Maintaining Your Competitive Edge In Singapore
Being a foreign entrepreneur in Singapore is pretty challenging, but what’s even more challenging is when a new competitor enters the scene. So what do you do when a new and more “edgy” competitor enters your niche? Businesses often react to this by cutting down their prices before the niche loses its novelty. Of course, this would cost businesses big time.
According to Harvard Business School professor Michael Porter in his popular book The Competitive Advantage of Nations, competition is created by these five factors: 1. When a new competitor enters the market; 2. When the competition between existing players intensifies; 3. When substitute products are released into the market; 4. When buyers take advantage of the rivalry between competitors; 5. When suppliers press competitors with their greater bargaining power.
Porter also maintains that some industries are more profitable for companies than others. This, however, is easier for companies that can easily switch from their niche to another, without doing so much reinvention. For example, Nokia went from being a timber producer to a major mobile phone manufacturer during the time when fellow timber producers brought down their margins.
If you don’t want to switch niches, though, you can still make most of the profits you’re making. Porter stated that companies can apply two major strategies if they want to gain a step ahead of their rivals and these are by spending less and charging more. These strategies can be streamlined through market research and surveying their clientele or that of their competitors.
Spending less (cost leadership) entails minimising the use of your resources until you have bounced back in terms of profits and operational costs. Also, the goal of spending less is to make sure that you are spending less than your competitors when manufacturing the same product.
Charging more, meanwhile, involves creating a super product which buyers are willing to pay more without having to increase your expenditures.