Is Competition Good For Your Business?

General business theory suggests that a new company is more likely to thrive if it faces less competition. Therefore, entrepreneurs try to launch their businesses in uncontested markets so they can avoid the potential problems usually associated with going head-to-head with an entrenched rival.

However, a recent study has shown that exposure to competition in the introductory stage can actually increase the likelihood of long-term survival. Andrew Burke and Stephanie Hussels (Harvard Business Review, March, 2013, p 24) found that “companies launched in crowded markets had higher odds than others of failing in the first year — but if a company survived during this early period, it had a much greater chance of making it to the three-year mark.”

Why is this so? Companies in competitive segments have to rely on their business skills to succeed. They remain focused on cost containment while solving customers’ problems. It can be done, as demonstrated by Southwest Airlines. It took off in the crowded airline industry in 1967 with a low-cost culture combined with a no-frills approach to increase profits. And its efficient time utilization maximized the in-flight, revenue-generating use of each plane.

Publishers can mimic this success with an innovative business model seeking revenue-generating sales in non-bookstore segments. There will be competition among non-book purveyors of promotional items, but your creative strategy can give you the lead in sales leading to long-term success. Avoid a head-on collision with a niche leader by establishing a position within a segment that you can dominate.