adminShelter Chieza Change Management
Competition between companies is healthy because it benefits mostly the consumer who is looking for value for money.
It generally keeps prices low and quality very high. Competition helps water down the effects that may come as a result of monopolies that tend to dictate the pace at which business should move, how they will treat customers and what they expect from their suppliers.
In as much as some companies have tried to work on this issue by setting up regulatory authorities that govern monopolies, in most cases, the consumers always stand to lose.
What happens in most cases is that short-term focus invites corruption. If a company gets into the business using a loan, that company is more than willing to arm-twist processes and available systems because they generally do not have much time.
Short term focus may also emanate from intense pressure among companies that offer more or less the same products.
Ernest and Young conducted a Global Fraud survey about three years ago in more than 43 countries.
The results showed that more than 15 percent were willing to make cash payments as a way of retaining business.
The research further showed that 5 percent were willing to misstate their financial performance to survive an economic downturn. Such unhealthy competition has had adverse effects on the global economy.
The major downturn of competition is that it can lead to unhealthy price cuts. A case-in-points is the fare wars that occurred among bus companies plying the Harare-Mutare route in the late 1990s.
The war, which started due to an entry of a new bus company on the route, saw companies that were plying the route slashing fares by between 50 and 80 percent as they tried to oust the new entrant.
Suffice to say that sanity eventually prevailed as the new entrant was also equal to the task and the companies realised that they were doing themselves more harm than good with the beneficiary being the passengers who were paying negligible fares.
The desire to win against all odds can become very unhealthy because it can threaten the very existence of the company as was the case with Harare-Mutare route fare wars.
For companies, the prospect of losing a customer or customers can be daunting and this can lead to companies throwing ethic out of the window and adopting unethical or unfair business practices.
In other sectors, licensing has been used as protection from individual malpractices. Normally people that have been in business for a long time tend to take positions that cushion them against competition from new players.
For instance where there is a licence requirement, they will lobby that the licence for new players is way higher than those for renewals just to make it difficult for new entrants.
There are companies that enter into business with the skewed motives. They may enter into business based on highly ambitious growth motives.
Now in a challenging economy like ours, such targets would create unnecessary pressure. These are the type of companies that would destabilise the market as a result of their behaviour.
Just as much as short term gains are a negative, long term growth targets also have their negative effects.
Tenders in my opinion have been instrumental in creating unhealthy competition in this country.
In as much as it is a good initiative which allows transparency and equal opportunity, it can be one of the most dangerous aspects of competition.
The nature of bidding itself dictates that when you are fully engaged in a deal, with a limited client base, you may need to bend a few rules to clinch the sale.
Your individuality may immediately be eroded away leaving you at the peril of the customer. I have been part of team that did sales pitches and in some instances our boss would in the heat of the moment revise prices downwards by 50 percent during a pitch.
It’s during periods of pressure that rationality, logic and strategy is lost. It is always important to be firm and keep your cool and business decision intact even though you are in the middle of what seems like a lucrative deal. It may backfire in future.
There are also instances where as a company you may be tempted to enter into a collusion deal.
Most collusion cases involve competitors coming from different backgrounds, levels of experience, and degrees of expertise.
In most instances, you know each other as competitions but have come together to oust an “enemy”.
For an individual company it is very disruptive to internal operations because their leverage has been minimised. Whatever benefits you derive from it, I believe collusion is a highly unethical business practice.
Till next week, may God richly bless you.
Shelter Chieza is a Management Consultant. She can be contacted at [email protected]
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