SUCCESSFULLY MANAGING COMPETITION RISK

In an increasingly global market, companies face rising levels of competition. As such, it is natural that all organisations face some degree of competitive risk. In recent years, many big name brands have fallen victim to competitive threats left unchecked. Former industry heavyweights in their respective sectors, companies such as Kodak, Blackberry and Nokia have all been laid low when faced with aggressive competitors and unable to defend their market share. The failure of companies such as Nokia and Kodak demonstrates that, irrespective of the size of the firm, any company can easily lose market share and potentially their entire business.

When it comes to the demise of former industry superpowers, hubris can undoubtedly play a part in companies’ lack of response to emerging threats. However, one of the main reasons businesses fail to defend themselves effectively is often that they simply underestimate the size of the risk posed. Be it from existing rivals or start-ups just entering the market, from a position of size and dominance in a particular field, it is easy to dismiss threats from smaller, seemingly inconsequential rivals.

When it comes to managing competition risk, for many businesses a sound defensive strategy can be incredibly important. Pushing back new entrants to the market and responding to competitors should be considered a top priority for anyone running a business, although in some respects it may be harder for larger firms to justify a major defensive effort against a significantly smaller threat. Often, companies are unable or unwilling to redirect vital spending from offensive programs without a compelling reason to do so.

Oct-Dec 2013 Issue

Richard Summerfield