March 6, 2006

Is strong competition good for an organization? This is what I have been thinking for the last one week. Some recent developments in the organization I work have tickled my mind. The more I am thinking on this the more convinced I am becoming that strong competition is indeed very healthy for an organization.

Typically, when an organization has a virtual monopoly in the market and there is no strong competition complacency sets in. It reflects in the day to day operations of the organization. Gradually, this complacency builds into arrogance and a feeling of invincibility. Due to all these, they start taking their customers and business for granted. Of course, there are exceptions to this generality. There are indeed many self-motivated and avant-garde organizations that despite being a monopoly are always on the move to bring better and better products and services to the market without getting complacent. In fact, they compete with themselves. But overall, it’s true that in absence of competition, lethargy sets in organizations resulting in loss of dynamism.

What strong competition does?
Strong competition brings the dynamism back to the organizations. A sense of urgency sets in and every moment is spent in trying to outmaneuver the competition. It becomes a matter of survival. And is it hard to guess what your reaction will be when you are thrown in the ring of life and death with an equal opponent? You will give your best to live. Similar is the story of organizations when faced with strong competition. They bring the best out of themselves to outmaneuver the competition. Systems and processes get revamped. Better people find their place under the sun and the average ones are shown the doors. Innovation rather than complacency drives the organization in its constant endeavour to outwit the competition. Better products and services with better value proposition come out faster in the market. Strong competition forces the organizations to sprint rather than run at the pace of a snail. All these result in a better managed and agile organization that works at its full potential to deliver best returns to the shareholders.

It is not only the organization that benefits from strong competition. In markets where there is strong competition almost every organism in the market ecosystem benefits. Customers are the biggest beneficiary. They get the most bangs for their bucks. In markets with strong competitive forces, it is a game of delivering the most relevant benefits at the least cost. Even the trade partners benefit. In the presence of strong competitive forces, they get their bargaining power which also results in trade efficiency.

And these are not the end. The best part of presence of strong competitive forces is in the fact that it helps in growing the market. It is all about making the pie bigger and tastier. As efficiency sets in the market ecosystem, every organism gets the right bundle of benefits at the right price. Typically, this will result in greater affordability thereby bringing in more customers to the fold. A perfect example would be the telephony market in India. Just 12 years back there was a monopoly of Department of Telecommunication in India. It was marked with obscene pricing that was not affordable for 90% of the potential consumers. Inefficiency was at its zenith. It used to take 2 years to get a phone connection. Slowly, the telecommunication sector opened. Private players entered first with cell phones and then with landlines. This resulted in fierce competition among players. And see what the strong competitive forces have done to Indian telephony market in just 12 years. Call rates have fallen by almost 100%. India has the cheapest mobile telephony charges in the world. Maintaining a mobile phone has become affordable even for a road-side vendor selling tea. India has the highest number of mobile phone in the world. Level of customer service has increased manifold. Now it takes hardly a few hours to get a new telephone connection. And to top it all, the efficient players in the telecommunication market are growing exponentially and getting good profit. Isn't it a win-win situation? Would all these have been possible if we had a sustained monopoly in the telecommunication market?

Well, it is not chimera. It is reality. And what I’m seeing these days in my organization is reinforcing my belief that strong competition is the vital component of an organization’s well-being. It is strong competitive forces that will help organizations achieve their true potential. Those who can withstand the grind will survive and excel, the weak hearted will get brutal death.


  1. _ // March 6, 2006 at 7:15 PM  

    man ur popular!! check out the last comment on my post!! pretty soon loads of people will be coming to your blog pleeding to do an analysis.
    u can start charging them and give soem to me, nice business model!!

  2. Mayank Krishna // March 6, 2006 at 11:25 PM  

    Hehehe!! Nice one...beg, pray, cry, kneel :-D

    Let the requests come then I will decide on my pricing strategy ;-)