Saturday, July 28, 2007

Competing With Style

Ain't Competition Nasty!!

I just want to relay my thank you to those of you who have bothered to contact me over the demise of the old Share Investor Forum. It has taken a lot of work to get it going and it was getting a couple of thousand of visitors a day. Not big, but it was growing.

It seems I have now been relegated to the realms of blogging. Here I shall stay and I hope some of you will join me.

The main thrust of this post has been spurred on by the nastiness that has come from individuals and those connected with http://www.sharetrader.co.nz/ . They are responsible for informing my host, http://www.jconserv.net/, that I was "violating copyright" on my site and thus here I am now.

I'm not sure what the "violation" was for but suffice it to say Share Trader has a wealth of material on it that infringes copyright. I am not about to inform the owners of copyrighted material of such.

The nastiness started soon after I opened the site last September, with subterfuge related to the owners of Share Trader, re-directing my URL to a porn site and an attack on its content in early 2007.

For the life of me I don't understand why Share Trader may be afraid of a little competition. They are in a monopoly position, so perhaps they want to maintain it anyway they see fit?

Competition is really what today's piece is about and I can relate my recent experience to the business world in general and specifically to New Zealand business and its listed companies.

Perhaps the most glaring example of recent occurrence when it comes to tough competition is the stoush between New Zealands two major supermarket players, Foodstuffs and Progressive, over the battle for control of The Warehouse [WHS.NZ] Foodstuffs and Progressive currently dominate the supermarket sector with duopoly pricing but want to take out a fledgling player in the supermarket industry simply because they fear what a bigger third player might do to corporate profits.

These two players are not interested in competing at the shop floor with a new entrant, they simply want to eliminate this competition before it starts.I am not against competition but surely if Progressive and Foodstuffs want to expand their empires why don't they duke it out with the minnow fair and square, compete on price and service and open some additional outlets of their own?

It is interesting to note that Progressive have stopped one of Foodstuffs outlets from opening on Auckland's North Shore for more than 10 years and the market has lain idle for more than two years as empty as it was when first built. Legal action has also been taken(and failed) by Progressive to shut down an outlet mall in the same area for dubious reasons.

The fate of this stoush is now in the hands of New Zealand's Commerce Commission.

Monopolies in New Zealand are very common. This is mainly because we are a small market. The consumer clearly must be protected to some extent from these giants.

Telecom [TEL.NZ]and its dominance in the tel co sector for the last 20-30 years has had a negative effect on New Zealand, its economy and the consumers back pocket. The technology that Telecom customers must use is never up to date with overseas tel cos and most communication is still being done with the use of copper wire. True enough Telecom has been a good business for its early investors and many have made plenty of moola but as time has gone on the refusal by management to invest back in the business has cost Telecom ,its current shareholders and customers dearly. New Zealand is currently at the back end of the line when it comes to broadband and its products are expensive. Its current shareholders have lost big time.

Vodafone, similarly, seems to have adopted many of the traits that Telecom has had as a Telco monopoly and its mobile service and prices reflect the duopoly structure that co-exists with Telecoms mobile network.

It is a human trait to be confidant when one is in a good position in life and one could be forgiven if one was even a little cocky and boastful at times but some of the leaders of our monopolies take this position to levels of arrogance that seem to mock and deride their customers.

The recent case of Teresa Gattung is a well known one. She professed in 2006 in a Telecom shareholders meeting that "...the tel co business model, using "confusion" as a "marketing tool to maintain prices and margins" and that Telcom had been using this model for years wasn't really a shock to consumers but what was a slap in the face was the fact that she actually said it with impunity!!

Perhaps the funniest use of arrogance and disdain for consumers of recent times by the CEO of Auckland Airport [AIA.NZ] was his contention that narrowing the duty free retailers from two down to one at Auckland International Airport would "...give consumers more choice and the same low prices that they have always had..." now I didn't graduate from university with honours but even I can fathom that Don Huse might be pulling on something more malleable than a duty free wine cork. This individual is currently telling AIA shareholders to sell their shares to Dubai Aeronautical Enterprise for a measly $NZ3.80. Would you trust him? I don't.

Even my favourite topic of discussion of listed companies on the NZX, Restaurant Brands[RBD.NZ] have displayed some of the qualities of a monopoly over its last 10 years as a listed company without actually being one as such-to be fair though its Pizza Hut and KFC divisions were very dominant. Vicki Salmon, its most recent CEO, was blind in the face of reality when every time there was a poor profit announcement(which was most often the case) she continued to trot out the mantra "...we expect to see an improvement in the coming months..." The real arrogance of Vicki and her predecessors though was the fact that they had two dominant brands, KFC and Pizza Hut and much like Teresa Gattung RBD management neglected those brands simply because of their dominant positions and the thought by management that these brands were bullet-proof. Those two brands currently wallow in mediocrity in the face of real competition from the likes of Dominoes and Nando's Chicken.

Sky Televisions [SKT.NZ] position as the only player in the pay TV market in New Zealand makes its clients shake in their boots every month when their account arrives. Monopoly pricing rules and the arrogance of management when consumers complain is almost on a par with Telecoms head honchos. Perhaps they all went to the same charm school but I detect a pattern with management reaction to customer complaint when you are the only big kid on the block.

A dominant player that must be admired is Coca Cola. The focus on their product is fanatical and every aspect of marketing and selling is expertly crafted and nurtured from upper management all the way down to the fridge in the corner store. Coke ignored their consumers in the mid-1980s when they changed the formula of Coke without consulting consumers and had to back peddle when a backlash by consumers saw sales volumes fall in the USA. Their dominance of the caffeinated fizzy beverage market gave management the belief that they could mess with their leading product without a consequence. How wrong they were. They did learn from their mistake though and that is to be admired.

What can happen when a company or individual has a dominance in its field-and clearly they have got that way because they have been enterprising, hard working and clever-is that its position as the only or biggest player can be undermined by the tunnel vision that often comes about when one doesn't have to look over ones shoulder at the ankle biter running behind you. When suddenly that ankle biter starts nipping at your heels your reaction to the competition is a very important pivotal position for your company or product. What you do next, whether it be competing on a level playing field in your market or trying to undermine the newbie in any way you can , can have a negative perceptional outlook on your company from its consumers and ultimately a material effect as you lose the vision you once had when you initially set out to conquer your entrepreneurial goals.

There are countless monopolies that have fallen because of lack of care, they shouldn't have simply because they were in the dominant position, but the lack of care for the consumer and or the product or service they sell can even bring a dominant player to its knees. Management simply can't overlook basic business acumen simply because they "own the market."

Competition is essential to life, in business, on the sports field and life in general but ultimately if you play with a loaded deck and cards up your sleeve you , your company and your product or service just may be the loser in the end.

Related Amazon Reading

On Competition, Updated and Expanded Edition

On Competition, Updated and Expanded Edition by Michael E. Porter
Buy new: $26.37 / Used from: $22.50
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