Three levels of business competition

Neo Matrix

Competition among businesses is defined by following characteristics:
– Businesses compete for customers;
– Brands have the important role in the business competition because they are the customer’s point of view;
– Businesses can create new categories by creating new customer needs and avoid expensive direct competition.

In business competition brands can interact with customers with:
– Products – whatever they offer to customers as part of an exchange – products, services, membership, etc;
– Media – events, technologies, people who deliver the content – mobile app, website, TV show, festival, celebrity, etc;
– Content – text, images, video, sounds that can be shared with different media and communicate the brand – slogan, viral video, blog post, photo, etc.

Products, media, and content offer values which customers accept and build a brand. Value is a positive change in customer’s experience, and a brand is defined as a collection of all values accepted by customers.

There are two types of values:
– Hard values – values which can be easily measured and are usually delivered by products – speed, weight, fuel consumption, etc;
– Soft values – values which are hard or impossible to measure and are usually delivered by content – relationship, social positioning, rite of passage, etc.

Based on above we can define three levels of business competition:

1) Isolated Competition
Businesses do not compete with products, media, or content. This is possible in cases of highly regulated markets, monopolies, and other similar situations. At this level of competition, businesses can use salesforce size, networking, large budgets, lobbying to win. This type of competition is not the most developed competition because a customer is left with a limited purchase choice. Businesses that develop in this competition level have a hard time to compete in other competition levels because they do not have the assets and know-how for it.

2) Developing Competition
Businesses compete only with products and therefore most of the values are hard. Since hard values are easy to measure they are also easy to copy by competitors. So the typical behavior of competitors is undeveloped media and content, and a lot of similar products. Patents are relevant and patent litigation is present. Also, businesses repeat what worked and constantly create new products with which they enter in new categories, and each time their competitors follow them quickly.

3) Mature Competition
Businesses compete with all available assets – products, media, and content. This allows them to offer soft values to their customers. Soft values are hard to copy and businesses can maintain their position longer while the overall category grows. This is the most sophisticated level of competition and requires a high level of management and cultural maturity. Most brands which reached a multinational level have mastered Mature Competition level. Businesses from Developing level can grow to the Mature level. Businesses from Isolated Competition will have a hard time doing it.

Competition level classification is a generalization designed as an aid in the understanding of management decisions. The reality of many businesses could be that all three levels of competition are used in different categories. In such case the competition levels can be used to describe the most dominant category business competes in.

Of the top 50 businesses in the world by revenue, some most likely use Isolated Competition (China National Petroleum, Foxconn) but most are in Mature Competition. In top ten businesses in the world by market cap in 2017, more than half are in Mature Competition (Apple, Alphabet, Microsoft, Amazon.com, Johnson & Johnson, Facebook). In Interbrand’s 100 best global brands ranking all are in Mature Competition.

Written by: Nikola Tosic
Publishing date: 21 May 2017