It may sound like an oxymoron, but Competition also has the merit of improving business sustainability. For telecom, fairly across the globe, ARPUs and AMPUs have all gone flying out of the window, because of a bunch of factors that includes the effect of ‘cut-throat’ competition. Instead of fighting against one another, ‘what-if’ analysis w.r.t competition could help build businesses. For telecom operators across the globe, for aiding the considerations of economic stability (which, at times I feel, is somewhat completely neglected), there could be thoughts of ‘consolidation’; ‘revenue and bandwidth sharing’ et al; instead of ‘only’ poaching on subscribers to increase subscriber base. Hence, adding the idea of ‘collaboration’ in the “what-if” during competitive strategy analysis, one may try and detect effects of such options instead of trying to predict their own ARPU and AMPU variations ignoring the effect of competition.
For growth in business, the questions to ask need to be dedicated to understand, what it would take to “sustain”. In the following examples, I would try and highlight the benefits of the same, and what goes wrong when this is not done.
Consider a consumer market player like Starbucks which enters market, not with one, but usually with a number of shops somewhat near to each other. They have their own set of brand messaging et al, but the point to be driven home is, Starbucks still remains the ‘pricy coffee shop’ while it enters a new market with existing coffee shops. Effectively, or probably hardly ever, has local competition been washed away, instead, both have survived by “providing the consumer more number of choices to select from”. So now, people the pricy Starbucks, as well as (probably) lower priced local coffee.
However, in a stance of survival and penetration, at times a Competitor would enter a market by heavily slashing charges, especially in telecom. At that point of time, what matters most for both the present players and also the new incumbent is, what would it take to sustain? Such is the state of telecom, especially in India. Slashing call rates was the strategy for all the new operators who entered the market which was dominated by likes of Airtel, BSNL, Vodafone, Idea et al. In a matter of 2 years (or may be less) India saw a rise of available operators to roughly 12-13, where everyone wanted to lure customers by providing lower costs for services. The price war was (and is even now) so intense, that none of the operators in India are adding onto revenues while some are bleeding heavily. The irony is, the worst affected are the new operators themselves, because they paid a lot to get into the market; they charged the subscribers at dirt cheap rates in order to increase customer base, and hence somehow just could not make it to sustain profitability. The giants, somehow still remain giants, albeit bleeding as well; however the entire telecom economy is in doldrums.
I guess it sounds like ‘…..and they lived happily ever after and after.’ when I say about competitive collaboration. But this is in continuation to my last post (here) where the real problem I tried to highlight was with conventional tools/software that try and predict business growths in terms of increasing ARPUs and AMPUs, without considering a number of factors. It is for analyzing these factors, human intellect is required with a fair sense of finance, economic, domain knowledge et al instead of relying on dumb tools. A good tool for what-if therefore has to show, the benefits of such collaboration. Is there one right now? Help me find one.