Recently I met with a former classmate at a forum, who got me reviewing what constitutes my priorities in terms of positioning my employer in the market. Martin has been running his own bookstore since leaving college in 2008. He reckons that initially he struggled to set up the shop, from savings and money from friends. It took him almost a year to break even, at a point where he was giving up.
Then came the windfall of free education. Ideally, service providers were contracted by schools to supply books at a premium. Martin agrees that due to the exorbitant prices they charged, he made millions within the first three years of implementation of this program. This he attributes to the huge number of customers he was able to admit, coupled with the fact that price structures were not entirely regulated, and hence the law of demand and supply within his county was the only moderating force. However, soon, new entrants flooded in due to ease of entry and exit in the sector. The business was no longer lucrative, since even briefcase suppliers were more than the real serious suppliers.
Around two years ago, the downtown started, a phenomenon Martin attributes to what he summarizes as competition.
A lot of businesses fold up due to competition, either from new entrants or increased market share by the existing players. The telecommunications industry in Kenya is a classic example of how one can be pushed out of market while offering almost the same products and services.
Companies use a number of ways to create a leap past the other players, a phenomenon called competitive advantage. It is not easy to create this advantage but various ways can work. A lot of firms use technology to ease out of competition. A bank for example can use easy friendly mobile banking platform to create convenience for customers hence stay ahead of pack. Uber uses technology to enhance access to taxi services, what is easily pushing away traditional service provision and ushering in a convenient way to book and ride a cab. Years back, the streets of Nairobi were dotted with telephone booths. The advent of mobile telephony has pushed out use of landlines and rendered booths redundant.
There are companies that take advantage of existing legal and regulatory frameworks to create competitive advantage. A while back, advertisers were discussing how one firm was putting up multi-directional signs while road signs from other firms were being pulled down. Simply, this firm was taking advantage of new laws that prohibited blocking visibility along highways to create more market share for herself.
It is important to note that there is no business where competition does not exist. My discussion with entrepreneurs is that a business person has to consider two things to stay afloat:
- First, keep re-inventing. Admit that technology is changing, so are the needs of customers. It is paramount to try to keep up with technology, or even anticipate it and plan to ride along. Banks have adapted well to mobile money and even sought partnerships with telecommunication companies to create synergy.
- Secondly, create specific value. I ask entrepreneurs, who will miss their businesses if they wound up. In case no one will miss your business, then, you are in danger now. Creating value proposition takes a lot of research, but puts the firm on a sustainability platform.
So, for any businessperson out there, competition is here to stay, strategize on how to hang on there successfully.
