The writer is a business analyst and training consultant, Newtimes Business Solutions.

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