The financial crisis of 2008 fastened horizontal (or industry) competition and shrank sales markets.
Beginning 2010, the role of the government and large capital as the market regulator also increased. As a result, on the one hand, vertical competition between small and medium size business has increased and on the other hand – competition among big businesses has also increased.
Still, the“Made in Ukraine” label is considered weak not only worldwide but also in Eastern Europe. It creates a third setback for businesses that try to conquer foreign markets.
Pursuant to the Anglo-Saxon model, the platforms of capitalism are `market, democracy, and nation`.
Depicted are three types of competitiveness: competition between companies on the same market (horizontal, internal); competition among top and bottom markets or, in the case of Ukraine, between small, medium and big businesses (vertical competition) and, finally, competition among countries/nations (horizontal, external).
The market situation is more or less favorable, but there are very few who deny the challenges of the democracy. What does this all mean when we speak business?
Survival conditions (access to resources, governmental support, etc.) are noticeably in favor of the “power stock holder” a.k.a big capital.
What does this speak of?
If you focus on field competition, then you are struggling with your business pals who are in the same boat with you. If you swing to hard, both will sink (belly up) together.
Let’s look closely at Michael Porter`s model of five forces analysis. Learn to cooperate with your direct competitors against threat of substitute products. The threat of established rivals, and the threat of new entrants, is oftentimes represented by large Western or Russian corporations.
While at Yalta`s central market, I witnessed firsthand a wonderful example of cooperation.
Small cafes (oftentimes belonging to Crimea-Tatar families) created a simple system of mutual aid to fight against the big players. Small business cannot afford a large assortment of goods and an expensive liquor license. But when the main goal was to keep the customer, a solution was found.
If the menu is lacking something you want, fear not- you can order it from the cafe next door (the competitor!) and your waiter will even deliver it to you. You may even bring your own fruit or vegetables you bought at the farmers market, even alcohol – just order at least something at the cafe.
Why, then, some have no difficulty finding that synergy and cooperation, and others do not? Could the reason be national traditions?
After visiting Kiev, Francis Fukuyama wrote an article about our (Ukrainian) poverty expressed in social capital but not money. The foundation of that capital is trust. But what do we see now in Ukraine? Companies lack trust in business partners and employees.
This so called phobia (lack of trust) continues and even intensifies within external circles.
We see many examples how once successful businesses collapse due to market fluctuations, or business partners` quarreling.
Sometimes, the internal situation within the company resembles the Vietnam War where more than 40% of the young officers were killed by their own soldiers who lacked trust and who were scared of those young officers’ incompetent orders.
It is the catastrophic deficit of trust in the society that is in the way of the transition from competition to cooperation.
Let’s imagine an actual formula of success.
1. External environment – the basis for trust is common interests. Find these and build cooperation models based on trust and joint desire to survive.
Join professional clubs, and live large. Nothing is more stimulating and fulfilling than being among peers. It is the clubs nowadays that generate trust. When you expand your social circle you expand your business.
2. Internal (company) environment – unite people based on common values.
Create the atmosphere of respect and trust. It is human capital that becomes one of the main sources of your competitive advantages. But for a business, not only the person is important but the whole team. Do not scramble on human (development) capital, train staff as teams!
Igor Gut is a marketing expert, founder of the Ukrainian Club "Develop Your Business".
