Scenario of Competition

by Thomas Sim, 21 Oct, 2001

By now you should have known that I am a keen follower of Michael E Porter's 3 generic strategies of competition - Differentiation, Cost and Focus.

My earlier articles have illustrated these competition theories, please read 3 Key Factors For Success In Business and Market Efficiency - you choice of business for some practical illustrations.

This time I hope to give examples in real life of how these strategies actually affect business and suggest the ingredients for choosing your field of expertise.

Example 1 - VCD

Once upon a time VHS (Video Home System) or VCR (Video Cassette Recorder) is the in-thing. Then came LD (Laser Disk) and now VCD (Video Compact Disk). This evolution is a combination of competition between differentiation and cost. This illustrated the combination of two factors in the dynamics of a market situation. In poorer places, VHS is thriving and in more affluent townships, VCD (now DVD) is the leading technology. This is a differentiating business but competition is seen easy as technology is not further refined.

Example 2 - Pharmacy

Once upon a time, there was a pharmacy I could remember in Padungan. Then, I was very young - probably 15 years old. It was at the left-hand corner shop by the current location. Business was thriving (and it now still is) although there is more competition from the new comers. This form of business employs a focus strategy, the combination of differentiation and cost. The shop tries to be different in location, level of service and of course, cost advantage over other pharmacies and doctors.

The focus is inevitably those who do not have the resources to see doctors or prefer to cut short the necessity of waiting, diagnosis and treatment. The segmentation of healthcare market is seen here. Other example of this form of strategy is Chinese Physician who specialize in acupuncture.

Example 3 - Microsoft Windows/Office

This is no doubt a differentiation strategy in place. Advance technology brings this programme to every new level of satisfaction in personal computing. This is a form of business which employ most skill and technology and its fullest effect is seen as rival is rare and cost is not very much a factor in the success or failure of the business.

This form of business is what most entrepreneurs dream of, as profit is in your control.

By now this article only illustrate the how the forces worked in different business environment. Your reaction would be: that I already know, what's new?

The discussion is on the next article - What business is good business?