Brian Gongol
Competition is Inevitable in the Private Sector
In the private sector, every firm faces competition. Unless protected by force of law, subsidy, or regulation, every private firm must acknowledge the reality that other firms will try to deliver similar goods or services for a competitive price.
In general, the result is good for the consumer. Competition ensures that reasonable prices prevail and that quality and innovation are rewarded. The consumer history of the American mass market in the 20th Century bears this point rather well; except for a few exceptional instances in which monopoly practices or unreasonable government intervention interfered, the day-to-day needs of most Americans are fulfilled today much more efficiently and at higher quality than they were a century ago.
"Friendly" Competition is the Competition You Respect
While competition is virtually inescapable, firms and the individuals who make up those firms adapt to it in different ways. Most everyone in the private sector is familiar with the concept of a "friendly competitor." This is the "other team" that one realizes the private market cannot be without. Generally one has a sense of respect for the friendly competitor, because they likely produce a similar good or service at a roughly similar cost. In essence, the friendly competitor is the one against whom the "any given Sunday" rule applies: On any given project, or in the mind of any given customer, either firm is equally qualified to earn the sale.
This relationship is reasonably healthy; after all, competition itself isn't going away, so it makes sense to come to terms with the competition one has. If the business literature is correct, a stable market will usually contain three or four competing firms. This was at one time taught as the 50-30-20 rule (representing the market shares of three competitors), though the research suggests that markets remain stable with four competitors.
"Unfriendly" Competition Gets That Way By Disrupting the Market Equilibrium
The challenge to competitive market psychology is the entrance of an "unfriendly" competitor. Whereas the friendly competitor isn't a disruption to the market but is instead a part of the natural order, the unfriendly competitor does something distinctly wrong: Generally, the unfriendly firm either offers a dramatically lower price or offers a distinctively different level of quality.
And thus is born much unhappiness.
When a Friendly Competitor Adapts and Improves, the Others Usually Follow
The rules of change in business are simple: "Cheaper, faster, better." And if the office joke is true, one can only expect two at a time; the cheap, quick project won't be very good; or the excellent piece of work done on a shoestring budget will take a long time. Firms expect their friendly competition to be forever working on one or more of those three. And when one firm learns how to improve in one of those categories, the others usually follow shortly thereafter, either by copying, redoubling their efforts, or simply by hiring away the people who made it happen at the competition.
Unfriendly Competitors Change Without Getting Better
But the "unfriendly" competitor is usually different. The unfriendly firm usually achieves "cheaper" or "faster" at the expense of "better." This is what makes them unfriendly.
It's not just that the unfriendly competitors make an inferior product; it's that their work reveals a market for inferior work that didn't exist when the market was in equilibrium among friendly competitors, all of whom upheld a certain expectation for quality.
Unfriendly Competition Often Causes Big Disruptions to the Market
The examples are abundant and practically overwhelming: A certain discount retail giant achieves "low prices" at the expense of clean, well-organized stores with knowledgeable staff. High-quality durable goods once made to last a lifetime become disposable goods that are expected only to sustain a few years of light use. Cheap tract housing erected in weeks displaces quality craftsmanship in adjacent neighborhoods.
Once this market for inferior work is revealed, it diminishes the incentive to produce quality work. This is the mentality of "Well, if that's what passes for good work these days..."
Once Consumers Accept Lower-Quality Products, the Old Competitors Have to Make a Big Decision
What makes this evolutionary stage unfortunate is that the revealed market for inferior goods challenges the existing market firms to either charge a premium for quality or adapt to the new, lower standard for quality. The preference for quality is, like many other things, rather cyclical. Consumers often don't realize they want higher quality until they have been burned by an experience with lesser quality. In the meantime, though, it's hard to survive the downturn as a "quality" producer -- especially if the old friendly competition capitulates to the new lower standard.
Unfriendly Competition Hurts the Sense of Pride in One's Work
Running in parallel to the difficulty of efficiently producing quality work at a level above what the market demands is the psychological challenge of keeping up the sense of pride in one's work that most people demand as a sort of compensation in terms of self-actualization. Most people feel the need to produce good work in which they can feel a sense of pride. When an unfriendly competitor emerges and lowers the bar for quality in a market, the cost is felt not only by the consumer, but by the producer as well.
Business Must Learn How to Teach Economy Rather than Cheapness
The real challenge to be overcome is for the friendly competitors to learn to teach the customer how to economize -- evaluating the real value of a product, rather than overreacting to sticker shock and price envy. Until business theory catches up with this significant void in our understanding, we should expect lots of ugly market brawls and unfortunate pleas for protectionist policies in the market. It's the obligation of the "good" producers to save the market economy by seeking out this knowledge with all due haste.