Friday, 9 December 2011

Know yourself, your business


 Avoid head-on collisions with cash-flushed competitors

ON YOUR OWN By TAN THIAM HOCK

ENTREPRENEURS are the most gung-ho people in the world. But not necessary the smartest. More often than not, this everything-also-can-do attitude lands the entrepreneur in trouble especially in new projects.

Without a realistic assessment of his own capabilities in funding, experience and competitive strength, he plunges into so-called virgin territory that existing competitors dominate.

I have been trading in food, confectionary, toiletries and cosmetics for 26 years and the two product categories that I will not compete in are chocolate malt drink and mass shampoo for ladies. Nestle through Milo controls more than 90% of the chocolate malt market and unless you have suicidal tendencies, you will be better off donating your launch budget to your favourite charity.

If you turn on your TV, you will find shampoo advertisements in every channel, every hour and every brand. Well, every brand refers to brands from Unilever and P&G and the two of them control more than 80% of the mass shampoo business.

Unilever AustralasiaImage via Wikipedia
These are the only high margin high volume businesses that I will ask you to leave alone. Unless you have RM20mil to dump into TVCs in return for a 2% market share. And even then, your shampoo TVC will look the same as the others with long silicone hair swinging from side to side in slow motion being watched by slow-witted viewers already numb to new brands.

To be fair, new and small entrepreneurs have no access to market information, consumer research and competitive activities. Relying on their gut feeling and entrepreneurial spirit, they plunge into new businesses with gusto and optimism.

Unfortunately for every survivor, there are probably five casualties with battered pride, empty pockets and hungry families. What a waste of time, effort and financial resources.

Economist will tell you that competition breeds efficiency and inefficient players will be eliminated eventually. So before you invest into a new venture, do you consider yourself an efficient competitor? Do you know who your main competitors are? What is their competitive edge over you?

Competition comes in all shapes and sizes. Here are a few pointers about competitors that you should avoid and do what entrepreneurs do. Dream big, start small.



Avoid going head on with big cash-flush competitors especially when their petty cash is equivalent to your annual sales turnover. Concentrate instead on nibbling some market share. No point in waking the sleeping fat cat. There is enough fat in the business to keep everyone happy.

Avoid the herd mentality. By the time you hear the news, hundreds have gone into the business. Rubber gloves then, swiflets and kopitiams now. So stay out and let others enjoy the success. If they can.

Talking about herds, many politicians are angry because they were not offered loans that they do not have to pay back. Grave injustice indeed. I predict state feedlots will be the new trend. Opposition state government will also join in the cow and bull circus act. Opportunities of easy loans will be in abundance. Now everybody can breed.

Avoid big business. This is reserved for the well connected incumbents and GLC's. But keep your eyes open for any crumbs of opportunity that might just spill over from their inefficiencies. To the small entrepreneurs, crumbs is still better than nothing, right?

Or better still, for existing players, there will never be a better opportunity to cash out. GLC's are paying high premiums for non controlling stakes nowadays but offer is only open until cash runs out.
Avoid owning airlines and airports. Stiff competition for attention and support. Nobody trust nobody. But you. You will end up paying for every single service provided. But nobody will admit it.

But there's money in ancillary business for small entrepreneurs. Like printing protest stickers and placards. Or join the band of protestors online. RM10 for every tweet against price hike. And RM10 for any twit who is willing to believe that travelling by air will be cheaper in the next 10 years.

So where are the opportunities for small entrepreneurs? Plenty, if you know where to look for it. Just look at businesses that have been ignored by your competitors;

competitors like EPF, Khazanah, PNB, SEDCs, LTAT, Felda, Umno, MCA, MIC, politicians, politician's family, politician's cronies, politically-connected business tycoons, MNCs etc. Competitors with superior comparative advantage over you. Competitors who are allowed to sit on the dining table first and have their choice cuts before others.

But spare a thought for these competitors. There are just a limited number of seats at the table and come meal time, everyone is scrambling to get a seat. The first group gets the best cut, the second scrape the leftovers and the third gets to lick the plates and scream hell. Grave injustice indeed.

Now that competition is so intense at the dining table hosted by the government, some of these competitors have moved on to the private sector dining table. With superb strategies, bottomless funds and sheer political brute force, they have plonked themselves at the dining table and helped themselves to all the choice cuts of the economy.

The big entrepreneurs who refused to play the political game have cashed out and moved to greener pastures overseas. The small entrepreneurs will still be fighting among themselves for the leftovers. The economist is proven right again. Inefficient and weak competitors will perish.

Against my better judgement, I recommend that you stick to your original plan to open your dream 24-hour Kopitiam. It does not matter that there are already two mamak restaurants and three fast-food joints in your choice location.

At least, you get to put food on your own table, dignity in your heart and pride on your sleeve. You have fulfilled your dream to be an entrepreneur.

The writer is an entrepreneur who hopes to share his experience and insights with readers who want to take that giant leap into business but are not sure if they should. Email him at thtan@alliancecosmetics.com

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