Competition and Maintaining Growth
"Internet companies are on a treadmill where you need to move forward just to remain in place. If what you offer isn't getting better every year, existing and new competitors will pass you by."
The Price of Competition
"Competition is valuable. Don't give it away; instead, get paid to play. For example, if someone asks you to bid, merely to increase competition and with no intention of giving the product/service/deal to you, require sufficient compensation. They probably won't pay you an actual fee to participate, but you might be able to get bid preparation expenses, or a "last look" provision (in which you get the deal if you match the best price), or you might ask them to quote a price which you either accept or reject, or you might ask for a guaranteed contract at the bid price. When deciding how much compensation you deserve in order to bid, keep in mind these potential hidden costs: the labor involved in putting together the bid; the fact that the bid requester (and potentially your competitors and customers) will learn what you're willing to pay; and the chance that your existing customers will want a better deal."
How much power do your suppliers have?
"Convincing customers to buy your products is tough enough without suppliers giving you a hard time. Basic rule of thumb: The fewer the number of suppliers, the more sway they have. Take the steel industry, which relies on a handful of companies for its iron feedstock. If two of those big guys should get together--as BHP Billton and Rio Tinto have been discussing--they would have significant pricing power, potentially crimping steel producers' margins. On the flipside, beware getting hooked on low-cost providers who don't keep an eye on quality. ("Lead-laced" Barbie, anyone?)"
What differentiates your product from competitors'?
"Few companies can rely on--let alone afford--clever marketing schemes to separate themselves from the competition. Yes, Starbucks made people believe they wanted $4 caffeinated concoctions, and Louis Vuitton lulled people into shelling out $1,500 for denim handbags, but those are the exceptions that prove the rule. If you want to win in business, you need to offer something tangibly valuable that the competition doesn't. Examples: rock-bottom prices (Wal-Mart); ingenious product design (Apple); extreme convenience (Fed Ex)."
A Retrospective Look at One CEO's Statement
"I'm in a race to take CBS out of business.... That's why we're going to make the big bucks. (Josh Harris, founder of the streaming media company Pseudo.com, which went out of business a few months later)"