Message From MD – March 2018
01 March 2018
Talking about challenges and the spirit of business, in late 2016, drug maker Eli Lilly decided to discontinue their research on a drug for Alzheimer’s Disease, as results from the three trials they had carried out turned out to be disappointing. The other leaders in the market and their competitors – Biogen, Merck, and Roche – now faced a perplexing situation. Was this an opportunity or a warning? Did this pose an opportunity for capturing a larger market share or was this a warning to quit when the going was good?
Today’s real estate scenario is quite similar. A lot of the people in the sector who are into selling houses have been in this market only for the past few years. So they have not had the experience of facing a market where houses don’t get sold on their own. Things were far different and a lot simpler in the early 2000s. Many builders, after the introduction of RERA and GST, are going slow on their project launches and are cautious about new commitments. This creates a delay in the market which invariably creates a vacuum whereby the market witnesses not competition, but vanishing players.
Latest researches and surveys show that, when a direct competitor decides to quit the market, companies are more likely to see the half-empty glass than the half-full one, and they tend to follow suit. However, this decision, more often than not, turns out to be a bad one.
The exit of a competitor actually presents a huge market opportunity, and you would naturally expect that the learning or herding behaviour would be evened out by the positive market forces. But time and again it has been proved that the fear of the probable risk is far stronger than the faith in the possible opportunity due to decreased competition.
It is also interesting to know how companies choose to react when a competitor exits the market in a recession era. Many may decide that further investment and new projects are not warranted due to poor sales results, changing market conditions, enactment of new laws, deteriorating financials of the host company, escalating project costs and so on and so forth. According to me, the decision to slow down projects after a competitor pulls out is often wrong, and it is an overreaction.
Having less competition and being the first choice entails avoidance of duplication, and hence avoidance of wastage of resources. We have to understand that duplicate and fake products are a real problem in our business. Becoming one of the few suppliers of projects in the market gives us a chance to enjoy economies of scale. The benefits can be passed on to the consumers. There is a possibility of increased profitability, which can be used for research and development. We can afford to invest in the latest technology and machinery in order to be more efficient. We may also help the government generate more revenue in the form of taxation.
I have a strong feeling that as the market emerges, it may become less competitive allowing good positioning for our brand which, again, has its own benefits. Let’s work together to be the first choice among equals.
Sunil Kumar V