The Competition On The Move
You have “staked out” a high growth market with some success. A major competitor calls a press conference to announce their entrance next month, which forces your top management to make some quick assumptions and formulate a response. Yet rarely do more than 50% of those responses turn out to be the right ones. Let’s consider some criteria, which best protects your decision-making:
First, the most successful executives don’t make a great many decisions.
They concentrate on the important competitive decisions. Starting with, “Is this a generic situation (opportunist competitor move, Samsung pursuing Apple in the smart phone market) or an exception (disruptive opportunity, Amazon moving into book retailing)? Is the occurrence a pre-cursor to a more frequent competitive issue (changing customer behavior, Facebook offering online fixed-odds gaming)? Or is this occurrence a unique event that needs to be dealt with as such (a “one-off” event, world record prices set at the Yves Saint Laurent House Sale for late 19th Century furniture)?”
Second, what does your competitive response need to accomplish.
What are the objectives your decision has to achieve (increased local market share, brand loyalty, profitability etc)? What are the minimum goals (local buy-in, viable future market presence, support from key customers etc)? What are the conditions it needs to satisfy? (net positive impact on return on all assets, increased productivity, stronger balance sheet, increased shareholder value etc.)?
Third, what is the “right”, not the acceptable competitive response.
You must first be clear what “right” is before you can begin to compromise. For example, Zara, the European retail giant, decide it is the right time to expand into China’s secondary cities, so does their two closest global rivals. They are competing now with local incumbents for the brightest and best Mandarin-speaking retail store managers. They must be clear what the “right” selection criteria are for those Managers, what the “right” level of support is, what the “right” level of pay for the key strategic positions is, the “right” level of local management accountability to Regional/Global HQ and the “right” level of monitoring and feedback to generate their desired strategic results.
Fourth, converting the competitive response into action is the pivot point.
Key questions: who has to know about your organisation’s competitive move? What action needs to be taken? Who is to take it? What is required to enable the implementers to do it? Bear in mind, the action must be appropriate to the capability of the people tasked with making it happen. Two of the most common failures in high-growth markets, are the failure to adequately answer the first and last of those questions.
Fifth, measure the effectiveness of the competitive response.
How did your assumptions stack up against actual events? The best decisions have a high probability of being wrong. The best managers are fallible.
Sixth, competitive responses require a judgment.
Collate opinions, not facts first from key management. Demand those offering opinions, also articulate the relevant decision criteria. Ask what do we need to know to make this a “go”? There are two determinants of risk you need to consider: the frequency and the catastrophic aspects. Your final question should be, “What will happen if we do nothing?” It pushes top management to determine the cost and risk vs. the reward of taking or not taking action.
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