Home Advice For The Young At Heart Should You Let The Size Of Competition Intimidate You?

Should You Let The Size Of Competition Intimidate You?


by Anand Srinivasan, founder of LeadJoint.com

david and goliath

Quite often, aspiring entrepreneurs pick a business idea solely on the fact that “there is nobody else doing this”. What is more interesting is that the enthusiasm towards these ideas often fade away when these aspirants realize that there are others who have been working on similar ideas. Typically this leads to the junking of the business idea as the wantrapreneur goes in search of an exotic new one.

Is this a wrong thing to do? Successful entrepreneurs would often tell you that competition should not scare you away but instead steady your resolve to launch your business. When there is competition, you can be rest assured that there is indeed a market for your product or service. Also, you do not have to educate your customers on the need you are trying to solve. It is more likely for a business to succeed when there is competition as compared to when you are the only player in the market.

In business strategy, this is called operating with a “red ocean strategy”. In comparison, being the first in a market is regarded as the “blue ocean strategy”. In the case of the latter, you have the freedom to pick a price point, a marketing perspective and generally the way you want to operate. However, the challenge lies in the fact that your market is not aware of the need. As a result, you also have to allocate significant budget in educating your audience about the need and how your business solves the need.

On the other hand, a red ocean market already has the market served to you on a platter. However, you do not have much freedom in choosing the market boundary or the price point – you only operate based on how the market dynamics have already been set by competitors in your industry. But in this case, the market is already aware of the product and as a business owner, you do not have to spend money in creating awareness of the problem you are trying to solve.

But running a successful business in a red ocean market is easier said than done. For one, building a unique selling proposition is not always easy. Also, if you operate in a highly competitive industry, advertising costs could easily add up. So how does one tackle this? I asked Dan Voell, a serial entrepreneur and the co-founder of Patch Medical, a healthcare startup delivering medical devices to hospitals. He tells me that every business focuses on specific marketing channels for growth. “It is not practical for all businesses to focus on every marketing channel out there. We picked the online channel that was still not saturated in our industry. Once you get a foothold in the market, it is always easier to diversify into other channels”.

Another way to beat competition in a red ocean market is to compete on price. However, this does not work all the time. In highly competitive markets, businesses often compete on wafer-thin margins. As a result, it is not sustainable to differentiate on price alone. Doing so often results in the bigger player wiping out competition through sustained pricing wars and is hence generally considered to be an unhealthy practice.

One of the more sustainable ways to compete is by offering a different value proposition. Take the example of Zappos that entered the shoe market when it was extremely competitive and price differentiation was the only strategy among players. Zappos changed the rules of the game by focusing on customer service. When customers realize your business treats customers better, they begin to love you and tend to spread the word.

There are several ways to successfully operate in a competitive market. Let the size or aggression from competition not deter you. If there is a market, there will be competition. By learning to take them head on, you will eventually learn to succeed as well.


anand srinivasan

Anand Srinivasan is the founder of LeadJoint.com, an online lead generation tool for digital marketing agencies. He is also a part-time marketing consultant and has previously worked with some of the most promising Indian startups.