The only two rules of competition

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Marketing is a study of competition. It focuses on what is the biggest factor in competition — customer decisions and content which influences them. Other factors, such as regulation and efficiency, are relevant but are slowly losing ground.

Competition is also defined by following three global changes:
1) Globalization – every local company must be prepared to compete with global leaders on a local level.
2) Digitalization – global leaders are using technologies to offer more values to everyone and beat the local companies.
3) Content – content influences all customer decisions, in B2C and B2B, and is proliferated digitally.

Under these factors and global changes following two rules apply:

1) Do not allow competitors to make a new category
If competitors make a new category by offering new unique values, they will take over the customers from the leader and leader’s category. Leaders need a category. Categories consist of competitors and customers who create content, products, and values. Once categories start to loose customers and competitors then leaders start to lose influence and revenue.
Example: Tesla grows by developing the electric car category, not by competing within the standard car category.

2) Motivate competitors to make bad growth investments
Competitors copy a leaders’ behavior. Therefore leaders should focus on resource-intensive projects such as advertising, e-commerce, and retail. Competitors will copy these strategies and waste resources while not developing new unique values.
Example: Leading fashion brands invest heavily in advertising and therefore increasing the barrier to entry.

If you are managing a non-leading competitor then focus on creating your own unique values and new categories, and avoid direct competition with leaders.

Written by: Nikola Tosic
Publishing date: 5 Dec 2018