Competition - A Bogus Idea?

I love this elegant, gentle dismantling from Wharton of all the HUA!, ruff! ruff! ruff! management BS that treats business as a war where the objective is to "defeat" your "competitors". Not surprisingly, some of the most successful practitioners of business as making profits by creating good products and keeping your customers happy, are Japanese; not exclusively, but well represented.

After review of the literature and history of the fallacies of hunting competitors instead selling products and services, larded with some delicious quotes from Toyota -

   

Kazuo Okamoto, executive vice president, [is] "nonchalant" about Toyota's achievement. "We aren't that concerned about vehicle numbers," Okamoto told the AP. "But we are determined to go at it to develop cars that make a lot of people happy." Indeed, researchers have long known that, in general, Japanese automakers shun market share as an objective
(hmp, like THAT will work)

the story zeroes in on a contemporary story, the "battle" for market share among game console manufacturers.

   

The harm that competitor-oriented objectives can cause the companies that pursue them was the subject of a December 4, 2006, article in The New Yorker by James Surowiecki, the magazine's business writer. Surowiecki describes how Sony, with its PlayStation 3, and Microsoft, maker of the Xbox 360, are beating each other's brains out trying to capture the biggest share of the video-game market. Meanwhile, third-place Nintendo, with its new game console called Wii (pronounced "wee"), has quietly become the most profitable game console company in Japan.

   

Nintendo "has not just survived out of the spotlight; it has thrived," Surowiecki writes. "It has $5 billion in the bank from years of solid profits, and this past year, though it has spent heavily on the launch of the Wii, it made close to a billion dollars in profit and saw its stock price rise by 65%. Sony's game division, by contrast, barely eked out a profit and Microsoft's reportedly lost money. Who knew bringing up the rear could be so lucrative?"

   

[...] Armstrong says it is never too late for CEOs to change.

   

"We're not saying companies shouldn't pay attention to their competitors; they might be doing reasonable things that you may also want to do," Armstrong says. "What we're saying is that the objective should not be to try to beat your competitor. The objective should be profitability. In view of all the damage that occurs by focusing on market share, companies would be better off not measuring it."

So let me get this straight, budgeting is a straightjacket marketing is highly suspect because there is no demand for messages and now letting your "competitors" control your strategy turns out to be bad for business as well.

Damn, I wonder what is left for businesses to do?

Comments

[Albert Poghosyan]

I think that more important than porfitability is customer satisfaction oriented goals. The vision that Competition Harm Profitability is very one-sidedly. And personally me, I don't think that companies should be oriented on any other goal rather than customers satisfaction.

[Saltation]

at the primitive level, companies are vehicles for reduced-risk profit-making.

over time, they become more sophisticated, or are invaded by the sophisticated from the wider (older) jobmarket), and companies become, at the upper levels, vehicles for their participants' social statuses.

this is the key motivation underpinning the bulk of the "commercial" decisions made, and the myriad bizarre illogics and irrationalities often evaporate if you look at the micro-motivation and immediate political context of the core decision-makers/group.