Entrepreneurs' Fear of Competing Against Industry Leaders

Sabotage

Prior to market entry, when entrepreneurs analyze the competition, they might experience a feeling of doom, from the magnitude of a powerful image projected by their potential rivals. Overwhelmed and scared, they end up discarding their idea.

If you are an entrepreneur, you might have secretly felt the fear, and successfully conquered it by proceeding with your idea. How about the ones who were torn apart by such fear?

In most cases, the entrant is nothing but a small fish in a sea of sharks. Obsessively fearing the competition at the point of start is pointless. If such fear capitalizes, there shall be no entry.

New entrants should invest in identifying demand, tailoring products to fit the target audience and offering a better alternative than rivals. Competition analysis is paramount prior to market entry. Nevertheless, over-emphasis on the competition is destructive.

“Bait the hook to suit the fish, not your fellow fishermen/women.*”

Exploiting Weaknesses

From the outset of every industry, the leader seems to be untouchable and indestructible, until a few people start thinking otherwise.

Businesses are like people, when they become too busy, they perceive life and its events with blurry eyes. Founders can exploit this to their advantage. Leaders of an industry often suffer from complacency. When their output increases, the quality of their products decreases. The pressure of fulfilling demand often results in neglecting the customer in hopes of chasing growth and revenue.

If your industry is oversaturated, you will be up against big players who did it long-time before you were even born. This does not mean you can not do it better. It can always be done again, only radically better is required to achieve greatness. While if it has not been done, you can be the one claiming first honor. However, be sure to be remembered for it.

Additionally, the digital world offers plenty of advantages. It allows you to easily enter and gain large exposure in any industry. You can attract clients globally, while staying local. However, the same applies to your competition, as they are now considered global.

Clients and competitors are no longer local but global. In a world where boundaries have disappeared, and competition can not be identified, companies must dominate platforms where clients are known to exist.

Innovative Marketing Techniques to Beat the Competition

Xiaomi, a Chinese Electronics Manufacturer, is a relatively new player in the smartphone industry in comparison to old giants like Apple and Samsung. Xiaomi now ranks as the number two brand in global smartphone shipments with 17% market share (Q2 2021) according toBloomberg**.

When Xiaomi first entered the smartphone market in 2010, they relied on social media marketing, word of mouth and an online retail model. They did not use physical stores or big advertising campaigns to sell products. The previous helped in building an aggressive pricing model for their phones in comparison to the competition. They were selling a $300 smartphone with the same specifications and performance as an $800 Samsung or Apple smartphone.

The innovative and then-different marketing techniques which are not afforded by their competition, made them successful. On the other hand, Samsung and Apple had enormous costs in advertising, retail stores, employees, etc., all of which contributed to the price of their expensive phones.

Xiaomi was so aggressive in cutting costs, they were barely making a profit on their phones and products for the first several years. Year after year, while gaining traction and market share, they started to increase the retail price of their phones.

In 2021, their flagship models equaled or exceeded Samsung’s offerings in price. The latest smartphone flagship (Xiaomi Mi 11) retails at $750, up from $300 in 2016. The latest flagship model from Samsung retails at $650. After gaining enough popularity and market share, Xiaomi's phones are now more expensive than Samsung. They also incorporated retail stores as part of their sales channels, to attract more customers. The roles have now been reversed, at least for Xiaomi.

Xiaomi serves as an excellent example of a company who was not afraid to compete with giants and used an innovative marketing strategy, combined with cutting down supply chain costs, to achieve its goals. It is worth mentioning that a lot of Chinese Electronics Manufacturers followed suit, and replicated Xiaomi's model, however, they were not able to repeat the exact same success.

Utilizing Social Media and online channels to sell products have been heavily used by startups and companies in the past ten to fifteen years. However it is difficult to break into a global industry with extremely high barriers, like smartphones, and be able to win. Xiaomi is now an established leader, with a lot of electronics' innovations coming out of their house. They recently announced plans for an electric car subsidiary with a $10 billion investment over the next 10 years.

Examples of entrants beating or achieving a leading position vs industry leaders:

  • Netflix vs. Blockbuster.
  • Tesla vs. Incumbent Car Manufacturers.
  • Apple vs. BlackBerry, Nokia & Samsung.

Key takeaway

Capabilities can be attained as the business grows. Humans are born as infants who grow to become adults. Innovative marketing techniques and robust pre-entry strategies may pave the way for entry against established industry leaders.

History is filled with battles, in which small armies vastly outnumbered, were still able to emerge victorious against bigger armies.




*Note: "Bait the hook to suit the fish" is a well-known idiom. But attributed sometimes to Dale Carnegie, because he used it in one of his books.

**Update: The article was updated to reflect Xiaomi's new global market share as of Q2 2021. According to a recentBloomberg article citing Canalys, a market analyst firm.

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